UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
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þ
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the quarterly period ended February 28, 2010
OR
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from
to
Commission file number 0-619
WSI Industries, Inc.
(Exact name of registrant as specified in its charter)
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Minnesota
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41-0691607
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(State or other jurisdiction of
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(I.R.S. Employer
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incorporation or organization)
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Identification No.)
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213 Chelsea Road, Monticello, Minnesota
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55362
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(Address of principal executive offices)
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(Zip Code)
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(763) 295-9202
(Registrants telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes
þ
No
o
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months
(or for such shorter period that the registrant was required to
submit and post such files). Yes
o
No
o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer, or a smaller reporting company. See the definitions of larger
accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the
Exchange Act.
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Large accelerated filer
o
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Accelerated filer
o
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Non-accelerated filer
o
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Smaller reporting company
þ
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of
the Exchange Act).
Yes
o
No
þ
Indicate the number of shares outstanding of each of the issuers classes of common stock, as
of the latest practicable date: 2,888,492 shares of common stock were outstanding as of March 31,
2010.
WSI INDUSTRIES, INC.
AND SUBSIDIARIES
INDEX
2
Part 1. Financial Information
Item 1. Financial Statements
WSI INDUSTRIES, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
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February 28,
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August 30,
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2010
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2009
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Assets
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Current Assets:
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Cash and cash equivalents
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$
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3,928,899
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$
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2,879,952
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Accounts receivable
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2,147,147
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2,735,586
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Inventories
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1,856,747
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2,146,531
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Prepaid and other current assets
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75,249
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51,902
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Deferred tax assets
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179,506
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156,812
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Total Current Assets
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8,187,548
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7,970,783
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Property, Plant and Equipment Net
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6,990,640
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7,520,359
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Deferred tax assets
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547,388
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644,277
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Goodwill and other assets, net
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2,368,452
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2,368,452
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$
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18,094,028
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$
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18,503,871
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Liabilities and Stockholders Equity
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Current Liabilities:
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Trade accounts payable
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$
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1,633,106
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$
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2,007,516
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Accrued compensation and employee withholdings
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380,849
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313,071
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Other accrued expenses
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281,493
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171,450
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Current portion of long-term debt
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2,098,997
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2,075,672
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Total Current Liabilities
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4,394,445
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4,567,709
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Long-term debt, less current portion
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4,444,997
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4,901,748
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Stockholders Equity:
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Common stock, par value $.10 a share; authorized
10,000,000 shares; issued and outstanding
2,888,492 and 2,878,868 shares, respectively
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288,850
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287,886
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Capital in excess of par value
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2,846,927
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2,871,068
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Deferred compensation
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(250,414
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)
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(361,861
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)
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Retained earnings
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6,369,223
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6,237,321
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Total Stockholders Equity
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9,254,586
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9,034,414
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$
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18,094,028
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$
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18,503,871
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See notes
to condensed consolidated financial statements.
3
WSI INDUSTRIES, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
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13 weeks ended
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26 weeks ended
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February 28,
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March 1,
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February 28,
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March 1,
|
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2010
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2009
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2010
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2009
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Net sales
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$
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4,059,599
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$
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4,001,424
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$
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8,313,908
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$
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10,036,855
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Cost of products sold
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3,402,154
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3,809,624
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6,874,121
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9,018,390
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Gross margin
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657,445
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191,800
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1,439,787
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1,018,465
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Selling and administrative expense
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531,075
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557,666
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1,061,399
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1,140,206
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Interest and other income
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(9,545
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)
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(4,045
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)
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(17,524
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)
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(9,732
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)
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Interest expense
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92,359
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117,147
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189,817
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209,643
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Income (loss) before income taxes
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43,556
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(478,968
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)
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206,095
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(321,652
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)
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Income taxes (benefits)
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15,681
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(172,429
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)
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74,195
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(115,796
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)
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Net income (loss)
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$
|
27,875
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$
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(306,539
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)
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$
|
131,900
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$
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(205,856
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)
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Basic earnings (loss) per share
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$
|
.01
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$
|
(.11
|
)
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$
|
.05
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|
$
|
(.07
|
)
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Diluted earnings (loss) per share
|
|
$
|
.01
|
|
|
$
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(.11
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)
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|
$
|
.05
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|
$
|
(.07
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)
|
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|
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Cash dividend per share
|
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$
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$
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$
|
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$
|
.0375
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|
Weighted average number of common shares outstanding, basic
|
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2,800,107
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2,788,897
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2,797,240
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2,786,706
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Weighted average number of common shares outstanding, diluted
|
|
|
2,800,107
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|
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|
2,788,897
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2,797,240
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|
|
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2,786,706
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|
|
|
|
|
|
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See notes to condensed consolidated financial statements.
