þ | ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Minnesota | 41-0691607 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
Large accelerated filer o | Accelerated filer o | Non-accelerated filer o | Smaller reporting company þ |
Item 1. | Description of Business. |
2
Item 1A. | Risk Factors. |
3
Item 1B. | Unresolved Staff Comments. |
4
Item 2. | Properties. |
Item 3. | Legal Proceedings. |
Item 4. | [Removed and Reserved.] |
5
Item 5. | Market for the Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. |
Stock Price | ||||||||
High | Low | |||||||
FISCAL 2010: |
||||||||
First quarter |
$ | 3.22 | $ | 2.12 | ||||
Second quarter |
2.20 | 1.74 | ||||||
Third quarter |
2.52 | 1.80 | ||||||
Fourth quarter |
4.41 | 1.98 | ||||||
FISCAL 2009: |
||||||||
First quarter |
$ | 7.32 | $ | 2.60 | ||||
Second quarter |
3.55 | 1.38 | ||||||
Third quarter |
2.63 | 1.15 | ||||||
Fourth quarter |
2.60 | 1.96 |
6
Number of shares of | ||||||||||||
Number of shares of | common stock remaining | |||||||||||
common stock to be | Weighted-average | available for future issuance | ||||||||||
issued upon exercise of | exercise price of | under equity compensation | ||||||||||
outstanding options, | outstanding options, | plans (excluding securities | ||||||||||
Plan category | warrants and rights | warrants and rights | reflected in the first column) | |||||||||
Equity compensation
plans approved by
shareholders: |
||||||||||||
2005 Stock Plan |
219,666 | $ | 3.72 | 55,795 | ||||||||
Total |
219,666 | $ | 3.72 | 55,795 | ||||||||
7
Item 6. | Selected Financial Data |
Item 7. | Managements Discussion and Analysis of Financial Condition and Results of Operations |
8
9
Fiscal 2010 | Fiscal 2009 | Fiscal 2008 | ||||||||||
Recreational vehicle |
$ | 12,209,000 | $ | 10,121,000 | $ | 14,050,000 | ||||||
Aerospace and defense |
1,633,000 | 1,507,000 | 2,219,000 | |||||||||
Energy |
4,485,000 | 6,693,000 | 8,856,000 | |||||||||
Biosciences |
379,000 | 351,000 | 504,000 | |||||||||
Other |
120,000 | 94,000 | 253,000 | |||||||||
$ | 18,826,000 | $ | 18,766,000 | $ | 25,882,000 | |||||||
10
11
Item 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. |
12
13
14
Item 15. | Exhibits. |
(a) | Documents filed as part of this report. |
1. | Consolidated Financial Statements: Reference is made to the Index to Consolidated Financial Statements (page 21) hereinafter contained for all Consolidated Financial Statements. | ||
2. | Exhibits. Exhibit |
Exhibit No. | Description | |||
3.1 | Restated Articles of Incorporation of WSI Industries, Inc.
Incorporated by reference from Exhibit 3 of the Registrants
Form 10-Q for the quarter ended November 29, 1998. |
|||
3.2 | Restated and Amended Bylaws, as amended through January 6,
2005. Incorporated by reference from Exhibit 3.2 of the
Registrants Form 10-K for the year ended August 28, 2005. |
|||
10.1 | WSI Industries, Inc. 1994 Stock Plan, as amended. Incorporated
by reference from Exhibit 4.1 of the Registrants Registration
Statement on Form S-8 (SEC File No. 333-78491). |
|||
10.2 | WSI Industries, Inc. 2005 Stock Plan. Incorporated by
reference from Exhibit 4.1 of the Registrants Registration
Statement on Form S-8 (SEC File No. 333-155768). |
|||
10.3 | Form of Restricted Stock Award Agreement under the Companys
2005 Stock Plan. Incorporated by reference to Exhibit 10.1 to
the Registrants Current Report on Form 8-K dated February 23,
2007. |
|||
10.4 | Form of Non-Qualified Stock Option and Stock Appreciation
Rights Agreement under the Companys 2005 Stock Plan.
Incorporated by reference to Exhibit 10.2 to the Registrants
Current Report on Form 8-K dated February 23, 2007. |
|||
10.5 | Form of Restricted Stock Bonus Award Agreement under the
Companys 2005 Stock Plan. Incorporated by reference to
Exhibit 10.5 to the Registrants Annual Report on Form 10-K
for the year ended August 30, 2009. |
15
Exhibit No. | Description | |||
10.6 | Board of Directors Retirement Program dated June 25, 1982.
Incorporated by reference from Exhibit 10.12 of the
Registrants Form 10-K for the year ended August 25, 2002. |
|||
10.7 | Employment Agreement dated as of October 7, 2009 by and
between WSI Industries, Inc. and Michael J. Pudil.
Incorporated by reference to Exhibit 10.4 to the Registrants
Form 8-K dated October 7, 2009. |
|||
10.8 | Employment (change in control) Agreement between Paul D.
Sheely and Registrant dated January 11, 2001 incorporated by
reference from Exhibit 10.2 of the Registrants Form 10-Q for
the quarter ended May 27, 2001. |
|||
10.9 | Amendment No. 1 to Employment (change in control) Agreement
between Paul D. Sheely and Registrant dated November 1, 2002.
Incorporated by reference from Exhibit 10.11 of the
Registrants Form 10-K for the year ended August 25, 2002. |
|||
10.10 | Second Amendment to Employment Change in Control Agreement
dated December 29, 2008 by and between WSI Industries, Inc.
