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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 February 27, 2005
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
WSI 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.)
Monticello, Minnesota 55362
- ------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(763) 295-9202
- ------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
- ------------------------------------------------------------------------------
(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 [ ]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).
Yes [ ] No [X]
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.
2,557,629 Common Shares were outstanding as of March 18, 2005.
WSI INDUSTRIES, INC.
AND SUBSIDIARIES
INDEX
Page No.
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements
Condensed Consolidated Balance Sheets February 27, 2005 (Unaudited)
and August 29, 2004 3
Condensed Consolidated Statements of Operations Thirteen and
Twenty-Six weeks ended February 27, 2005 and February 29, 2004
(Unaudited) 4
Condensed Consolidated Statements of Cash Flows Twenty-Six weeks
ended February 27, 2005 and February 29, 2004 (Unaudited) 5
Notes to Condensed Consolidated Financial Statements (Unaudited) 6 - 8
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 9 - 13
Item 4. Controls and Procedures 13
PART II. OTHER INFORMATION:
Item 4. Submission of Matters to a Vote of the Security Holders 14
Item 6. Exhibits 14
Signatures 14
2
Part I. Financial Information
Item 1. Financial Statements
WSI INDUSTRIES, INC
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
FEBRUARY 27, AUGUST 29,
2005 2004
---------------- -------------
(unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 36,669 $ 294,766
Accounts receivable 1,912,972 1,757,282
Inventories 1,148,237 923,223
Prepaid and other current assets 62,853 93,394
Deferred tax assets 242,085 198,225
---------------- -------------
Total Current Assets 3,402,816 3,266,890
---------------- -------------
Property, Plant and Equipment - Net 3,907,462 3,838,910
---------------- -------------
Deferred tax assets 1,613,725 1,687,931
---------------- -------------
Intangible assets, net 2,396,004 2,399,311
---------------- -------------
$ 11,320,007 $ 11,193,042
================ =============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Revolving line of credit $ 100,000 $ -
Trade accounts payable 739,148 808,047
Accrued compensation and employee withholdings 326,543 251,343
Miscellaneous accrued expenses 132,881 145,294
Current portion of long-term debt 314,796 306,588
---------------- -------------
Total Current Liabilities 1,613,368 1,511,272
---------------- -------------
Long term debt, net of current portion 2,775,897 2,613,150
---------------- -------------
STOCKHOLDERS' EQUITY:
Common stock, par value $.10 a share; authorized
10,000,000 shares; issued and outstanding
2,557,629 shares 255,763 255,763
Capital in excess of par value 1,837,441 1,837,441
Retained earnings 4,837,538 4,975,416
---------------- -------------
Total Stockholders' Equity 6,930,742 7,068,620
---------------- -------------
$ 11,320,007 $ 11,193,042
================ =============
See notes to condensed consolidated financial statements
3
WSI INDUSTRIES, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
13 weeks ended 26 weeks ended
------------------------------ -------------------------------
February 27, February 29, February 27, February 29,
2005 2004 2005 2004
------------- -------------- -------------- --------------
Net sales $ 3,654,475 $ 2,615,666 $ 7,528,516 $ 5,421,727
Cost of products sold 3,036,317 2,198,175 6,337,436 4,581,724
------------- -------------- -------------- --------------
Gross margin 618,158 417,491 1,191,080 840,003
Selling and administrative expense 536,880 323,837 1,031,244 641,726
Interest and other income (5,189) (4,095) (6,656) (7,685)
Interest expense 42,196 15,043 82,199 31,026
------------- -------------- -------------- --------------
Earnings from operations
before income taxes 44,271 82,706 84,293 174,936
Income tax expense 15,937 27,116 30,346 62,977
------------- -------------- -------------- --------------
Net earnings $ 28,334 $ 55,590 $ 53,947 $ 111,959
============= ============== ============== ==============
Basic earnings per share $ .01 $ .02 $ .02 $ .04
============= ============== ============== ==============
Diluted earnings per share $ .01 $ .02 $ .02 $ .04
============= ============== ============== ==============
Cash dividend per share $ .0375 $ .0375 $ .075 $ .075
============= ============== ============== ==============
Weighted average number of
common shares 2,557,629 2,552,008 2,557,629 2,551,569
============= ============== ============== ==============
Weighted average number of
common and dilutive potential
common shares 2,630,114 2,625,887 2,624,359 2,628,038
============= ============== ============== ==============
See notes to condensed consolidated financial statements.