4
WSI INDUSTRIES, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
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|
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26 weeks ended
|
|
|
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February 28,
|
|
|
March 1,
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|
|
|
2010
|
|
|
2009
|
|
Cash Flows From Operating Activities:
|
|
|
|
|
|
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|
|
Net income (loss)
|
|
$
|
131,900
|
|
|
$
|
(205,856
|
)
|
Adjustments to reconcile net earnings to net cash
provided by operating activities:
|
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|
|
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|
Depreciation
|
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|
540,255
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|
|
|
508,264
|
|
Amortization
|
|
|
|
|
|
|
3,306
|
|
Deferred taxes
|
|
|
74,195
|
|
|
|
(96,996
|
)
|
Stock option compensation expense
|
|
|
105,095
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|
|
|
83,777
|
|
Changes in assets and liabilities:
|
|
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|
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|
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Decrease (increase) in accounts receivable
|
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|
588,439
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(18,392
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)
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Decrease (increase) in inventories
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|
289,784
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|
|
|
(25,582
|
)
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Decrease (increase) in prepaid expenses
|
|
|
(23,347
|
)
|
|
|
25,803
|
|
Decrease in accounts payable
and accrued expenses
|
|
|
(213,412
|
)
|
|
|
(531,639
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)
|
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|
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|
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|
Net cash provided by (used in) operations
|
|
|
1,492,909
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(257,315
|
)
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Cash Flows From Investing Activities:
|
|
|
|
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|
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|
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Purchase of property, plant and equipment
|
|
|
(10,536
|
)
|
|
|
(402,521
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)
|
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|
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|
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|
|
Net cash used in investing activities
|
|
|
(10,536
|
)
|
|
|
(402,521
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)
|
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Cash Flows From Financing Activities:
|
|
|
|
|
|
|
|
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Payments of long-term debt
|
|
|
(433,426
|
)
|
|
|
(409,638
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)
|
Proceeds from issuance of long-term debt
|
|
|
|
|
|
|
625,000
|
|
Dividends paid
|
|
|
|
|
|
|
(104,504
|
)
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities
|
|
|
(433,426
|
)
|
|
|
110,858
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Increase (Decrease) In Cash And Cash Equivalents
|
|
|
1,048,947
|
|
|
|
(548,978
|
)
|
|
|
|
|
|
|
|
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|
Cash And Cash Equivalents At Beginning Of Year
|
|
|
2,879,952
|
|
|
|
1,843,601
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
Cash And Cash Equivalents At End Of Reporting Period
|
|
$
|
3,928,899
|
|
|
$
|
1,294,623
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental cash flow information:
|
|
|
|
|
|
|
|
|
Cash paid during the period for:
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
190,696
|
|
|
$
|
206,849
|
|
Income taxes
|
|
$
|
3,486
|
|
|
$
|
1,200
|
|
Payroll withholding taxes in cashless stock option exercise
|
|
$
|
16,823
|
|
|
$
|
9,540
|
|
Non cash investing and financing activities:
|
|
|
|
|
|
|
|
|
Acquisition of equipment through capital lease
|
|
$
|
|
|
|
$
|
919,043
|
|
See notes to condensed consolidated financial statements.