and Paul D. Sheely. Incorporated by reference to Exhibit 10.3
to the Registrants Form 8-K dated December 29, 2008. |
|||
10.11 | Severance Letter Agreement dated October 7, 2009 by and
between WSI Industries, Inc. and Paul D. Sheely. Incorporated
by reference to Exhibit 10.5 to the Registrants Form 8-K
dated October 7, 2009. |
|||
10.12 | Employment Offer Letter dated October 5, 2009 by WSI
Industries, Inc. to Benjamin Rashleger. Incorporated by
reference to Exhibit 10.1 to the Registrants Form 8-K dated
October 7, 2009. |
|||
10.13 | Employment (Change In Control) Agreement dated October 12,
2009 by and between WSI Industries, Inc. and Benjamin
Rashleger. Incorporated by reference to Exhibit 10.2 to the
Registrants Form 8-K dated October 7, 2009. |
|||
10.14 | Form of Restrictive Covenant Agreement by and between WSI
Industries, Inc. and Michael J. Pudil, Paul D. Sheely and
Benjamin Rashleger. Incorporated by reference to Exhibit 10.3
to the Registrants Form 8-K dated October 7, 2009. |
|||
10.15 | Promissory Note dated as of May 3, 2004 by WSI Industries,
Inc. as debtor and Excel Bank Minnesota as holder in the
original principal amount of $1,360,000. Incorporated by
reference from Exhibit 10.2 of the Registrants Form 8-K dated
May 3, 2004. |
|||
10.16 | Loan Agreement dated as of May 3, 2004 between WSI Industries,
Inc. and Excel Bank Minnesota. Incorporated by reference from
Exhibit 10.3 of the Registrants Form 8-K dated May 3, 2004. |
16
Exhibit No. | Description | |||
10.17 | Promissory Note dated as of May 3, 2004 by WSI Industries,
Inc. as debtor and Monticello Economic Development Authority
as holder in the original principal amount of $350,000.
Incorporated by reference from Exhibit 10.4 of the
Registrants Form 8-K dated May 3, 2004. |
|||
10.18 | Loan Agreement dated as of May 3, 2004 between WSI Industries,
Inc. and the Monticello Economic Development Authority.
Incorporated by reference from Exhibit 10.5 of the
Registrants Form 8-K dated May 3, 2004. |
|||
10.19 | Mortgage and Security Agreement and Fixture Financing
Statement dated as of May 3, 2004 between WSI Industries, Inc.
and Excel Bank Minnesota. Incorporated by reference from
Exhibit 10.6 of the Registrants Form 8-K dated May 3, 2004. |
|||
10.20 | Mortgage dated as of May 3, 2004 between WSI Industries, Inc.
and the Monticello Economic Development Authority.
Incorporated by reference from Exhibit 10.7 of the
Registrants Form 8-K dated May 3, 2004. |
|||
10.21 | First Amendment to Loan Agreement dated April 20, 2009 by and
between WSI Industries, Inc. and the City of Monticello
Economic Development Authority. Incorporated by reference from
Exhibit 10.1 of the Registrants Form 8-K dated April 22,
2009. |
|||
10.22 | Amended Promissory Note dated April 20, 2009 issued by WSI
Industries, Inc. to the City of Monticello Economic
Development Authority in the maximum principal amount of
$350,000. Incorporated by reference from Exhibit 10.2 of the
Registrants Form 8-K dated April 22, 2009. |
|||
10.23 | Second Amendment and Modification of Revolving Line of Credit
Loan Agreement and Reaffirmation of Guaranties dated as of May
3, 2004 by and among WSI Industries, Inc., Taurus Numeric
Tool, Inc. and WSI Rochester, Inc. and Excel Bank Minnesota.
Incorporated by reference from Exhibit 10.8 of the
Registrants Form 8-K dated May 3, 2004. |
|||
10.24 | Third Amendment and Modification of Revolving Line of Credit
Loan Agreement and Reaffirmation of Guaranties dated as of
January 1, 2005 by and among WSI Industries, Inc., Taurus
Numeric Tool, Inc. and WSI Rochester, Inc. and Excel Bank
Minnesota. Incorporated by reference from Exhibit 10.1 of the
Registrants Form 10-Q for the quarter ended November 28,
2004. |
|||
10.25 | Fourth Amendment and Modification of Revolving Line of Credit
Loan Agreement and Reaffirmation of Guaranties dated as of
January 1, 2006 by and among WSI Industries, Inc., Taurus
Numeric Tool, Inc. and WSI Rochester, Inc. and Excel Bank
Minnesota. Incorporated by reference from Exhibit 10.1 of the
Registrants Form 10-QSB for the quarter ended November 27,
2005. |
17
Exhibit No. | Description | |||
10.26 | Fifth Amendment and Modification of Revolving Line of Credit
Loan Agreement and Reaffirmation of Guaranties dated as of
January 1, 2007 by and among WSI Industries, Inc., Taurus
Numeric Tool, Inc. and WSI Rochester, Inc. and Excel Bank
Minnesota. Incorporated by reference from Exhibit 10.1 of the
Registrants Form 10-QSB for the quarter ended November 26,
2006. |
|||
10.27 | Sixth Amendment and Modification of Revolving Line of Credit
Loan Agreement and Reaffirmation of Guaranties dated as of
January 31, 2008 by and among WSI Industries, Inc., Taurus
Numeric Tool, Inc. and WSI Rochester, Inc. and M&I Marshall
and IIsley Bank. Incorporated by reference from Exhibit 10.1
of the Registrants Form 10-QSB for the quarter ended February
24, 2008. |
|||
10.28 | Loan Agreement dated as of August 26, 2008 by and between WSI
Industries, Inc. and M&I Marshall and Iisley Bank.
