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
(Do not check if a smaller reporting company) |
Smaller reporting company þ |
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Stock Price | ||||||||
High | Low | |||||||
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 | ||||||
FISCAL 2008:
|
||||||||
First quarter
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$ | 7.08 | $ | 4.31 | ||||
Second quarter
|
10.80 | 5.30 | ||||||
Third quarter
|
17.45 | 7.68 | ||||||
Fourth quarter
|
12.71 | 6.05 |
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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
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174,666 | $ | 4.08 | 107,312 | ||||||||
|
||||||||||||
|
||||||||||||
Total
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174,666 | $ | 4.08 | 107,312 | ||||||||
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Fiscal 2009 | Fiscal 2008 | Fiscal 2007 | ||||||||||
Recreational vehicle
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$ | 10,121,000 | $ | 14,050,000 | $ | 14,330,000 | ||||||
Aerospace and defense
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1,507,000 | 2,219,000 | 1,944,000 | |||||||||
Energy
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6,693,000 | 8,856,000 | 1,449,000 | |||||||||
Biosciences
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351,000 | 504,000 | 819,000 | |||||||||
Other
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94,000 | 253,000 | 266,000 | |||||||||
|
||||||||||||
|
$ | 18,766,000 | $ | 25,882,000 | $ | 18,808,000 | ||||||
|
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Table of Contents
Table of Contents
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18
Exhibit
No.
Description
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.
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.
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).
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).
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.
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.
Form of Restricted Stock Bonus Award Agreement under the
Companys 2005 Stock Plan.
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.
Table of Contents
Exhibit
No.
Description
Employment Agreement between Michael J. Pudil and
Registrant dated November 4, 1993, is incorporated by
reference from Exhibit 10.4 of Registrants Form 10K for
the fiscal year ended August 28, 1994.
Amendment dated January 9, 1997 to the Employment
Agreement between the Registrant and Michael J. Pudil
incorporated by reference from Exhibit 10 of the
Registrants Form 10-Q for the quarter ended February 23,
1997.
Second Amendment to Employment Agreement dated December
29, 2008 by and between WSI Industries, Inc. and Michael
J. Pudil. Incorporated by reference to Exhibit 10.1 to
the Registrants Form 8-K dated December 29, 2008.
Employment (Change in Control) Agreement between Michael
J. Pudil and Registrant dated January 11, 2001.
Incorporated by reference from Exhibit 10.1 of the
Registrants Form 10-Q for the quarter ended May 27,
2001.
Amendment No. 1 to Employment (Change in Control)
Agreement between Michael J. Pudil and Registrant dated
November 1, 2002. Incorporated by reference from Exhibit
10.10 of the Registrants Form 10-K for the year ended
August 25, 2002.
Second Amendment to Employment (Change in Control)
Agreement dated December 29, 2008 by and between WSI
Industries, Inc. and Michael J. Pudil. Incorporated by
reference to Exhibit 10.2 of the Registrants Form 8-K
dated December 29, 2008.
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.
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.
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.
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.
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.
Table of Contents
Exhibit
No.
Description
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
Table of Contents
Exhibit
No.
Description
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.
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 10.7 of the Registrants Form 8-K dated May 3,
2004.
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.
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.
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.
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.
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.
Table of Contents
Exhibit
No.
Description
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.
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.
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.
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.
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.
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.
Consent of Schechter Dokken Kanter Andrews & Selcer Ltd.
Certification of Chief Executive Officer pursuant to
Rules 13a-14 and 15d-14 of the Exchange Act.
Certification of Chief Financial Officer pursuant to
Rules 13a-14 and 15d-14 of the Exchange Act.
Certificate pursuant to 18 U.S.C. §1350.
Table of Contents
19
20
WSI INDUSTRIES, INC.
BY:
/s/ Michael J. Pudil
Michael J. Pudil
Chief Executive Officer
BY:
/s/ Paul D. Sheely
Paul D. Sheely
Vice President and Treasurer
Signature
Title
Date
/s/ Michael J. Pudil
Chief Executive Officer and Director
November 25, 2009
/s/ Paul Baszucki
Director
November 25, 2009
Paul Baszucki
/s/ Thomas C. Bender
Director
November 25, 2009
Thomas C. Bender
/s/ Burton F. Myers II
Director
November 25, 2009
Burton F. Myers II
/s/ Eugene J. Mora
Director
November 25, 2009
Eugene J. Mora
Table of Contents
CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE
Page
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26-36
Table of Contents
21
WSI Industries, Inc.