4
WSI INDUSTRIES, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
26 weeks ended
--------------------------------
February 27, February 29,
2005 2004
-------------- --------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 53,947 $ 111,959
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation 326,367 294,827
Amortization 3,307 -
Loss on disposal of equipment 1,125 -
Deferred taxes 30,346 62,977
Changes in assets and liabilities:
(Increase) decrease in accounts receivable (155,690) 258,604
Increase in inventories (225,014) (74,291)
Decrease in prepaid expenses 30,541 20,710
Decrease in accounts payable
and accrued expenses (6,111) (56,456)
-------------- --------------
Net cash provided by operations 58,818 618,330
-------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment (61,044) (40,272)
-------------- --------------
Net cash used in investing activities (61,044) (40,272)
-------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Stock options exercised - 3,190
Net borrowings on revolving line of credit 100,000 -
Payments of long-term debt (164,045) (95,941)
Dividends paid (191,826) (191,337)
-------------- --------------
Net cash used in financing activities (255,871) (284,088)
-------------- --------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (258,097) 293,970
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 294,766 891,218
-------------- --------------
CASH AND CASH EQUIVALENTS AT END OF REPORTING PERIOD $ 36,669 $ 1,185,188
============== ==============
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 81,696 $ 31,026
Income taxes $ 1,500 $ -
Noncash investing and financing activities:
Acquisition of machinery through capital lease $ 335,000 $ -
See notes to condensed consolidated financial statements.
5
WSI INDUSTRIES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS:
The condensed consolidated balance sheet as of February 27, 2005, the
condensed consolidated statements of operations for the thirteen and twenty-six
weeks ended February 27, 2005 and February 29, 2004 and the condensed
consolidated statements of cash flows for the twenty-six 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.
The condensed consolidated balance sheet at August 29, 2004 is derived
from the audited consolidated balance sheet as of that date. 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 2004 annual report to shareholders. The results of operations for
interim periods are not necessarily indicative of the operating results for the
full year.
Reclassification: Certain prior year items have been reclassified to conform to
the current year presentation.
2. INVENTORIES
Inventories consist primarily of raw material, work-in-progress (WIP) and
finished goods. The following table breaks out the values in each category net
of the inventory valuation allowances of $340,224 and $409,249 at February 27,
2005 and August 29, 2004, respectively.
February 27, August 29,
2005 2004
-------------- --------------
Raw material $ 374,283 $ 277,359
WIP 429,601 359,432
Finished goods 344,353 286,432
-------------- --------------
$ 1,148,237 $ 923,223
============== ==============
3. GOODWILL AND INTANGIBLE ASSETS:
Under Statements of Financial Accounting Standards No. 142, Goodwill and
Other Intangible Assets, goodwill and intangible assets are deemed to have
indefinite lives and are not amortized, but are subjected to annual impairment
tests in accordance with the statement. Other intangible assets will continue to
be amortized over their useful lives.
6
The Company adopted the new rules on accounting for goodwill and other
intangible assets beginning in the first quarter of fiscal 2002. The Company
performed its annual impairment test in the fourth quarter of fiscal 2004 and
has determined no charge is warranted.
