Form 8-K WSI INDUSTRIES, INC. For: Oct 18

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

 

PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

 

Date of Report (date of earliest event reported): October 18, 2016

 

WSI Industries, Inc.

(Exact name of Registrant as Specified in its Charter)

 

Minnesota

(State Or Other Jurisdiction Of Incorporation)

 

000-00619		41-0691607
(Commission		(I.R.S. Employer
File Number)		Identification No.)

 

213 Chelsea Road Monticello, MN		55362
(Address Of Principal Executive Offices)		(Zip Code)

 

(763) 295-9202

Registrant’s Telephone Number, Including Area Code

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

	[  ]	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
	[  ]	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
	[  ]	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
	[  ]	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 

Items under Sections 1, 3, 4, 6, 7, and 8 are not applicable and therefore omitted.

 

Item 2.02

Results of Operations and Financial Condition.

 

WSI Industries, Inc. (the “Company”) issued a press release on October 18, 2016 disclosing material non-public information regarding its results of operations for the fourth quarter and fiscal year ended August 28, 2016. The Company hereby furnishes the press release, which is attached hereto as Exhibit 99.1.

 

Item 5.02

Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

 

Adjustments to Base Salaries for 2017 and 2017 Incentive Play Delay

 

On October 18, 2016, the Company’s Compensation Committee set the annual base salaries for the Company’s executive officers, Benjamin T. Rashleger, President and Chief Executive Officer, and Paul D. Sheely, Chief Financial Officer effective October 31, 2016. Mr. Rashleger’s and Mr. Sheely’s annual base salaries will both be decreased 10% to $229,500 and $138,600, respectively.

 

On October 18, 2016, the Company’s Compensation Committee determined to delay adoption of a cash incentive compensation plan for fiscal year 2017 (the “2017 Incentive Plan”) until February 2017. The Compensation Committee felt that the delay of the adoption of the 2017 Incentive Plan, as well as the pay decreases to the Company’s executive officers, was appropriate at this time given the uncertain economic environment and financial impact on the Company during the demand gap with the Company’s primary customer as described in the Company’s press release dated October 18, 2016. The Compensation Committee will reevaluate the adoption of a 2017 Incentive Plan and the executive officer pay adjustments prior to the end of the Company’s fiscal second quarter, which is when sales to the Company’s primary customer are expected to resume to normal levels following the demand gap.

 

Payouts under 2016 Cash Incentive Plan

 

On October 18, 2016, the Company’s Compensation Committee determined the achievement and payout to executive officers under the Company’s fiscal year 2016 cash incentive plan that was adopted on October 20, 2015 (the “2016 Incentive Plan”).

 

Under the 2016 Incentive Plan, Messrs. Rashleger and Sheely were eligible for a cash bonuses of a percentage of his respective base salary based upon the Company’s achievement of performance goals in fiscal year 2016 relating to adjusted pre-tax income for fiscal year 2016 and value-add sales in fiscal year 2016 as compared to fiscal year 2015 and, for Mr. Sheely, achievement of departmental goals in 2016. If the Company’s fiscal year 2016 achievement failed to meet the minimum performance goals under the matrix established for the 2016 Incentive Plan, Mr. Rashleger would be entitled to no incentive payment under the 2016 Incentive Plan and Mr. Sheely would be entitled to no incentive payment under the 2016 Incentive Plan regardless of his achievement of department goals.

 

Based on the fiscal year 2016 results for value-added sales and adjusted pre-tax income, the Compensation Committee determined that the results did not meet the minimum performance goals under the matrix. Accordingly, neither Messrs. Rashleger or Sheely were entitled to any incentive payment under the 2016 Incentive Plan.

 

 

Item 9.01

Financial Statements And Exhibits.

 

Exhibit No.		Description
99.1		Press Release issued on October 18, 2016.

 

 

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 hereunto duly authorized.

 

	WSI INDUSTRIES, INC.
	By:	/s/ Benjamin T. Rashleger
		Benjamin T. Rashleger
		Chief Executive Officer

 

Date: October 20, 2016

 

 

 

For Immediate Release

 

WSI Industries Reports Fourth Quarter and Full Year Results

 

October 18, 2016—Minneapolis, MN—WSI Industries, Inc. (Nasdaq: WSCI) today reported annual sales for the fiscal 2016 year ending August 28, 2016 of $35,216,000 versus the prior year’s sales of $42,983,000. The Company also reported full year net income of $173,000, or $.06 per diluted share versus $997,000 or $.34 per diluted share in the prior year.

 

For the fiscal 2016 fourth quarter, the Company reported sales of $8,110,000 versus the prior year’s quarter of $8,779,000 while the Company incurred a net loss of $43,000 or $.01 per diluted share as compared to a net loss of $34,000 or $.01 per diluted share in the prior year’s fiscal fourth quarter.

 

Included in both fiscal 2016 and fiscal 2015 year-to-date income were income tax benefits related primarily to the utilization of research and development tax credits of $418,000 and $334,000, respectively. For the fiscal 2016 and 2015 fiscal fourth quarters the amounts related to these tax benefits were $242,000 and $214,000, respectively.