Monticello, Minnesota
/s/ Schechter Dokken Kanter
Andrews & Selcer Ltd
November 25, 2009
Table of Contents
2009 | 2008 | |||||||
ASSETS
|
||||||||
|
||||||||
Current assets:
|
||||||||
Cash and cash equivalents
|
$ | 2,879,952 | $ | 1,843,601 | ||||
Accounts receivable, less allowance for doubtful
accounts of $10,074
|
2,735,586 | 3,753,354 | ||||||
Inventories (Note 2)
|
2,146,531 | 2,536,006 | ||||||
Prepaid and other current assets
|
51,902 | 188,933 | ||||||
Deferred tax assets (Note 6)
|
156,812 | 163,829 | ||||||
|
||||||||
Total current assets
|
7,970,783 | 8,485,723 | ||||||
|
||||||||
Property, plant, and equipment, at cost:
|
||||||||
Land
|
819,000 | 819,000 | ||||||
Building and improvements
|
2,286,077 | 2,024,164 | ||||||
Machinery and equipment
|
11,065,856 | 10,028,147 | ||||||
Less accumulated depreciation
|
(6,650,574 | ) | (5,640,796 | ) | ||||
|
||||||||
Total property, plant, and equipment
|
7,520,359 | 7,230,515 | ||||||
|
||||||||
Deferred tax assets (Note 6)
|
644,277 | 557,689 | ||||||
|
||||||||
Other assets (Note 10):
|
||||||||
Deferred financing costs, net of accumulated
amortization of $33,063 and $28,654, respectively
|
| 4,409 | ||||||
Goodwill and related acquisition costs
|
2,368,452 | 2,368,452 | ||||||
|
||||||||
|
$ | 18,503,871 | $ | 18,646,788 | ||||
|
||||||||
LIABILITIES AND STOCKHOLDERS EQUITY
|
||||||||
|
||||||||
Current liabilities:
|
||||||||
Trade accounts payable
|
$ | 2,007,516 | $ | 2,498,624 | ||||
Accrued compensation and employee withholdings
|
313,071 | 719,208 | ||||||
Other accrued expenses
|
171,450 | 54,723 | ||||||
Current portion of long-term debt (Note 3)
|
2,075,672 | 1,025,414 | ||||||
|
||||||||
Total current liabilities
|
4,567,709 | 4,297,969 | ||||||
|
||||||||
Long-term debt, less current portion (Note 3)
|
4,901,748 | 5,237,460 | ||||||
|
||||||||
Stockholders equity
(Note 5):
|
||||||||
Common stock, par value $.10 a share; authorized
10,000,000 shares; issued and outstanding
2,878,868 shares and 2,825,358 respectively
|
287,886 | 282,536 | ||||||
Capital in excess of par value
|
2,871,068 | 2,573,797 | ||||||
Deferred compensation
|
(361,861 | ) | (245,984 | ) | ||||
Retained earnings
|
6,237,321 | 6,501,010 | ||||||
|
||||||||
Total stockholders equity
|
9,034,414 | 9,111,359 | ||||||
|
||||||||
|
$ | 18,503,871 | $ | 18,646,788 | ||||
|
22
2009 | 2008 | 2007 | ||||||||||
|
||||||||||||
Net sales (Note 8)
|
$ | 18,765,982 | $ | 25,881,818 | $ | 18,808,260 | ||||||
|
||||||||||||
Cost of products sold
|
16,394,530 | 20,987,594 | 15,332,766 | |||||||||
|
||||||||||||
Gross margin
|
2,371,452 | 4,894,224 | 3,475,494 | |||||||||
|
||||||||||||
Selling and administrative expense
|
2,225,914 | 2,492,226 | 2,156,133 | |||||||||
Gain on sale of equipment
|
| (102,326 | ) | (22,400 | ) | |||||||
Interest and other income
|
(22,385 | ) | (75,967 | ) | (59,446 | ) | ||||||
Interest expense
|
416,650 | 306,563 | 196,894 | |||||||||
|
||||||||||||
|
2,620,179 | 2,620,496 | 2,271,181 | |||||||||
|
||||||||||||
|
||||||||||||
Income (loss) before income taxes
|
(248,727 | ) | 2,273,728 | 1,204,313 | ||||||||
|
||||||||||||
Income taxes (benefits) (Note 6)
|
(89,542 | ) | 795,805 | 457,639 | ||||||||
|
||||||||||||
|
||||||||||||
Net income(loss)
|
$ | (159,185 | ) | $ | 1,477,923 | $ | 746,674 | |||||
|
||||||||||||
|
||||||||||||
Basic earnings (loss) per share
|
$ | (.06 | ) | $ | .54 | $ | .28 | |||||
|
||||||||||||
|
||||||||||||
Diluted earnings (loss) per share
|
$ | (.06 | ) | $ | .52 | $ | .27 | |||||
|
||||||||||||
|
||||||||||||
Cash dividend per share
|
$ | .0375 | $ | .15 | $ | .15 | ||||||
|
||||||||||||
|
||||||||||||
Weighted average number of common
shares outstanding, basic
|
2,789,717 | 2,751,779 | 2,700,385 | |||||||||
|
||||||||||||
|
||||||||||||
Weighted average number of
common shares outstanding, diluted
|
2,789,717 | 2,816,954 | 2,751,556 | |||||||||
|
23
Common | Capital in | Total | ||||||||||||||||||||||