5
WSI INDUSTRIES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1.
|
|
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS:
|
The condensed consolidated balance sheet as of February 28, 2010, the condensed
consolidated statements of income for the thirteen and twenty-six weeks ended February 28,
2010 and March 1, 2009 and the condensed consolidated statements of cash flows for the
twenty-six weeks then ended, respectively, have been prepared by the Company without audit.
In the opinion of management, all adjustments (which include normal recurring adjustments)
necessary to present fairly the financial position, results of operations and cash flows for
all periods presented have been made.
The condensed consolidated balance sheet at August 30, 2009 is derived from the audited
consolidated balance sheet as of that date. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with accounting principles
generally accepted in the United States of America have been condensed or omitted.
Therefore, these condensed consolidated financial statements should be read in conjunction
with the financial statements and notes thereto included in the Companys 2009 annual report
to shareholders on Form 10-K. The results of operations for interim periods are not
necessarily indicative of the operating results for the full year.
Inventories consist primarily of raw material, work-in-progress (WIP) and finished goods and are valued at the
lower of cost or market value:
|
|
|
|
|
|
|
|
|
|
|
February 28,
|
|
|
August 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
Raw material
|
|
$
|
294,402
|
|
|
$
|
467,765
|
|
WIP
|
|
|
1,014,302
|
|
|
|
1,135,058
|
|
Finished goods
|
|
|
548,043
|
|
|
|
543,708
|
|
|
|
|
|
|
|
|
|
|
$
|
1,856,747
|
|
|
$
|
2,146,531
|
|
|
|
|
|
|
|
|
3.
|
|
GOODWILL AND OTHER ASSETS:
|
Goodwill and other assets consist 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 assesses the valuation or
potential impairment of its goodwill by utilizing 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 cost assumptions to estimate the fair value of the
Company (which is the only reporting unit). The result of the analysis performed in the
fiscal 2009 fourth quarter did not indicate an impairment of goodwill. The Company will
analyze goodwill more frequently should changes in events or circumstances, including
reductions in anticipated cash flows generated by our operations, occur.
The Company recorded $33,063 of deferred financing costs incurred in connection with
mortgages entered into in order to purchase the Companys facility in Monticello, Minnesota.
The costs are being amortized over five years on a straight-line basis with the Company
incurring $1,653 and $3,306 of amortization expense for the quarter and year-to-date periods
ended March 1, 2009, respectively. The deferred financing costs are fully amortized as of
February 28, 2010.
6
4.
|
|
DEBT AND LINE OF CREDIT:
|
Effective February 1, 2010, the Company renewed its revolving credit agreement in the
maximum amount of $1 million with its bank. Interest on the renewed agreement is at LIBOR
plus 2.75%, however the rate shall never go below a floor of 4.50%. At February 28, 2010,
the effective rate was 4.50%. The agreement also contains restrictive provisions concerning
yearly capital expenditures, a maximum debt to net worth ratio, a minimum current ratio, a
minimum net worth and a minimum debt service coverage ratio. The Company is in compliance
with all of the covenants of the agreement as of February 28, 2010. The credit agreement is
secured by all assets of the Company, expires February 1, 2011 and does not have an
outstanding balance at February 28, 2010.
The following table sets forth the computation of basic and diluted earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thirteen weeks ended
|
|
|
Twenty-Six weeks ended
|
|
|
|
February 28,
|
|
|
March 1,
|
|
|
February 28,
|
|
|
March 1,
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
Numerator for basic and diluted
earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
27,875
|
|
|
$
|
(306,539
|
)
|
|
$
|
131,900
|
|
|
$
|
(205,856
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
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|
|
Denominator
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator for basic earnings
per share weighted average shares
|
|
|
2,800,107
|
|
|
|
2,788,897
|
|
|
|
2,797,240
|
|
|
|
2,786,706
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of dilutive securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee and non-employee options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dilutive common shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator for diluted earnings
per share
|
|
|
2,800,107
|
|
|
|
2,788,897
|
|
|
|
2,797,240
|
|
|
|
2,786,706
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings (loss) per share
|
|
$
|
.01
|
|
|
$
|
(.11
|
)
|
|
$
|
.05
|
|
|
$
|
(.07
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings (loss) per share
|
|
$
|
.01
|
|
|
$
|
(.11
|
)
|
|
$
|
.05
|
|
|
$
|
(.07
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7
Item 2.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND
RESULTS OF OPERATIONS
Critical Accounting Policies and Estimates:
Managements Discussion and Analysis of Financial Condition and Results of Operations discuss
our consolidated financial statements, which have been prepared in accordance with accounting
principles generally accepted in the United States. The preparation of these financial statements
requires management to make estimates and judgments that affect the reported amounts of assets,
liabilities, revenues and expenses and related disclosure of contingent assets and liabilities.