 

Benjamin Rashleger, president and chief executive officer, commented: “During the fiscal fourth quarter, the Company’s primary customer’s demand unexpectedly softened while sales to the energy business remained at minimal levels. These sales shortfalls have led to capacity and manufacturing inefficiencies that have continued to negatively impact gross margins, especially due to the heavy capital requirements of our business.

 

We expect, in the short term, to continue to experience a difficult economic environment. During portions of the Company’s first two fiscal quarters of fiscal 2017, our primary customer will have a gap in their demand with us as they retool one of their production facilities. During this period, the Company will not be shipping parts that are utilized for production in this facility, which will impact our sales and earnings. We expect this gap to be a one-time event and that sales will recommence at normal levels once production has resumed.

 

While our business is impacted by a softening economic environment, we have continued to invest in our organization, and remain focused on the long-term infrastructure, people and systems required to support our business and future growth. Our employees have gone through thousands of hours of training this past year to improve their capabilities, and we have continued to hire and recruit the best employees. All of these efforts will assist in driving the successful capture, launch and execution of new long-term programs. In addition, we have gained traction in our business development efforts. Our request for quote count has increased significantly, and we have been awarded programs with 26% of the customer prospects we have quoted resulting in the addition of several new customers in the past year. While the volumes and dollar values start slow, demonstrating capability, quality and service are necessary steps in the customer development process to expand them into large core accounts for WSI, which is our primary business development objective.”

 

Rashleger concluded: “WSI’s core mission has not changed: We are striving to achieve diversified growth through the expansion of our contract manufacturing services; we will develop the best people and foster an environment of empowerment and accountability for them to work in; and we will invest in technology and insist on operational excellence. We believe that if we continue to focus on these items, we will be able to provide our shareholders with superior returns. Our focus is on execution, and we are confident that our efforts will produce positive results over the long-term.”

 

WSI Industries, Inc. is a leading contract manufacturer that specializes in the machining of complex, high-precision parts for a wide range of industries, including automotive, avionics and aerospace, energy, recreational powersports vehicles, small engines, marine, bioscience and the defense market.

 

#        #        #

 

For additional information:

 

Benjamin Rashleger (President & CEO) or Paul D. Sheely (CFO) 763-295-9202

 

The statements included herein which are not historical or current facts are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Reform Act of 1995. There are certain important factors which could cause actual results to differ materially from those anticipated by some of the statements made herein, including the Company’s ability to retain current programs and obtain additional manufacturing programs, and other factors detailed in the Company’s filings with the Securities and Exchange Commission.

  

 

CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited)

In thousands, except per share amounts

 

		Quarter ended								Year ended
		August 28, 2016				August 30, 2015				August 28, 2016				August 30, 2015
Net Sales		$	8,110			$	8,779			$	35,216			$	42,983
Cost of products sold			7,672				8,441				32,292				38,659
Gross margin			438				338				2,924				4,324
Selling and administrative expense			803				632				3,012				2,972
Interest and other income			(1	)			(1	)			(22	)			(6	)
Interest expense			72				87				308				346
Net Income (loss) before taxes			(436	)			(380	)			(374	)			1,012
Income tax expense (benefit)			(393	)			(346	)			(547	)			15
Net income (loss)		$	(43	)		$	(34	)		$	173			$	997
Basic earnings (loss) per share		$	(0.01	)		$	(0.01	)		$	0.06			$	0.34
Diluted earnings (loss) per share		$	(0.01	)		$	(0.01	)		$	0.06			$	0.34
Weighted average number of common  shares outstanding			2,920				2,916				2,920				2,910
Weighted average number of common and dilutive potential common shares			2,920				2,916				2,928				2,960

 

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

In thousands

 

		August 28, 2016				August 30, 2015
Assets:
Total Current Assets		$	10,897			$	13,747
Property, Plant, and Equipment, Net			11,461				12,901
Other Assets			3,625				2,379
Total Assets		$	25,983			$	29,027
Liabilities and Shareholders’ Equity:
Total Current Liabilities		$	3,815			$	4,919
Long-Term Debt			6,786				8,343
Deferred Tax Liabilities			1,403				1,890
Shareholders’ Equity			13,979				13,875
Total Liabilities and Shareholders’ Equity		$	25,983			$	29,027

 

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)

In thousands

 

		Year Ended
		August 28, 2016				August 30, 2015
Cash flows from operating activities (1)		$	2,978			$	3,241
Cash used in investing activities			(378	)			(192	)
Cash used in financing activities			(3,011	)			(2,132	)
Net increase (decrease) in cash and cash equivalents			(411	)			917
Cash and cash equivalents at beginning of period			4,150				3,233
Cash and cash equivalents at end of period		$	3,739			$	4,150

 

(1) Cash flows from operating activities includes non-cash adjustments for depreciation and stock option compensation expense of $2,001 and $2,226 at August 28, 2016 and August 30, 2015, respectively.

 

 

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