Stock | Excess of | Deferred | Retained | Stockholders | ||||||||||||||||||||
Shares | Amount | Par Value | Compensation | Earnings | Equity | |||||||||||||||||||
Balance at August 27, 2006
|
2,680,630 | $ | 268,063 | $ | 2,129,167 | $ | | $ | 5,094,045 | $ | 7,491,275 | |||||||||||||
|
||||||||||||||||||||||||
Net income
|
| | | | 746,674 | 746,674 | ||||||||||||||||||
Restricted stock grants
|
7,606 | 761 | 25,816 | (26,577 | ) | | | |||||||||||||||||
Stock option compensation
|
| | 61,873 | | | 61,873 | ||||||||||||||||||
Exercise of stock options
|
10,389 | 1,039 | 19,152 | | | 20,191 | ||||||||||||||||||
Exercise of stock
appreciation rights and
payment of withholding
taxes
|
32,540 | 3,254 | (21,086 | ) | | | (17,832 | ) | ||||||||||||||||
Dividends paid
|
| | | | (404,099 | ) | (404,099 | ) | ||||||||||||||||
|
||||||||||||||||||||||||
|
||||||||||||||||||||||||
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 | ||||||||||||
|
24
25
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 2009 and 2007 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 30, 2009 were evaluated for subsequent events through November 25, 2009, the date the consolidated financial statements were issued. | ||
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 10 years | |
Building and improvements | 15 to 40 years |
26
Long-lived Assets The Company evaluates long-term assets on a periodic basis in compliance with Statement of Financial Accounting Standards (SFAS) No. 144, 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 SFAS 142 to determine if the current value of goodwill has been impaired. 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 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 2009 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 FIN 48 effective for fiscal year 2008. The adoption of FIN 48 did not have a material impact on its financial statements or accompanying disclosures. FIN 48 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. FIN 48 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. |
27
Use of Estimate s 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 SFAS No. 123(R), Share-Based Payment , which establishes accounting for equity instruments exchanged for employee services. Under the provisions of SFAS 123(R), 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 SFAS 123(R) 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 $196,284, $163,285 and $61,873 for the years ended August 30, 2009, August 31, 2008 and August 26, 2007, respectively. | ||
The following information has been determined as if the Company had accounted for its stock options under the fair value method of SFAS 123. 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. |
Date of Grant in fiscal | 2009 | 2008 | 2007 | |||||||||
Dividend yield
|
| 2.75 | % | 3.75 | % | |||||||
Expected volatility
|
60.80 | % | 56.80 | % | 60.11 | % | ||||||
Risk free interest rate
|
1.6%-2.47 | % | 3.5%-4.0 | % | 4.41%-4.62 | % | ||||||
Expected term
|
5-10 years | 5-10 years | 5-10 years |
SFAS No. 123 (R) 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 30, 2009, August 31, 2008 and August 26, 2007. 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 SFAS No. 123(R) 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. |
28
Recent Accounting Pronouncements | ||
In June 2009, FASB issued SFAS 168, The FASB Accounting Standards Codification and Hierarchy of Generally Accepted Accounting Principles. SFAS 168 defines the new hierarchy for U.S. GAAP and explains how the FASB will use its Accounting Standards Codification (ASC) as the sole source for all authoritative guidance. The ASC will be effective for all reporting periods that end after September 15, 2009, which means it will be effective for our fiscal year beginning August 31, 2009. We expect that the adoption of this standard will have no impact on our financial statements. | ||