We base our estimates on historical experience and on various other assumptions that we
believe are reasonable under the circumstances, the result of which forms the basis for making
judgments about the carrying values of assets and liabilities that are not readily apparent from
other sources. Results may differ from these estimates due to actual outcomes being different from
those on which we based our assumptions. The estimates and judgments utilized are reviewed by
management on an ongoing basis and by the audit committee of our board of directors at the end of
each quarter prior to the public release of our financial results.
The critical accounting policies and estimates followed in the preparation of the financial
information contained in this Quarterly Report on Form 10-Q are the same as those described in the
Companys Annual Report on Form 10-K for the year ended August 30, 2009. Refer to the Annual
Report on Form 10-K for detailed information on accounting policies.
Results of Operations:
Net sales were $4,060,000 for the thirteen weeks ending February 28, 2010, an increase of 1.5%
or $58,000 from the same period of the prior year. Year-to-date sales in fiscal 2010 are
$8,314,000 compared to $10,037,000 in the prior year which equates to a 17.2% decrease. Total
Company sales by product markets are as follows:
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Second Quarter Thirteen Weeks Ended
|
|
|
Fiscal Second Quarter Year-to-Date Ended
|
|
|
|
|
|
|
|
Percent
|
|
|
|
|
|
|
Percent
|
|
|
Dollar
|
|
|
|
|
|
|
Percent
|
|
|
|
|
|
|
Percent
|
|
|
Dollar
|
|
|
|
February
|
|
|
of Total
|
|
|
March
|
|
|
of Total
|
|
|
Percent
|
|
|
February
|
|
|
of Total
|
|
|
March
|
|
|
of Total
|
|
|
Percent
|
|
|
|
28, 2010
|
|
|
Sales
|
|
|
1, 2009
|
|
|
Sales
|
|
|
Change
|
|
|
28, 2010
|
|
|
Sales
|
|
|
1, 2009
|
|
|
Sales
|
|
|
Change
|
|
|
ATV &
Motorcycle
|
|
$
|
2,476,000
|
|
|
|
61
|
%
|
|
$
|
1,869,000
|
|
|
|
47
|
%
|
|
|
32
|
%
|
|
$
|
5,024,000
|
|
|
|
61
|
%
|
|
$
|
5,154,000
|
|
|
|
51
|
%
|
|
|
-3
|
%
|
Energy
|
|
|
1,040,000
|
|
|
|
26
|
%
|
|
|
1,635,000
|
|
|
|
41
|
%
|
|
|
-36
|
%
|
|
|
2,324,000
|
|
|
|
28
|
%
|
|
|
3,747,000
|
|
|
|
37
|
%
|
|
|
-38
|
%
|
Aerospace
& Defense
|
|
|
333,000
|
|
|
|
8
|
%
|
|
|
375,000
|
|
|
|
9
|
%
|
|
|
-11
|
%
|
|
|
682,000
|
|
|
|
8
|
%
|
|
|
861,000
|
|
|
|
9
|
%
|
|
|
-21
|
%
|
Bioscience
|
|
|
119,000
|
|
|
|
3
|
%
|
|
|
97,000
|
|
|
|
2
|
%
|
|
|
23
|
%
|
|
|
173,000
|
|
|
|
2
|
%
|
|
|
220,000
|
|
|
|
2
|
%
|
|
|
-21
|
%
|
Other
|
|
|
92,000
|
|
|
|
2
|
%
|
|
|
25,000
|
|
|
|
1
|
%
|
|
|
268
|
%
|
|
|
111,000
|
|
|
|
1
|
%
|
|
|
55,000
|
|
|
|
1
|
%
|
|
|
102
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Sales
|
|
$
|
4,060,000
|
|
|
|
100
|
%
|
|
$
|
4,001,000
|
|
|
|
100
|
%
|
|
|
1
|
%
|
|
$
|
8,314,000
|
|
|
|
100
|
%
|
|
$
|
10,037,000
|
|
|
|
100
|
%
|
|
|
-17
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales from the Companys ATV and Motorcycle markets were up 32% for the fiscal 2010
second quarter as compared to the prior year quarter due primarily to the Company being the sole
source supplier on a select product line in fiscal 2010 while the product line was multi-sourced in
the prior year quarter.