Goodwill and other intangible assets resulting from acquisitions of
business and the formation of the Company consist of the following:
February 27, August 29,
2005 2004
-------------- ------------
Goodwill $ 2,713,264 $ 2,713,264
Less accumulated amortization 344,812 344,812
-------------- ------------
$ 2,368,452 $ 2,368,452
============== ============
Deferred financing $ 33,063 $ 33,063
Less accumulated amortization 5,511 2,204
-------------- ------------
$ 27,552 $ 30,859
-------------- ------------
$ 2,396,004 $ 2,399,311
============== ============
4. EARNINGS PER SHARE:
The following table sets forth the computation of basic and diluted
earnings per share:
Thirteen weeks ended Twenty- Six weeks ended
-------------------------------- -------------------------------
February 27, February 29, February 27 February 29,
2005 2004 2005 2004
-------------- -------------- ------------- --------------
Numerator for basic and diluted
earnings per share:
Net earnings $ 28,334 $ 55,590 $ 53,947 $ 111,959
============== ============== ============= ==============
Denominator
Denominator for basic earnings
per share - weighted average shares 2,557,629 2,552,008 2,557,629 2,551,569
============== ============== ============= ==============
Effect of dilutive securities:
Employee and non-employee options 72,485 73,879 66,730 76,469
============== ============== ============= ==============
Dilutive common shares
Denominator for diluted earnings
Per share 2,630,114 2,625,887 2,624,359 2,628,038
============== ============== ============= ==============
Basic earnings per share $ .01 $ .02 $ .02 $ .04
============== ============== ============= ==============
Diluted earnings per share $ .01 $ .02 $ .02 $ .04
============== ============== ============= ==============
7
5. DEBT AND LINE OF CREDIT:
The Company has renewed its revolving credit agreement in the
maximum amount of $1 million with its bank. Interest on the renewed
agreement is at the bank's prime rate. The revolver was accessed during
the fiscal 2005 second quarter, and $100,000 was owed at February 27,
2005. The credit agreement is secured by all assets of the Company and
expires December 31, 2005. It contains restrictive provisions concerning
yearly capital expenditures, maximum debt to net worth and minimum current
ratios, as well a minimum debt service coverage ratio. At February 27,
2005, the Company was in compliance with these provisions.
The Company purchased a new manufacturing facility and office
located in Monticello, Minnesota on May 3, 2004. In order to facilitate
the purchase, the Company entered into two mortgage agreements. The first
mortgage was with its bank for $1,360,000 with a monthly payment of $8,307
based on a 25-year amortization schedule. Interest is at 5.37% with a
provision to adjust the rate after 5 years to the monthly five-year
Treasury yield plus 2.5%. The entire principal balance is due May 1, 2014.
The second mortgage is with the City of Monticello Economic
Development Authority (MEDA) for $350,000 with a monthly payment of $1,483
based on a 25-year amortization schedule. Interest is at 2.0%. The entire
balance is due after five years on May 1, 2009. The indebtedness to the
bank is secured pursuant to a mortgage and security agreement and fixture
financing statement and the debt to MEDA is secured by a mortgage.
8
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
and
RESULTS OF OPERATIONS
Critical Accounting Policies and Estimates
Management's Discussion and Analysis of Financial Condition and Results of
Operations discusses the Company's condensed consolidated financial statements,
which have been prepared in accordance with accounting principles generally
accepted in the United States. The preparation of these financial statements
requires management to make estimates and judgments that affect the reported
amounts of assets, liabilities, revenues and expenses and related disclosure of
contingent assets and liabilities.
The Company believes that the estimates, assumptions and judgments
involved in the accounting policies described below have the greatest potential
impact on our financial statements, so the Company consider these to be its
critical accounting policies. Because of the uncertainty inherent in these
matters, actual results could differ from the estimates the Company uses in
applying the critical accounting policies. Within the context of these critical
accounting policies, the Company is not currently aware of any reasonably likely
event that would result in materially different amounts being reported.
Allowance for Excess and Obsolete Inventory:
Inventories, which are composed of raw materials, work in process and
finished goods, are valued at the lower of cost or market. Any excess of cost
over the net realizable value of inventory components is included in the
allowance for obsolete inventory. The Company analyzes the level of inventory on
hand, its cost in relation to market value and estimated customer requirements
to determine whether write-downs for excess or obsolete inventory are required.
Actual customer requirements in any future periods are inherently uncertain and
thus may differ from our estimates. If actual or expected requirements were
significantly lower than the established reserves, the Company would record an
increase to the obsolescence allowance in the period in which we made such a
determination. The Company performs its lower of cost or market testing as well
as its excess or obsolete inventory analyses quarterly.
The Company's allowance for obsolete inventory consists of the following
at February 27, 2005 and August 29, 2004:
February 27, 2005 August 29, 2004
----------------- ---------------
Obsolete finished goods $ 256,199 $ 258,844
Obsolete work-in-process 8,740 90,020
Cost exceeding market value 75,285 60,384
----------------- ---------------
$ 340,224 $ 409,249
The Company has no specific timeline to dispose of its remaining obsolete
inventory as it still occasionally sells some of those items.