Incorporated by reference to Exhibit 10.1 to the Registrants
Form 8-K dated August 26, 2008. |
|||
10.29 | Eighth Amendment and Modification of Revolving Line of Credit
Promissory Note, Loan Agreement and Reaffirmation of
Guaranties dated February 1, 2009 by and among WSI Industries,
Inc., Taurus Numeric Tool, Inc., WSI Rochester, Inc., and M&I
Marshall & Ilsley Bank. Incorporated by reference to Exhibit
10.1 of the Registrants Form 10-Q for the quarter ended March
1, 2009. |
|||
10.30 | Promissory Note dated August 26, 2008 issued by WSI
Industries, Inc. to M&I Marshall & Ilsley Bank in the maximum
principal amount of $1,200,000. Incorporated by reference to
Exhibit 10.2 to the Registrants Form 8-K dated August 26,
2008. |
|||
10.31 | Security Agreement dated August 26, 2008 by WSI Industries,
Inc. as debtor in favor of M&I Marshall & Ilsley Bank as
secured party. Incorporated by reference to Exhibit 10.3 to
the Registrants Form 8-K dated August 26, 2008. |
|||
10.32 | Guaranty By Corporation dated August 26, 2008 by Taurus
Numeric Tool, Inc. Incorporated by reference to Exhibit 10.4
to the Registrants Form 8-K dated August 26, 2008. |
|||
10.33 | Guaranty By Corporation dated August 26, 2008 by WSI
Rochester, Inc. Incorporated by reference to Exhibit 10.5 to
the Registrants Form 8-K dated August 26, 2008. |
|||
10.34 | Ninth Amendment and Modification of Revolving Line of Credit
Promissory Note, Loan Agreement and Reaffirmation of
Guaranties dated February 1, 2010 by and among WSI Industries,
Inc., Taurus Numeric Tool, Inc., WSI Rochester, Inc., and M&I
Marshall & Ilsley Bank. Incorporated by reference to Exhibit
10.1 of the Registrants Form 8-K filed February 11, 2010. |
18
Exhibit No. | Description | |||
14.1 | Code of Ethics & Business Conduct adopted by WSI Industries,
Inc. on October 29, 2003. Incorporated by reference to
Exhibit 14.1 of the Registrants Annual Report on Form 10-K
for the year ended August 31, 2003. |
|||
21.1 | Subsidiaries of the Registrant. |
|||
23.1 | Consent of Schechter Dokken Kanter Andrews & Selcer Ltd. |
|||
31.1 | Certification of Chief Executive Officer pursuant to Rules
13a-14(a) and 15d-14(a) of the Exchange Act. |
|||
31.2 | Certification of Chief Financial Officer pursuant to Rules
13a-14(a) and 15d-14(a) of the Exchange Act. |
|||
32.1 | Certificate pursuant to 18 U.S.C. §1350. |
19
WSI INDUSTRIES, INC. |
||||
BY: | /s/ Michael J. Pudil | |||
Michael J. Pudil | ||||
Chief Executive Officer (principal executive officer) | ||||
BY: | /s/ Paul D. Sheely | |||
Paul D. Sheely | ||||
Vice President and Treasurer (principal financial and accounting officer) |
Signature | Title | Date | ||||
/s/ Michael J. Pudil
|
Chief Executive Officer and Director | November 23, 2010 | ||||
/s/ Paul Baszucki
|
Director | November 23, 2010 | ||||
/s/ Thomas C. Bender
|
Director | November 23, 2010 | ||||
/s/ Burton F. Myers II
|
Director | November 23, 2010 | ||||
/s/ Eugene J. Mora
|
Director | November 23, 2010 | ||||
/s/ James D. Hartman
|
Director | November 23, 2010 |
20
Page | ||||
CONSOLIDATED FINANCIAL STATEMENTS |
||||
22 | ||||
23 | ||||
24 | ||||
25 | ||||
26 | ||||
27-36 |
21
22
2010 | 2009 | |||||||
ASSETS |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | 2,347,113 | $ | 2,879,952 | ||||
Accounts receivable, less allowance for doubtful
accounts of $10,074 |
3,087,087 | 2,735,586 | ||||||
Inventories (Note 2) |
2,185,283 | 2,146,531 | ||||||
Prepaid and other current assets |
60,686 | 51,902 | ||||||
Deferred tax assets (Note 6) |
171,713 | 156,812 | ||||||
Total current assets |
7,851,882 | 7,970,783 | ||||||
Property, plant, and equipment, at cost: |
||||||||
Land |
819,000 | 819,000 | ||||||
Building and improvements |
2,299,648 | 2,286,077 | ||||||
Machinery and equipment |
10,998,303 | 11,065,856 | ||||||
Less accumulated depreciation |
(7,610,282 | ) | (6,650,574 | ) | ||||
Total property, plant, and equipment |
6,506,669 | 7,520,359 | ||||||
Deferred tax assets (Note 6) |
258,901 | 644,277 | ||||||
Other assets (Note 10): |
||||||||
Goodwill and related acquisition costs |
2,368,452 | 2,368,452 | ||||||
$ | 16,985,904 | $ | 18,503,871 | |||||
LIABILITIES AND STOCKHOLDERS EQUITY |
||||||||
Current liabilities: |
||||||||
Trade accounts payable |
$ | 1,266,641 | $ | 2,007,516 | ||||
Accrued compensation and employee withholdings |
615,048 | 313,071 | ||||||
Other accrued expenses |
367,218 | 171,450 | ||||||
Current portion of long-term debt (Note 3) |
1,165,192 | 2,075,672 | ||||||
Total current liabilities |
3,414,099 | 4,567,709 | ||||||
Long-term debt, less current portion (Note 3) |
3,736,505 | 4,901,748 | ||||||
Stockholders equity (Note 5): |
||||||||
Common stock, par value $.10 a share; authorized
10,000,000 shares; issued and outstanding
2,888,492 shares and 2,878,868 respectively |
288,850 | 287,886 | ||||||
Capital in excess of par value |
2,922,048 | 2,871,068 | ||||||
Deferred compensation |
(250,412 | ) | (361,861 | ) | ||||
Retained earnings |
6,874,814 | 6,237,321 | ||||||
Total stockholders equity |
9,835,300 | 9,034,414 | ||||||
$ | 16,985,904 | $ | 18,503,871 | |||||
23
2010 | 2009 | 2008 | ||||||||||
Net sales (Note 8) |
$ | 18,826,498 | $ | 18,765,982 | $ | 25,881,818 | ||||||
Cost of products sold |
15,079,679 | 16,394,530 | 20,987,594 | |||||||||
Gross margin |
3,746,819 | 2,371,452 | 4,894,224 | |||||||||
Selling and administrative expense |
2,424,651 | 2,225,914 | 2,492,226 | |||||||||
Gain on sale of equipment |
| | (102,326 | ) | ||||||||
Interest and other income |
(33,183 | ) | (22,385 | ) | (75,967 | ) | ||||||
Interest expense |
359,269 | 416,650 | 306,563 | |||||||||
2,750,737 | 2,620,179 | 2,620,496 | ||||||||||
Income (loss) before income taxes |
996,082 | (248,727 | ) | 2,273,728 | ||||||||
Income taxes (benefits) (Note 6) |
358,589 | (89,542 | ) | 795,805 | ||||||||
Net income (loss) |
$ | 637,493 | $ | (159,185 | ) | $ | 1,477,923 | |||||
Basic earnings (loss) per share |
$ | .23 | $ | (.06 | ) | $ | .54 | |||||
Diluted earnings (loss) per share |
$ | .23 | $ | (.06 | ) | $ | .52 | |||||
Cash dividend per share |
$ | | $ | .0375 | $ | .15 | ||||||
Weighted average number of common
shares outstanding, basic |
2,801,210 | 2,789,717 | 2,751,779 | |||||||||
Weighted average number of
common shares outstanding, diluted |
2,801,210 | 2,789,717 | 2,816,954 | |||||||||
24
Common | Capital in | Total | ||||||||||||||||||||||
Stock | Excess of | Deferred | Retained | Stockholders | ||||||||||||||||||||
Shares | Amount | Par Value | Compensation | Earnings | Equity | |||||||||||||||||||
Balance at August 26, 2007 |
2,731,165 | $ | 273,117 | $ | 2,214,922 | $ | (26,577 | ) | $ | 5,436,620 | $ | 7,898,082 | ||||||||||||