Year-to-date sales for the ATV and Motorcycle markets were down slightly in fiscal 2010 as
compared to fiscal 2009 as the positive effects of the product line sole sourcing described
previously was offset by a volume decrease in sales in both the ATV and motorcycle segments.
8
Sales from the Companys energy business for the fiscal second quarter and year-to-date
periods declined by 36% and 38%, respectively. The Company believes that the reduction of the
volume of orders from its customers in this segment is due to a combination of factors including
the recession, tight credit conditions, lower oil prices and a reduction in the demand of the
particular type of oilfield equipment the Company manufactures.
Sales from the Companys aerospace and defense markets declined at a slower pace in the
Companys fiscal 2010 second quarter as compared to the fiscal 2010 first quarter. The lower sales
in both quarter and year-to-date periods are believed to be due to the economic recession.
Sales from the Companys biosciences market increased in the fiscal 2010 second quarter as
compared to the prior year quarter with the mix of parts sold being the determining factor for the
increase as opposed to an increase in volume. Sales year-to-date to the biosciences industry
remain down as compared to the prior year which is believed to be still due to the recession.
Sales from the Companys other category increased in the fiscal 2010 second quarter as
compared to the prior year quarter as the Company shipped orders of what it believes will be a
one-time sale of repair parts. The Companys fiscal 2010 year-to-date sales are higher than the
prior year for the same reason.
Gross
margin increased to 16% for the quarter ending February 28, 2010 versus 5% in the prior
year period. Year-to-date gross margins were 17% and 10% for the twenty-six week periods ending
February 28, 2010 and March 1, 2009, respectively. The increase in gross margin in the fiscal 2010
second quarter is partially attributable to a lower percentage of material and outside services
content in product shipped during the quarter. Thus the value added sales net sales less
material and outside services were higher during the fiscal 2010 second quarter as compared to
the prior year. So while the Companys overall sales were fairly flat year on year in the fiscal
second quarter, the Companys value added sales were up 16% and this increase in the volume of
value added sales, in combination with cost reduction efforts, were the primary drivers in the
increase in the gross margin percentage in the fiscal 2010 second quarter. The Companys
year-to-date gross margins were up as compared to the prior year period for largely the same
reasons previously described. However, the increase in year-to-date gross margins year over year
was somewhat lessened as the fiscal 2009 first quarter had higher sales volumes than the fiscal
2010 first quarter.
Selling and administrative expense of $531,000 for the quarter ending February 28, 2010 was
$27,000 lower than in the prior year period due primarily to lower compensation expense as a result
of cost reduction measures. Year-to-date selling and administrative expense of $1,061,000 was
$79,000 lower than the comparable prior year period due primarily to the same reason. Included in
selling and administrative expense are non-cash stock option compensation expense costs related to
the adoption of SFAS 123(R) in the amount of $58,000 and $49,000 for the quarters ended February
28, 2010 and March 1, 2009, respectively. The year-to-date stock option compensation expenses are
$105,000 and $84,000 for the periods ended February 28, 2010 and March 1, 2009, respectively.