In May 2009, the FASB issued SFAS No. 165 Subsequent Events (SFAS 165). SFAS 165 establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. SFAS 165 sets forth the following: (a) the period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements; (b) the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements; and (c) the disclosures that an entity should make about events or transactions that occurred after the balance sheet date. SFAS 165 is effective for interim or annual financial periods ending after June 15, 2009. The adoption of this statement did not have a material effect on the Companys financial statements. | ||
In April 2008, the FASB issued FSP SFAS 142-3, Determination of the Useful Life of Intangible Assets (FSP 142-3). This guidance is intended to improve the consistency between the useful life of a recognized intangible asset under SFAS No. 142, Goodwill and Other Intangible Assets, and the period of expected cash flows used to measure the fair value of the asset under SFAS 141R when the underlying arrangement includes renewal or extension of terms that would require substantial costs or result in a material modification to the asset upon renewal or extension. Companies estimating the useful life of a recognized intangible asset must now consider their historical experience in renewing or extending similar arrangements, or in the absence of historical experience, must consider assumptions that market participants would use about renewal or extension as adjusted for SFAS 142s entity-specific factors. FSP 142-3 is effective for us beginning August 31, 2009. We do not expect the adoption of FSP 142-3 to have a material impact on us. | ||
In February 2008, the FASB issued Financial Staff Position (FSP) SFAS 157-2, Effective Date of FASB Statement No. 157 (FSP 157-2), which delays the effective date of SFAS No. 157, Fair Value Measurement (SFAS 157), for all nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). SFAS 157 establishes a framework for measuring fair value and expands disclosures about fair value measurements. FSP 157-2 partially defers the effective date of SFAS 157 to fiscal years beginning after November 15, 2008, and interim periods within those fiscal years for items within the scope of this FSP. The adoption of SFAS 157 for all nonfinancial assets and nonfinancial liabilities is effective for us beginning August 31, 2009. We do not expect this adoption to have a material impact on us. |
29
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 30, 2009 | August 31, 2008 | |||||||
|
||||||||
Raw material
|
$ | 467,765 | $ | 1,004,577 | ||||
WIP
|
1,135,058 | 883,284 | ||||||
Finished goods
|
543,708 | 648,145 | ||||||
|
||||||||
|
$ | 2,146,531 | $ | 2,536,006 | ||||
|
3. | DEBT | |
Long-term debt consists of the following: |
August 30, 2009 | August 31, 2008 | |||||||
|
||||||||
Building related mortgages & term debt
|
$ | 2,693,769 | $ | 2,113,763 | ||||
Capitalized lease obligations
|
4,283,651 | 4,149,111 | ||||||
|
||||||||
|
6,977,420 | 6,262,874 | ||||||
Less current portion
|
2,075,672 | 1,025,414 | ||||||
|
||||||||
Long-term debt
|
$ | 4,901,748 | $ | 5,237,460 | ||||
|
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 30, 2009 and August 31, 2008 was $1,200,000 and $575,000, respectively. The loan requires monthly payments of interest only at the banks prime rate plus .50% with the loan due in full on June 30, 2010. At August 30, 2009 and August 31, 2008, the interest rate was 3.75% and 5.50%, respectively. The loan is secured by all assets of the Company. |
30
Maturities of long-term debt are as follows: |
Fiscal years ending August:
|
||||
2010
|
$ | 2,075,672 | ||
2011
|
1,165,192 | |||
2012
|
827,638 | |||
2013
|
805,046 | |||
2014
|
1,732,800 | |||
Thereafter
|
371,072 |
Included in the consolidated balance sheet at August 30, 2009 are cost and accumulated depreciation on equipment subject to capitalized leases of $7,537,576 and $3,377,891, respectively. At August 31, 2008, the amounts were $6,615,286 and $2,523,012, respectively. The capital leases carry interest rates from 5.9% to 8.4% and mature from 2010 2016. | ||