Net income |
| | | | 1,477,923 | 1,477,923 | ||||||||||||||||||
Restricted stock grants |
37,461 | 3,746 | 225,458 | (229,204 | ) | | | |||||||||||||||||
Restricted stock issuance |
| | (9,797 | ) | 9,797 | | | |||||||||||||||||
Stock option compensation |
| | 163,285 | | | 163,285 | ||||||||||||||||||
Exercise of stock options |
16,000 | 1,600 | 40,485 | | | 42,085 | ||||||||||||||||||
Exercise of stock
appreciation rights and
payment of withholding
taxes |
40,732 | 4,073 | (60,556 | ) | | | (56,483 | ) | ||||||||||||||||
Dividends paid |
| | | | (413,533 | ) | (413,533 | ) | ||||||||||||||||
Balance at August 31, 2008 |
2,825,358 | $ | 282,536 | $ | 2,573,797 | $ | (245,984 | ) | $ | 6,501,010 | $ | 9,111,359 | ||||||||||||
Net loss |
| | | | (159,185 | ) | (159,185 | ) | ||||||||||||||||
Restricted stock grants |
63,382 | 6,338 | 226,591 | (232,929 | ) | | | |||||||||||||||||
Restricted stock issuance |
| | (48,176 | ) | 48,176 | | | |||||||||||||||||
Stock option compensation |
| | 196,284 | | | 196,284 | ||||||||||||||||||
Restricted stock grants
not earned and payment
of withholding taxes |
(9,872 | ) | (988 | ) | (77,428 | ) | 68,876 | | (9,540 | ) | ||||||||||||||
Dividends paid |
| | | | (104,504 | ) | (104,504 | ) | ||||||||||||||||
Balance at August 30, 2009 |
2,878,868 | $ | 287,886 | $ | 2,871,068 | $ | (361,861 | ) | $ | 6,237,321 | $ | 9,034,414 | ||||||||||||
Net income |
| | | | 637,493 | 637,493 | ||||||||||||||||||
Restricted stock grants |
58,405 | 5,841 | 133,215 | (139,056 | ) | | | |||||||||||||||||
Restricted stock issuance |
| | (94,919 | ) | 94,919 | | | |||||||||||||||||
Stock option compensation |
| | 210,712 | | | 210,712 | ||||||||||||||||||
Restricted stock grants
not earned and payment
of withholding taxes |
(48,781 | ) | (4,877 | ) | (198,028 | ) | 155,586 | | (47,319 | ) | ||||||||||||||
Balance at August 29, 2010 |
2,888,492 | $ | 288,850 | $ | 2,922,048 | $ | (250,412 | ) | $ | 6,874,814 | $ | 9,835,300 | ||||||||||||
25
2010 | 2009 | 2008 | ||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: |
||||||||||||
Net income (loss) |
$ | 637,493 | $ | (159,185 | ) | $ | 1,477,923 | |||||
Adjustments to reconcile net income (loss) to net cash provided by
operating activities: |
||||||||||||
Depreciation and amortization of property and equipment |
1,074,457 | 1,050,833 | 817,658 | |||||||||
Amortization of deferred financing cost |
| 4,409 | 6,612 | |||||||||
Gain on sale of property, plant, and equipment
and other assets |
| | (102,327 | ) | ||||||||
Deferred taxes |
339,979 | (79,571 | ) | 752,951 | ||||||||
Stock option compensation |
210,712 | 196,284 | 163,285 | |||||||||
Changes in assets and liabilities: |
||||||||||||
Decrease (increase) in: |
||||||||||||
Accounts receivable |
(351,501 | ) | 1,017,768 | (699,304 | ) | |||||||
Inventories |
(38,752 | ) | 389,475 | (636,707 | ) | |||||||
Prepaid and other current assets |
(8,784 | ) | 137,031 | (34,140 | ) | |||||||
Decrease in accounts payable and accrued expenses |
(259,953 | ) | (790,058 | ) | (147,701 | ) | ||||||
Net cash provided by operating activities |
1,603,651 | 1,766,986 | 1,598,250 | |||||||||
CASH FLOWS FROM INVESTING ACTIVITIES: |
||||||||||||
Additions to property, plant, and equipment |
(60,767 | ) | (421,634 | ) | (1,018,755 | ) | ||||||
Proceeds from sale of equipment and other assets |
| | 130,531 | |||||||||
Net cash used in investing activities |
(60,767 | ) | (421,634 | ) | (888,224 | ) | ||||||
CASH FLOWS FROM FINANCING ACTIVITIES: |
||||||||||||
Payment of long-term debt |
(2,075,723 | ) | (829,497 | ) | (696,778 | ) | ||||||
Proceeds from issuance of long-term debt |
| 625,000 | 575,000 | |||||||||
Issuance of common stock |
| | 42,085 | |||||||||
Dividends paid |
| (104,504 | ) | (413,533 | ) | |||||||
Net cash used in financing activities |
(2,075,723 | ) | (309,001 | ) | (493,226 | ) | ||||||
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS |
(532,839 | ) | 1,036,351 | 216,800 | ||||||||
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR |
2,879,952 | 1,843,601 | 1,626,801 | |||||||||
CASH AND CASH EQUIVALENTS AT END OF YEAR |
$ | 2,347,113 | $ | 2,879,952 | $ | 1,843,601 | ||||||
SUPPLEMENTAL CASH FLOW INFORMATION: |
||||||||||||
Cash paid during the year for: |
||||||||||||
Interest |
$ | 363,278 | $ | 413,120 | $ | 306,599 | ||||||
Payroll withholding taxes in cashless stock option exercise |
16,823 | 9,540 | 414,255 | |||||||||
Income taxes |
15,536 | 13,762 | 12,580 | |||||||||
Noncash investing and financing activities: |
||||||||||||
Acquisition of machinery through capital lease |
| 919,043 | 2,537,240 | |||||||||
Deferred tax benefit from exercise of stock options |
30,496 | | 357,772 |
26
1. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
Business Description - WSI Industries, Inc. and Subsidiaries (the Company) is involved in the precision contract metal machining business primarily serving the recreational vehicle, energy, aerospace/avionics and bioscience industries. |
Fiscal Year - WSI Industries, Inc.s fiscal years represent a 52- to 53-week period ending the last Sunday in August. Fiscal 2008 consisted of 53 weeks. Fiscal 2010 and 2009 each consisted of 52 weeks. |
Basis of Presentation - The consolidated financial statements include the accounts of WSI Industries, Inc. and its subsidiaries. All material intercompany balances and transactions have been eliminated. Our consolidated financial statements for the year ended August 29, 2010 were evaluated for subsequent events. |
Cash and Cash Equivalents - Cash and cash equivalents include cash on hand, demand deposits with financial institutions and short-term, highly liquid investments with original maturities of three months or less. At times bank balances may exceed federally insured limits and the risk of losses related to such concentrations may have increased as a result of economic developments, particularly with the instability in the commercial and investment banking system. Cash equivalents are carried at cost plus accrued interest which approximates fair value. |
Inventories - Inventory costs determined using the average cost method consist of material, direct labor, and manufacturing overhead. They are valued at the lower of cost or market by comparing the cost of each item in inventory to its most recent sales price or sales order price. Inventory cost is adjusted down for any excess of cost over the net realizable value of inventory components. |