Goodwill Impairment:
9
The Company evaluates the valuation of its goodwill according to the
provisions of SFAS 142 to determine if the current value of goodwill has been
impaired. The Company believes that its stock price is not necessarily an
indicator of the Company's value given its limited trading volume and its wide
price fluctuations. The Company follows the guidance provided by SFAS 142 and
utilizes a present value technique to measure fair value by estimating future
cash flows. The major assumptions in this analysis include: a) sales estimates
for the Company in part provided with guidance provided from the Company's
customers; and b) material and labor costs of the company's major programs. The
Company constructs a discounted cash flow analysis based on these assumptions to
estimate the fair value of the Company (which is the only reporting unit). The
result of the analysis performed in the fiscal 2004 fourth quarter did not show
an impairment of goodwill. If the Company has changes in events or
circumstances, including reductions in anticipated cash flows generated by our
operations, goodwill could become impaired which would result in a charge to
earnings.
Deferred Taxes:
The Company accounts for income taxes using the liability method. Deferred
income taxes are provided for temporary difference between the financial
reporting and tax bases of assets and liabilities. A valuation allowance would
be set up should the realization of any deferred taxes become less likely than
not to occur. The valuation allowance is analyzed periodically by the Company
and may result in income tax expense different than statutory rates. The Company
has not established a valuation allowance as it believes it is more likely than
not that it will fully realize the benefit of its tax assets. Currently, the
Company's deferred tax assets have two major components which relate to the
Company's NOL and the Company's AMT tax credit carryforward. The Company's AMT
tax credit carryforward does not expire. The Company's NOL carryforward has
$870,000 expiring in fiscal year 2009, $415,000 in fiscal 2011 and $2.8 million
expiring in fiscal 2021 and after. The Company believes that its current rate of
growth will be sufficient to fully utilize its NOL before they expire. However,
a significant loss of a customer or a change in the Company's business could
affect the realization of the deferred tax assets.
Revenue Recognition:
The Company considers its revenue recognition policy to fall under the
guidance of FASB's conceptual framework for revenue recognition. The Company
recognizes revenue only after: a) The Company has received a purchase order
identifying price and delivery terms or services to be rendered; b) shipment has
occurred, or in the case of services, after the service has been completed; c)
collectibility is reasonably assured. The Company continually monitors its
accounts receivable for any delinquent or slow paying accounts. If an
uncollectible account should arise during the year, it would be written-off at
the point it was determined to be uncollectible. Credit losses relating to
customers have been minimal and within management's expectations. Based on
management's evaluation of uncollected accounts receivable, bad debts are
provided for on the allowance method. Accounts are considered delinquent if they
are 120 days past due. The Company mitigates its credit risk by performing
credit checks and actively pursuing past due accounts. The Company refers to
"net sales" in its consolidated statements of operations as the Company's sales
are sometimes reduced by product returned by its customers.
Results of Operations:
Net sales were $3,654,000 for the quarter ending February 27, 2005, an
increase of 40% or $1,039,000 from the same period of the prior year.
Year-to-date sales in fiscal 2005 were $7,529,000 compared to $5,422,000 in the
prior year. The increase in sales for the quarter, as well as the six months,
came primarily from a new program related to the Company's recreational vehicle
market.
10
Sales from the Company's recreational vehicle market amounted to
$3,012,000 and $2,036,000 for the quarter ended February 27, 2005 and February
29, 2004, respectively. Year to date sales for the Company's recreational
vehicle market were $6,292,000 and $4,272,000 for the six months ended February
27, 2005 and February 29, 2004, respectively.
Sales from the Company's aerospace and defense markets amounted to
$391,000 and $409,000 for the quarter ended February 27, 2005 and February 29,
2004, respectively. Year to date sales for the Company's aerospace and defense
markets were $828,000 and $764,000 for the six months ended February 27, 2005
and February 29, 2004, respectively.
Sales from the Company's other revenue markets amounted to $251,000 and
$172,000 for the quarter ended February 27, 2005 and February 29, 2004,
respectively. Year to date sales for the Company's other revenue markets were
$409,000 and $386,000 for the six months ended February 27, 2005 and February
29, 2004, respectively. The Company's other revenue markets consist primarily of
computer components and small engine parts.