The present value of the net minimum payments on capital leases as of August 30, 2009 is as follows: |
Fiscal years ending August:
|
||||
2010
|
$ | 1,089,146 | ||
2011
|
1,053,491 | |||
2012
|
935,974 | |||
2013
|
858,615 | |||
2014
|
743,525 | |||
Thereafter
|
383,005 | |||
|
||||
Total minimum lease payments
|
5,063,756 | |||
Less amount representing interest
|
780,105 | |||
|
||||
Present value of net minimum lease payments
|
4,283,651 | |||
Current portion
|
824,630 | |||
|
||||
Capital lease obligation, less current portion
|
$ | 3,459,021 | ||
|
Line of Credit: | ||
The Company renewed its revolving credit agreement with its bank on January 31, 2009. 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, 2010 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 30, 2009, the Company was in compliance with these provisions except for the annual debt service coverage ratio. The Company has received a waiver from its bank with respect to the annual debt service coverage ratio through August 31, 2009. Interest on any amounts borrowed under the agreement would be at a rate equal to the London Interbank Offered Rates (LIBOR) (.26% at August 30, 2009) 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 30, 2009 and August 31, 2008, 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 30, 2009. |
31
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 30, 2009 are summarized as follows: |
1994 Stock | 2005 Stock | |||||||||||||||
Option Plan | Option Plan | |||||||||||||||
Average | Average | |||||||||||||||
Shares | Price | Shares | Price | |||||||||||||
Outstanding at August 27, 2006
|
231,499 | $ | 3.13 | 83,000 | $ | 3.44 | ||||||||||
Granted
|
| | 30,500 | 3.40 | ||||||||||||
Forfeited
|
(25,000 | ) | 3.63 | | | |||||||||||
Exercised
|
(115,999 | ) | 2.93 | (20,000 | ) | 3.44 | ||||||||||
|
||||||||||||||||
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 | ||||||||||
|
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 30, 2009, August 31, 2008 and August 26, 2007 was $2.34, $2.59 and $1.53, respectively. The total intrinsic value of options exercised for the years August 30, 2009, August 31, 2008 and August 26, 2007 periods was $0, $1,008,979 and $17,035, respectively. As all unexercised options had exercise prices above the ending stock price at August 30, 2009, there was no intrinsic value for options outstanding or exercisable at that date. | ||
Cash received from option exercises for years ended August 30, 2009, August 31, 2008 and August 26, 2007 was $0, $42,085 and $14,405 respectively. The actual tax benefit realized for the tax deductions from option exercises totaled $0, $49,926 and $3,021 for fiscal years 2009, 2008 and 2007, respectively. | ||
As of August 30, 2009, there was $122,268 of total unearned compensation cost related to option-based compensation arrangements to be recognized over an expected weighted average of 1 year. |
32
As of August 30, 2009, there were 117,666 shares with exercise prices between $3.09 and $3.47 and 57,000 options outstanding with an exercise price of $5.39. At August 30, 2009, outstanding options had a weighted-average remaining contractual life of 7 years. | ||
The number of options exercisable as of August 30, 2009, August 31, 2008 and August 26, 2007 were 115,666, 75,166 and 134,004, respectively, at weighted average share prices of $4.05, $3.89, and $3.30 per share, respectively. At August 30, 2009, there were 59,000 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 30, 2009 are as follows: |
Options | Average Price | |||||||
Outstanding at August 27, 2006
|
| | ||||||
Granted
|
7,606 | $ | 3.47 | |||||
Vested
|
| | ||||||
Forfeited
|
| | ||||||
|
||||||||
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 | |||||
|
As of August 30, 2009, there was $137,321 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 30, 2009 was $42,652. |
6. | INCOME TAXES | |
Income taxes consisted of the following: |