In addition, the Company determines whether its inventory is excess and obsolete by analyzing the sales history of its inventory, sales orders on hand and indications from the Companys customers as to the future of various parts or programs. If, in the Companys determination, the inventory value has become impaired, the Company adjusts the inventory value to the amount the Company estimates as the ultimate net realizable value for that inventory. The Company performs its lower of cost or market testing, as well as its excess or obsolete inventory analyses, quarterly. |
Property, plant, equipment and depreciation and amortization - The cost of substantially all machinery and equipment, and buildings and improvements are being depreciated using the straight-line method. The estimated useful lives of the assets are as follows: |
Machinery and equipment |
3 to 7 years | |||
Building and improvements |
15 to 40 years |
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Long-lived Assets - The Company evaluates long-term assets on a periodic basis in compliance with Accounting Standards Codification (ASC) 360, Accounting for the Impairment of Long-lived Assets when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets carrying amount. If the undiscounted cash flows are less than the carrying amount, the impairment recognized is measured by the amount the carrying value of the assets exceeds their fair value determined primarily through the present value of estimated future cash flows. |
Goodwill - The Company assesses the valuation of its goodwill according to the provisions of ASC 350 to determine if the current value of goodwill has been impaired. The Company follows the guidance provided by ASC 350 and utilizes a present value technique to measure fair value by estimating future cash flows. The Company constructs a discounted cash flow analysis based on various sales and costs assumptions to estimate the fair value of the Company which is the only reporting unit. If the fair value is determined to be less than the carrying value, the Company would recognize an impairment loss at the amount of the difference between carrying value and fair value as determined by the discounted cash flows. The result of the analysis performed in the fiscal 2010 fourth quarter did not indicate 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. |
Income Taxes - The Company accounts for income taxes using the liability method. Deferred income taxes are provided for temporary differences between the financial reporting and tax bases of assets and liabilities. The Company adopted ASC 740-10 effective for fiscal year 2008. The adoption of ASC 740-10 did not have a material impact on its financial statements or accompanying disclosures. ASC 740-10 prescribes a comprehensive model for how a company should recognize, measure, present, and disclose in its financial statements uncertain tax positions that the company has taken or expects to take on a tax return as well as how it accounts for interest and penalties related to income tax matters. ASC 740-10 states that a tax benefit from an uncertain position may be recognized if it is more likely than not that the position is sustainable, based on its technical merits. The tax benefit of a qualifying position is the largest amount of tax benefit that is greater than 50 percent likely of being realized upon ultimate settlement with a taxing authority having full knowledge of all relevant information. The Company currently recognizes a tax position if it is probable of being sustained. |
Revenue Recognition - Revenues from sales of product are recorded generally upon shipment. The Company considers its revenue recognition policy to fall under the guidance of FASBs 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) the Companys price is fixed as evidenced by the purchase order; and (d) collectability is reasonably assured. The Company refers to its revenues as net sales in its Consolidated Statements of Income as the Companys sales are reduced for any product returned by customers. |
The Company generally does not require collateral on its trade receivables. The maximum loss that the Company would incur if a customer failed to pay amounts owed would be limited to the recorded amount due after any allowances provided. Credit losses relating to customers have been minimal and within managements expectations. Based on managements evaluation of uncollected accounts receivable throughout the year, 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. |
Freight costs The Company includes freight, shipping and handling costs, in the cost of goods sold. |
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Use of Estimates - The preparation of financial statements in conformity with U. S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Significant estimates made in those financial statements consist of estimates related to the impairment of goodwill, the evaluation of excess or obsolete inventory and the valuation allowance connected to the deferred tax assets. |
Earnings per Share - Basic earnings per share is computed using the weighted average number of common shares outstanding. Diluted earnings per share is computed using the combination of dilutive common share equivalents and the weighted average number of common shares outstanding. |
Stock-based compensation - Effective August 28, 2006, the Company adopted the provisions of ASC 718, Share-Based Payment, which establishes accounting for equity instruments exchanged for employee services. Under the provisions of ASC 718, stock-based compensation cost is measured at the grant date, based on the calculated fair value of the award, and is recognized as an expense over the employees requisite service period (generally the vesting period of the equity grant). The Company adopted ASC 718 using the modified prospective method of transition, which requires the Company to record compensation expense over the vesting period for all awards granted after the date of adoption, and for the unvested portion of previously granted awards that remain outstanding at the date of adoption. Share based compensation expense included in the Consolidated Statement of Income was $210,712, $196,284 and $163,285 for the years ended August 29, 2010, August 30, 2009 and August 31, 2008, respectively. |
The following information has been determined as if the Company had accounted for its stock options under the fair value method of ASC 718. The fair value for these options was estimated, for the purpose of determining compensation, at the date of grant using the Black-Scholes option pricing model with the following assumptions as set forth in the table below. The estimated fair value of the options is amortized to expense over the options vesting period. |
2010 | 2009 | 2008 | ||||||||||