Gross margin increased to 17% for the quarter ending February 27, 2005
versus 16% in the year ago period. The slight increase in gross margin is
attributable to efficiencies related to higher levels of volume offset by a
higher material content in the Company's sales in the current fiscal year
quarter. Year-to-date gross margins were 16% and 15% for the six-month periods
ending February 27, 2005 and February 29, 2004, respectively.
No significant sales of obsolete inventory items occurred during the first
two fiscal quarters of 2005. Correspondingly, no significant gross margin was
realized from any of those sales. During the fiscal 2005 second quarter, the
Company disposed of all but $8,740 of its obsolete WIP inventory. The amount
disposed amounted to 6% of the gross inventory value.
During the last quarter of fiscal 2004 and the first two quarters of
fiscal 2005, the Company moved its office and manufacturing operations from its
former site in Osseo, Minnesota to its current location in Monticello,
Minnesota. During this time, the Company recorded relocation costs, as well as
the costs associated with leasing and maintaining the Osseo facility, as selling
and administrative cost. These costs were $160,000 for the quarter ended
February 27, 2005 and $326,000 for the six months then ended. The relocation was
completed by the end of the Company's fiscal 2005 second quarter.
Selling and administrative expense of $537,000 for the quarter ending
February 27, 2005 was $213,000 higher than in the prior year period due
primarily to the relocation costs mentioned above, as well as higher
compensation costs. Year-to-date selling and administrative expense of
$1,031,000 was $390,000 higher than the comparable prior year period for the
same reasons.
Interest expense in the second quarter of fiscal 2005 was $42,000, which
was $27,000 more than the second quarter of fiscal 2004 amount of $15,000. The
increase is attributable to increased levels of debt due to mortgages on the
Company's new building of approximately $1.7 million that did not exist in the
prior year, as well as new capitalized leases for equipment purchases that have
occurred in the last 12 months. Year-to-date interest expense for fiscal 2005
also increased as compared to the same period of the prior year for the same
reason.
The Company recorded income tax expense at an effective tax rate of 36%
for the quarter and six months ended February 27, 2005. For the quarter and six
months ended February 29, 2004, the Company recorded income tax expense of 33%
and 36%, respectively.
11
Liquidity and Capital Resources
On February 27, 2005, working capital was $1,789,000 compared to
$1,756,000 at August 29, 2004. The ratio of current assets to current
liabilities at February 27, 2005 was 2.11 to 1.0 compared to 2.16 to 1.0 at
August 29, 2004. The Company's cash balance decreased $258,000 during the first
six months of fiscal 2005 despite borrowing $100,000 on its revolving line of
credit during the second quarter of fiscal 2005. The decrease in cash was
expected as the end of the Company's second fiscal quarter has historically been
a low point in cash balances due to the cyclical nature of the Company's sales
and production within the quarter.
As discussed in the Notes to Consolidated Financial Statements, the
Company renewed its $1,000,000 revolving credit facility with its bank. Interest
on the new agreement is at the bank's prime rate. The Company owed $100,000
under this revolving line of credit at February 27, 2005, however subsequent to
the end of the quarter, the Company repaid that amount in full.
The Company paid quarterly dividends of $.0375 per share of its common
stock in each of the first two quarters of fiscal 2005 and 2004. The dividend
payments for the first six months of fiscal 2005 and fiscal 2004 totaled
$192,000 and $191,000, respectively.
It is the Company's belief that its internally generated funds, as well as
its line of credit, will be sufficient to enable the Company to meet its working
capital requirements during the remainder of fiscal 2005.
Cautionary Statement:
Statements included in this Management's Discussion and Analysis of
Financial Condition and Results of Operations, in future filings by the Company
with the Securities and Exchange Commission, in the Company's press releases and
in oral statements made with the approval of an authorized executive officer
that are not historical or current facts are "forward-looking statements." These
statements are made pursuant to the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995 and are subject to certain risks and
uncertainties that could cause actual results to differ materially from
historical earnings and those presently anticipated or projected. The Company
wishes to caution readers not to place undue reliance on any such
forward-looking statements, which speak only as of the date made.