Years Ended | ||||||||||||
August 30, | August 31, | August 26, | ||||||||||
2009 | 2008 | 2007 | ||||||||||
|
||||||||||||
Current:
|
||||||||||||
Federal
|
$ | | $ | 5,280 | $ | 7,846 | ||||||
State
|
(9,971 | ) | 33,048 | 2,516 | ||||||||
|
||||||||||||
|
(9,971 | ) | 38,328 | 10,362 | ||||||||
|
||||||||||||
Deferred:
|
||||||||||||
Federal
|
(72,577 | ) | 741,360 | 425,707 | ||||||||
State
|
(6,994 | ) | 16,117 | 21,570 | ||||||||
|
||||||||||||
|
(79,571 | ) | 757,477 | 447,277 | ||||||||
|
||||||||||||
Total
|
$ | (89,542 | ) | $ | 795,805 | $ | 457,639 | |||||
|
33
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 30, | August 30, | August 26, | ||||||||||
2009 | 2008 | 2007 | ||||||||||
|
||||||||||||
Ordinary federal income tax statutory rate
|
(34.0 | )% | 34.0 | % | 34.0 | % | ||||||
State income taxes net of federal tax effect
|
(2.0 | ) | 3.3 | 2.0 | ||||||||
Other
|
| (2.3 | ) | 2.0 | ||||||||
|
||||||||||||
Effective rate
|
(36.0 | )% | 35.0 | % | 38.0 | % | ||||||
|
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 30, 2009 | August 31, 2008 | |||||||
Deferred Tax Assets
|
||||||||
Accrued liabilities
|
$ | 70,740 | $ | 70,818 | ||||
Inventory valuation adjustments
|
53,979 | 58,935 | ||||||
Net operating loss carryforwards
|
1,238,293 | 931,593 | ||||||
Tax credit carryforwards
|
522,293 | 515,183 | ||||||
Stock option expense
|
109,462 | 63,742 | ||||||
Other
|
78,579 | 97,588 | ||||||
|
||||||||
|
2,073,346 | 1,737,859 | ||||||
|
||||||||
Deferred Tax Liabilities
|
||||||||
Tax depreciation and
amortization greater than book
|
(1,272,257 | ) | (1,016,341 | ) | ||||
|
||||||||
Net deferred tax asset
|
$ | 801,089 | $ | 721,518 | ||||
|
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 30, 2009, the Company had federal net operating loss carryforwards of approximately $3.5 million expiring in 2021-2029. Also as of August 30, 2009, 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 as well as a profit sharing plan that all employees are eligible to participate in. Profit sharing contributions are discretionary and are based on Company results. With the 401(k) program for each of the fiscal years of 2009, 2008 and 2007, the Company matched the first 4% of employee contributions, subject to legal contribution limits. Contributions charged to operations for the profit sharing plan and matching contributions for the 401(k) plan for fiscal 2009, 2008, and 2007, were $137,762, $306,864 and $221,406, respectively. |
34
8. | INFORMATION CONCERNING SALES TO MAJOR CUSTOMERS | |
The Company had sales to two customers that exceeded 10 percent of total sales during fiscal years 2009, 2008 and 2007 as listed below: |
2009 | 2008 | 2007 | ||||||||||
Customer # 1
|
$ | 9,652,000 | $ | 13,818,000 | $ | 14,099,000 | ||||||
Customer # 2
|
$ | 5,680,000 | $ | 8,719,000 | $ | 1,449,000 |
The Company had accounts receivable from customer #1 of $1,379,000 and $1,555,000 at August 30, 2009 and August 31, 2008, respectively. The Company had accounts receivable from customer #2 of $803,000 and $1,484,000 at August 30, 2009 and August 31, 2008, 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: |
2009 | 2008 | 2007 | ||||||||||
|
||||||||||||
Net Income (loss)
|
$ | (159,185 | ) | $ | 1,477,923 | $ | 746,674 | |||||
|
||||||||||||
Denominator for earnings per share:
|
||||||||||||
|
||||||||||||
Weighted average shares;
denominator for basic earnings
per share
|
2,789,717 | 2,751,779 | 2,700,385 | |||||||||
|
||||||||||||
Effect of dilutive securities;
employee and non-employee options
|
| 65,175 | 51,171 | |||||||||
|
||||||||||||
|
||||||||||||
Dilutive common shares;
denominator for diluted earnings
per share
|
2,789,717 | 2,816,954 | 2,751,556 | |||||||||
|
||||||||||||
|
||||||||||||
Basic earnings (loss) per share
|
$ | (.06 | ) | $ | .54 | $ | .28 | |||||
|
||||||||||||
|
||||||||||||
Dilutive earnings (loss) per share
|
$ | (.06 | ) | $ | .52 | $ | .27 | |||||
|