Date of Grant in fiscal - |
||||||||||||
Dividend yield |
| | 2.75% | |||||||||
Expected volatility |
69.8%-70.2% | 60.8% | 56.8% | |||||||||
Risk free interest rate |
2.6%-3.8% | 1.6%-2.47% | 3.5%-4.0% | |||||||||
Expected term |
5-10 years | 5-10 years | 5-10 years |
ASC 718 also requires the benefit of tax deductions in excess of recognized compensation cost to be reported as a financing cash flow, rather than an operating cash flow under current accounting literature. Since we do not have the benefit of tax deductions in excess of recognized compensation cost because of our net operating loss position, the change will have no immediate impact on our consolidated financial statements. |
The Company granted shares of non-vested restricted stock to various employees during the years ended August 29, 2010, August 30, 2009 and August 31, 2008. The grants consisted of both outright stock grants as well as stock that could be earned in connection with the Companys incentive compensation program should certain predetermined targets be met. Both kinds of non-vested restricted stock vest over three years with the grantees of the restricted stock entitled to receive dividends in additional shares of restricted stock that also vest yearly and to voting rights for the shares. The shares are accounted for under ASC 718 as expense over the period that they vest. The shares are also reflected in stockholders equity as deferred compensation which is calculated at the value of the shares at the date of the grant. |
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Recent Accounting Pronouncements |
In June 2009, FASB established Accounting Standards Codification (ASC) as the single source of authoritative accounting principles recognized by the FASB in the preparation of financial statements in conformity with the GAAP. The Codification will supersede all then-existing non-SEC accounting and reporting standards. All other non-grandfathered non-SEC accounting literature not included in the Codification will become non-authoritative. The Codification is effective for financial statements issued for interim and annual periods ending after September 15, 2009. We adopted the new guidance for which changed the way we reference accounting standards in our disclosures. Adoption of the Codification has not had a material impact on the Companys results of operations or financial position. |
In February 2010, the FASB issued ASU 2010-09, Subsequent Events (Topic 855): Amendments to Certain Recognition and Disclosure Requirements. This amendment addresses both the interaction of the requirements of this Topic with the SECs reporting requirements and the intended breadth of the reissuance disclosure provision related to subsequent events (paragraph 855-10-50-4). All of the amendments in this ASU are effective upon issuance of the final ASU, except for the use of the issued date for conduit debt obligors. That amendment is effective for interim or annual periods ending after June 15, 2010. The adoption of this ASU did not have a material impact on the Companys financial statements. |
In April 2010, the FASB issued ASU No. 2010-13, Compensation - Stock Compensation: Effect of Denominating the Exercise Price of a Share-Based Payment Award in the Currency of the Market in Which the Underlying Equity Security Trades. ASU 2010-13 clarifies that a share-based payment award with an exercise price denominated in the currency of a market in which a substantial portion of the entitys equity securities trades should not be considered to contain a condition that is not a market, performance, or service condition. Therefore, such an award should not be classified as a liability if it otherwise qualifies as equity. ASU 2010-13 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2010, with early adoption permitted. The Company is currently evaluating the potential impact of this standard. |
In July 2010, the FASB issued ASU 2010-20, Receivables (Topic 310): Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses. This ASU amends Topic 310 to improve the disclosures that an entity provides about the credit quality of its financing receivables and the related allowance for credit losses. As a result of these amendments, an entity is required to disaggregate by portfolio segment or class certain existing disclosures and provide certain new disclosures about its financing receivables and related allowance for credit losses. For public entities, the disclosures as of the end of a reporting period are effective for interim and annual reporting periods ending on or after December 15, 2010. The disclosures about activity that occurs during a reporting period are effective for interim and annual reporting periods beginning on or after December 15, 2010. The adoption of this ASU is not expected to have a material impact on the Companys consolidated financial statements. |
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2. | INVENTORIES |
Inventories consist primarily of raw material, work-in-process (WIP) and finished goods valued at the lower of cost or market value: |
August 29, 2010 | August 30, 2009 | |||||||
Raw material |
$ | 584,719 | $ | 467,765 | ||||
WIP |
939,085 | 1,135,058 | ||||||
Finished goods |
661,479 | 543,708 | ||||||
$ | 2,185,283 | $ | 2,146,531 | |||||
3. | DEBT |
Long-term debt consists of the following: |
August 29, 2010 | August 30, 2009 | |||||||
Building related mortgages & term debt |
$ | 1,442,676 | $ | 2,693,769 | ||||
Capitalized lease obligations |
3,459,021 | 4,283,651 | ||||||
4,901,697 | 6,977,420 | |||||||
Less current portion |
1,165,192 | 2,075,672 | ||||||
Long-term debt |
$ | 3,736,505 | $ | 4,901,748 | ||||
The Company purchased its land and building in May 2004 and at that time entered into two mortgages. The first mortgage was with its bank for $1,360,000 that matures on May 1, 2014. The mortgage had an initial interest rate of 5.37% and required monthly principal and interest payments of $8,307 based on a 25-year amortization schedule. Effective May 3, 2009 the interest rate adjusted to a rate 2.5% above the monthly yield on United States Treasury five-year securities. The new interest rate is 4.38% with monthly payments of $7,637 also based on a 25-year amortization schedule. The mortgage is secured by all assets of the Company. |
The Company also entered into a mortgage with the City of Monticello, Minnesota Economic Development Authority (MEDA). The MEDA mortgage is subordinated to the bank mortgage, carries an interest rate of 2% and requires monthly principal and interest payments of $1,483 based on a 25-year amortization schedule. Effective May 1, 2009, the Company amended the agreement extending the maturity date of the mortgage to May 1, 2011 when the entire balance is due. The interest and payment terms did not otherwise change. |