The following important factors, among others, in some cases have affected
and in the future could affect the Company's actual results and could cause the
Company's actual financial performance to differ materially from that expressed
in any forward-looking statement: (i) the Company's ability to obtain additional
manufacturing programs and retain current programs; (ii) the loss of significant
business from any one of its current customers could have a material adverse
effect on the Company; (iii) the Company was dependent upon one customer for 79%
of its revenues in fiscal year 2004 and expects that a significant portion of
its future revenue will be derived from this customer; (iv) a significant
downturn in the industries in which the Company participates could have an
adverse effect on the demand for Company services; (v) our sales are
concentrated in a limited number of highly competitive industries, each with a
limited number of customers; (vi) the prices of our products are subject to
downward pressure from customers and market pressure from competitors; (vii) the
Company's ability to curtail its costs and expenses for new manufacturing
programs, commensurate with expected revenues; (viii) the Company's ability to
comply with covenants of its credit facility; (ix) fluctuations in operating
results due to, among other things, changes in customer demand for our product,
in our manufacturing costs and efficiencies of our operations; (x) a trend among
our customers toward outsourcing manufacturing to foreign operations.
12
The foregoing list should not be construed as exhaustive and the Company
disclaims any obligation subsequently to revise any forward-looking statements
to reflect events or circumstances after the date of such statements or to
reflect the occurrence of anticipated or unanticipated events.
ITEM 4. CONTROLS AND PROCEDURES
(a) Evaluation of Disclosure Controls and Procedures.
The Company's Chief Executive Officer, Michael J. Pudil, and Chief
Financial Officer, Paul D. Sheely, have evaluated the Company's disclosure
controls and procedures as of the end of the period covered by this report.
Based upon this review, they have concluded that these controls and procedures
are effective.
(b) Changes in Internal Controls over Financial Reporting.
There have been no changes in internal control financial reporting that
occurred during the fiscal period covered by this report that have materially
affected, or are reasonably likely to materially affect, the Company's internal
control over financial reporting.
13
PART II. OTHER INFORMATION:
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Annual Meeting of the Company Stockholders was held on January
6, 2005. Of the 2,557,629 shares were issued and outstanding and
entitled to vote at the close of business on November 8, 2004,
shareholders holding 2,447,706 shares were present at the meeting
either in person or by proxy. The following describes the matters
considered by the Company's shareholders at the Annual Meeting, as
well as the results of the votes cast at the Annual Meeting:
1. To ratify and approve an amendment to the Company's Bylaws
setting the number of directors at not less than three nor more than
nine.
For 2,363,230 Against 71,231 Abstain 13,245
The shareholders approved this proposal.
2. To elect five (5) directors to hold office until the next Annual
Meeting of Shareholders or until their respective successors have
been elected and shall qualify.
Name of Nominee
Paul Baszucki For 2,412,902 Against 34,804
Melvin L. Katten For 2,415,702 Against 32,004
George J. Martin For 2,415,852 Against 31,854
Eugene J. Mora For 2,413,252 Against 34,454
Michael J. Pudil For 2,406,981 Against 40,725
Each director nominee was elected by the shareholders.
3. To amend the Company's 1994 Stock Plan to (a) increase the total
number of authorized shares under the Plan from 450,000 to 650,000,
and (b) extend the term of the Plan from September 29, 2004 to
September 29, 2014
For 632,409 Against 162,338 Abstain 14,589 Broker non-vote 1,638,370
The shareholders did not approve this proposal.
ITEM 6. EXHIBITS:
A. The following exhibits are included herein:
Exhibit 31.1 Certification of Chief Executive Officer pursuant to
Rules 13a-14(a) and 15d-14(a) of the Exchange Act.
Exhibit 31.2 Certification of Chief Financial Officer pursuant to
Rules 13a-14(a) and 15d-14(a) of the Exchange Act
Exhibit 32 Certification pursuant to 18 U.S.C. Section 1350.
14
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.
WSI INDUSTRIES, INC.
Date: April 1, 2005 /s/ Michael J. Pudil
---------------------------------------------
Michael J. Pudil, President & CEO
Date: April 1, 2005 /s/ Paul D. Sheely
---------------------------------------------
Paul D. Sheely, Vice President, Finance & CFO
15