Stock options for the purchase of 174,666 shares and 86,139 non-vested restricted shares at August 30, 2009 were not used for the calculation of loss per share or weighted average shares outstanding on a fully diluted basis. |
35
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 SFAS No. 142 Goodwill and Other Intangible Assets ). | ||
The Company recorded $33,063 of deferred financing costs incurred in connection with the mortgages, obtained in 2004, described in Note 3. The costs are being amortized over five years on a straight-line basis (which approximates the interest method) with the Company incurring approximately $4,400 of amortization expense for the year ended August 30, 2009 and $6,600 of amortization expense for each of the years August 31, 2008 and August 26, 2007, respectively. |
36
RECIPIENT:
|
[ ] | |
|
||
AWARD DATE:
|
[ ] | |
|
||
RESTRICTED SHARES:
|
[ ] | |
|
||
LAPSE OF TIME RESTRICTIONS:
|
Time Restrictions on the Restricted Shares for which the Performance Restrictions have lapsed lapse in equal installments over a three (3) year period as follows: | |
|
||
|
One-third of such Shares on the date the fiscal [ ] year-end results have been audited and approved by the Companys Board of Directors. | |
|
||
|
One-third of such Shares on and
after the second anniversary of
the Award Date.
One-third of such Shares on and after the third anniversary of the Award Date. |
|
|
||
LAPSE OF PERFORMANCE RESTRICTIONS
|
Performance Restrictions on the Restricted Shares lapse upon achievement of performance goals established for Recipient under the Companys [ ] Executive Bonus Program (the Program) as follows: | |
|
||
|
Performance at the Maximum level under the Program, all Performance Restrictions lapse. | |
|
||
|
Performance above the Target level but below the Maximum level under the Program, Performance Restrictions lapse as to that number of Restricted Shares as equals the actual percentage of achievement within the range from Target level to Maximum level. For example, if Recipient has a performance level at the mid-point between Target and Maximum, Performance Restrictions would lapse as to 50% of the Restricted Shares. |
2
3
WSI INDUSTRIES, INC.
|
||||
By: | ||||
Michael J. Pudil | ||||
Chief Executive Officer | ||||
RECIPIENT:
|
||||
[ ] |
4
/s/ Schechter Dokken Kanter | ||||
Andrews & Selcer Ltd |
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1. | I have reviewed this Form 10-K of WSI Industries, Inc. | ||
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | ||
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | ||
4. | The registrants other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | ||
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | ||
(c) | Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | ||
(d) | Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting. |
5. | The registrants other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and | ||
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
Date: November 25, 2009 | /s/ Michael J. Pudil | |||
Chief Executive Officer | ||||
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1. | I have reviewed this Form 10-K of WSI Industries, Inc. | ||
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | ||
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | ||
4. | The registrants other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | ||
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | ||
(c) | Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | ||
(d) | Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting. |
5. | The registrants other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and | ||
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
Date: November 25, 2009 | /s/ Paul D. Sheely | |||
Chief Financial Officer | ||||
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Date: November 25, 2009 | /s/ Michael J. Pudil | |||
Chief Executive Officer | ||||
Date: November 25, 2009 | /s/ Paul D. Sheely | |||
Chief Financial Officer | ||||
40