In August 2008, the Company entered into an agreement with its bank to finance a building addition to its existing manufacturing facility. The Company was able to draw upon the loan on a non-revolving basis through May 31, 2009 in an aggregate amount not to exceed $1,200,000. The loan balance at August 29, 2010 and August 30, 2009 was $0 and $1,200,000, respectively. The loan required monthly payments of interest only at the banks prime rate plus .50% and was paid in full on June 30, 2010. At August 30, 2009 the interest rate was 3.75%. The loan was secured by all assets of the Company. |
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Maturities of long-term debt are as follows: |
Fiscal years ending August: | ||||
2011 |
$ | 1,165,192 | ||
2012 |
827,638 | |||
2013 |
805,046 | |||
2014 |
1,732,749 | |||
2015 |
344,160 | |||
Thereafter |
26,912 |
Included in the consolidated balance sheet at August 29, 2010 are cost and accumulated depreciation on equipment subject to capitalized leases of $7,537,576 and $4,258,583, respectively. At August 30, 2009, the amounts were $7,537,576 and $3,377,891, respectively. The capital leases carry interest rates from 5.9% to 8.4% and mature from 2011 2016. |
The present value of the net minimum payments on capital leases as of August 29, 2010 is as follows: |
Fiscal years ending August: | ||||
2011 |
$ | 1,053,491 | ||
2012 |
935,974 | |||
2013 |
858,615 | |||
2014 |
743,525 | |||
2015 |
355,875 | |||
Thereafter |
27,130 | |||
Total minimum lease payments |
3,974,610 | |||
Less amount representing interest |
515,589 | |||
Present value of net minimum lease payments |
3,459,021 | |||
Current portion |
846,339 | |||
Capital lease obligation, less current portion |
$ | 2,612,682 | ||
Line of Credit: |
The Company renewed its revolving credit agreement with its bank on February 1, 2010. Under the agreement, the Company can borrow up to $1 million, with the loan being collateralized by all assets of the Company. The agreement expires February 1, 2011 and has restrictive provisions requiring minimum net worth, current and debt service coverage ratios as well as a maximum ratio of debt to tangible net worth. At August 29, 2010, the Company was in compliance with these provisions. Interest on any amounts borrowed under the agreement would be at a rate equal to the London Interbank Offered Rates (LIBOR) (.26% at August 29, 2010) plus 2.75%. However, the rate shall never be less than 4.5%. There were no amounts outstanding related to its revolving credit agreement at August 29, 2010 and August 30, 2009, respectively. |
4. | FAIR VALUE OF FINANCIAL INSTRUMENTS |
The carrying amounts of financial instruments, including cash and equivalents, receivables, accounts payable and accrued expenses, and current maturities on long-term debt obligations approximates fair values due to their short term nature. Interest on long-term debt is primarily at fixed rates which do not differ significantly from approximate market rates at August 29, 2010. |
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5. | STOCK-BASED COMPENSATION |
Stock Options - The 1994 Stock Option Plan was approved and 450,000 shares of common stock were reserved for granting of options to officers, key employees, and directors. The Plan expired on September 29, 2004 and therefore no shares remain to be granted. |
The 2005 Stock Option Plan was approved and 400,000 shares of common stock were reserved for granting of options to officers, key employees and directors. The Plan has a term of 10 years and will expire in 2015. |
Stock options vest over a period of six months to three years for both stock option plans. |
Option transactions during the three years ended August 29, 2010 are summarized as follows: |
1994 Stock | 2005 Stock | |||||||||||||||
Option Plan | Option Plan | |||||||||||||||
Average | Average | |||||||||||||||
Shares | Price | Shares | Price | |||||||||||||
Outstanding at August 26, 2007 |
90,500 | $ | 3.24 | 93,500 | $ | 3.42 | ||||||||||
Granted |
| | 57,000 | 5.39 | ||||||||||||
Forfeited |
| | (3,000 | ) | 3.21 | |||||||||||
Exercised |
(88,500 | ) | 3.25 | (25,834 | ) | 3.41 | ||||||||||
Outstanding at August 31, 2008 |
2,000 | $ | 2.75 | 121,666 | $ | 4.35 | ||||||||||
Granted |
| | 53,000 | 3.46 | ||||||||||||
Forfeited |
(2,000 | ) | 2.75 | | | |||||||||||
Exercised |
| | | | ||||||||||||
Outstanding at August 30, 2009 |
| $ | | 174,666 | $ | 4.08 | ||||||||||
Granted |
45,000 | 2.32 | ||||||||||||||
Forfeited |
| | ||||||||||||||
Exercised |
| | ||||||||||||||
Outstanding at August 29, 2010 |
219,666 | $ | 3.72 | |||||||||||||
Of the 88,500 stock options from the 1994 Plan and the 25,834 stock options from the 2005 Plan that were exercised in fiscal 2008, 56,469 shares were returned to the Company to pay for the exercise price and for related payroll withholding taxes. |
The weighted fair value of options granted during the years ended August 29, 2010, August 30, 2009 and August 31, 2008 was $1.74, $2.34 and $2.59, respectively. The total intrinsic value of options exercised for the years August 29, 2010, August 30, 2009 and August 31, 2008 periods was $0, $0 and $1,008,979, respectively. The intrinsic value for options outstanding at August 29, 2010 was $14,157. |
Cash received from option exercises for years ended August 29, 2010, August 30, 2009 and August 31, 2008 was $0, $0 and $42,085 respectively. The actual tax benefit realized for the tax deductions from option exercises totaled $0, $0 and $49,926 for fiscal years 2010, 2009 and 2008, respectively. |
As of August 29, 2010, there was $85,879 of total unearned compensation cost related to option-based compensation arrangements to be recognized over an expected weighted average of 1 year. |
As of August 29, 2010, there were 35,000 shares with an exercise price of $2.13, 127,666 shares with exercise prices between $3.00 and $3.47 and 57,000 options outstanding with an exercise price of $5.39. At August 29, 2010, outstanding options had a weighted-average remaining contractual life of 7 years. |
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The number of options exercisable as of August 29, 2010, August 30, 2009 and August 31, 2008 were 169,999, 115,666 and 75,166, respectively, at weighted average share prices of $4.01, $3.89, and $3.30 per share, respectively. At August 29, 2010, there were 49,667 options that had not vested. |
The Company also grants non-vested restricted shares as part of the 2005 Stock Option Plan. These shares typically vest over a three year period and sometimes contain required minimum threshold levels before the shares are earned. Non-vested restricted share transactions during the three years ended August 29, 2010 are as follows: |
Options | Average Price | |||||||
Outstanding at August 26, 2007 |
7,606 | $ | 3.47 | |||||
Granted |
37,461 | 6.12 | ||||||
Vested |
(2,692 | ) | 3.64 | |||||
Forfeited |
| | ||||||
Outstanding at August 31, 2008 |
42,375 | $ | 5.80 | |||||
Granted |
63,382 | 3.67 | ||||||
Vested |
(13,444 | ) | 5.53 | |||||
Forfeited |
(6,174 | ) | 6.93 | |||||
Outstanding at August 30, 2009 |
86,139 | $ | 4.20 | |||||
Granted |
58,405 | 2.38 | ||||||
Vested |
(20,129 | ) | 4.72 | |||||
Forfeited |
(41,104 | ) | 3.78 | |||||
Outstanding at August 29, 2010 |
83,311 | $ | 3.00 | |||||
As of August 29, 2010, there was $71,053 in total unrecognized compensation cost related to non-vested restricted stock compensation arrangements granted under the Plan. That cost is expected to be recognized over a weighted average period of 1 year. The total intrinsic value of restricted stock options that vested during the year ended August 29, 2010 was $44,371. |
6. | INCOME TAXES |
Income taxes consisted of the following: |
Years Ended | ||||||||||||
August 29, | August 30, | August 31, | ||||||||||
2010 | 2009 | 2008 | ||||||||||
Current: |
||||||||||||
Federal |
$ | 15,289 | $ | | $ | 5,280 | ||||||
State |
15,676 | (9,971 | ) | 33,048 | ||||||||
30,965 | (9,971 | ) | 38,328 | |||||||||
Deferred: |
||||||||||||
Federal |
323,378 | (72,577 | ) | 741,360 | ||||||||
State |
4,246 | (6,994 | ) | 16,117 | ||||||||
327,624 | (79,571 | ) | 757,477 | |||||||||
Total |
$ | 358,589 | $ | (89,542 | ) | $ | 795,805 | |||||
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A reconciliation of the federal income tax provision at the statutory rate with actual taxes provided on earnings from continuing operations is as follows: |
Years Ended | ||||||||||||
August 29, | August 30, | August 31, | ||||||||||
2010 | 2009 | 2008 | ||||||||||
Ordinary federal income tax statutory rate |
34.0 | % | (34.0 | )% | 34.0 | % | ||||||
State income taxes net of federal tax effect |
2.0 | (2.0 | ) | 3.3 | ||||||||
Other |
| | (2.3 | ) | ||||||||
Effective rate |
36.0 | % | (36.0 | )% | 35.0 | % | ||||||
Deferred income taxes are provided for the temporary differences between the financial reporting and tax basis of the Companys assets and liabilities. Temporary differences, net operating loss carryforwards, and valuation allowances comprising the net deferred taxes on the balance sheet are as follows: |
August 29, 2010 | August 30, 2009 | |||||||
Deferred Tax Assets |
||||||||
Accrued liabilities |
$ | 78,998 | $ | 70,740 | ||||
Inventory valuation adjustments |
26,262 | 53,979 | ||||||
Net operating loss carryforwards |
827,896 | 1,238,293 | ||||||
Tax credit carryforwards |
510,993 | 522,293 | ||||||
Stock option expense |
151,244 | 109,462 | ||||||
Other |
114,989 | 78,579 | ||||||
1,710,382 | 2,073,346 | |||||||
Deferred Tax Liabilities |
||||||||
Tax depreciation and
amortization greater than book |
(1,279,768 | ) | (1,272,257 | ) | ||||
Net deferred tax asset |
$ | 430,614 | $ | 801,089 | ||||
Based on the long-term nature of its net operating loss carryforwards and the Companys recent operating history and growth prior to the fiscal 2009 recession, management believes that it is more likely than not that the Company will be able to generate taxable income in the future sufficient to utilize these deductions and carryforwards, and accordingly no tax asset valuation allowance is deemed necessary. |
As of August 29, 2010, the Company had federal net operating loss carryforwards of approximately $2.3 million expiring in 2021-2029. Also as of August 29, 2010, the Company had $464,000 in federal alternative minimum tax (AMT) credit carryforward that has no expiration. The AMT credits are available to offset future tax liabilities only to the extent that the Company has regular tax liabilities in excess of AMT tax liabilities. |
7. | EMPLOYEE BENEFITS |
The Company maintains a 401(k) retirement savings plan that all employees are eligible to participate in as well as a profit sharing plan. Profit sharing contributions are discretionary and are based on Company results. Contributions charged to operations for the profit sharing plan and matching contributions for the 401(k) plan for fiscal 2010, 2009 and 2008, were $184,037, $137,762 and $306,864, respectively. |
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8. | INFORMATION CONCERNING SALES TO MAJOR CUSTOMERS |
The Company had sales to two customers that exceeded 10 percent of total sales during fiscal years 2010, 2009 and 2008 as listed below: |
2010 | 2009 | 2008 | ||||||||||
Customer # 1 |
$ | 11,922,000 | $ | 9,652,000 | $ | 13,818,000 | ||||||
Customer # 2 |
$ | 4,480,000 | $ | 5,680,000 | $ | 8,719,000 |
The Company had accounts receivable from customer #1 of $2,171,000 and $1,379,000 at August 29, 2010 and August 30, 2009, respectively. The Company had accounts receivable from customer #2 of $633,000 and $803,000 at August 29, 2010 and August 30, 2009, respectively. Realization of these receivables, sale of inventory, and its future operations could be significantly affected by adverse changes in the financial condition or the Companys relationship with these customers. |
9. | EARNINGS PER SHARE |
The following table sets forth the computation of basic and diluted earnings per share: |
2010 | 2009 | 2008 | ||||||||||
Net Income (loss) |
$ | 637,493 | $ | (159,185 | ) | $ | 1,477,923 | |||||
Denominator for earnings per share: |
||||||||||||
Weighted average shares;
denominator for basic earnings
per share |
2,801,210 | 2,789,717 | 2,751,779 | |||||||||
Effect of dilutive securities;
employee and non-employee options |
| | 65,175 | |||||||||
Dilutive common shares;
denominator for diluted earnings
per share |
2,801,210 | 2,789,717 | 2,816,954 | |||||||||
Basic earnings (loss) per share |
$ | .23 | $ | (.06 | ) | $ | .54 | |||||
Dilutive earnings (loss) per share |
$ | .23 | $ | (.06 | ) | $ | .52 | |||||
Stock options for the purchase of 219,666 shares and 83,311 non-vested restricted shares at August 29, 2010 were not used for the calculation of earnings per share or weighted average shares outstanding on a fully diluted basis. |
10. | OTHER ASSETS |
Goodwill consists of costs resulting from business acquisitions which total $2,368,452 (net of accumulated amortization of $344,812 recorded prior to the adoption of ASC 350 Goodwill and Other Intangible Assets). |
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