Interest expense in the second quarter of fiscal 2010 was $92,000, which was $25,000 lower
than the second quarter of fiscal 2009 amount of $117,000. Year-to-date interest expense for
fiscal 2010 of $190,000 was lower than the prior year-to-date amount by $20,000. The lower
interest costs are due primarily to lower levels of debt.
The Company recorded income tax expense at an effective tax rate of 36% for the quarter and
year-to-date periods ended February 28, 2010 and March 1, 2009.
9
Liquidity and Capital Resources:
On February 28, 2010 working capital was $3,793,000 as compared to $3,403,000 at August 30,
2009. The ratio of current assets to current liabilities at February 28, 2010 was 1.86 to 1.0
compared to 1.75 to 1.0 at August 30, 2009. In fiscal 2010, the Companys primary source of funds
came from operations as it generated $1,493,000 as compared to the prior year when the Company
actually used $257,000 in operations. The Companys primary uses of funds in fiscal 2010 have been
payments of long-term debt as compared to fiscal 2009 where the primary uses of funds were the
purchase of property, plant and equipment.
As discussed in the Notes to Condensed Consolidated Financial Statements, the Company renewed
its $1,000,000 revolving credit agreement with its bank during the fiscal 2010 second quarter.
Interest on the renewed agreement is at LIBOR plus 2.75%, however the rate shall never go below a
floor of 4.50%.
It is the Companys belief that its current cash balance, plus future internally
generated funds and its line of credit, will be sufficient to enable the Company to meet its
working capital requirements through the next 12 months.
Cautionary Statement:
Statements included in this Managements Discussion and Analysis of Financial Condition and
Results of Operations, in future filings by the Company with the Securities and Exchange
Commission, in the Companys press releases and in oral statements made with the approval of an
authorized executive officer that are not historical or current facts are forward-looking
statements. These statements are made pursuant to the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995 and are subject to certain risks and uncertainties that
could cause actual results to differ materially from historical earnings and those presently
anticipated or projected. These risks and uncertainties are described in the Companys Annual
Report on Form 10-K for the year ended August 30, 2009, as well as other filings the Company makes
with the Securities and Exchange Commission. The Company wishes to caution readers not to place
undue reliance on any such forward-looking statements, which speak only as of the date made and are
not predictions of actual future results. The Company disclaims any obligation subsequently to
revise any forward-looking statements to reflect events or circumstances after the date of such
statements or to reflect the occurrence of anticipated or unanticipated events.
Item 4.
CONTROLS AND PROCEDURES.
(a) Evaluation of Disclosure Controls and Procedures.
As of the end of the period covered by this Quarterly Report on Form 10-Q, an evaluation was
performed under the supervision and with the participation of our management, including the Chief
Executive Officer (CEO) and Chief Financial Officer (CFO), of the effectiveness of our
disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)).
Based on that evaluation, the CEO and CFO have concluded that as of February 28, 2010 our
disclosure controls and procedures were not effective because of the material weakness in internal
control over financial reporting in the areas of segregation of duties and adequacy of personnel as
a result of the Companys reduction in staff during the quarter ended May 31, 2009.
Due to the lack of financial and personnel resources, we do not intend to take any action at
this time to increase our financial accounting staff to remediate this material weakness and the
corresponding deficiency in disclosure controls, but will continue to rely on our remaining staff
and historic oversight of management to provide reasonable assurances regarding the reliability of
our financial reporting.
10
(b) Changes in Internal Controls over Financial Reporting.
There have been no changes in internal control over financial reporting that occurred during
the fiscal period covered by this report that have materially affected, or are reasonably likely to
materially affect, the Companys internal control over financial reporting.
PART II. OTHER INFORMATION:
Item 1A.
RISK FACTORS.
Not Applicable.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Annual Meeting of the Shareholders of the Company was held on January 6, 2010.
Of the 2,880,952 shares of common stock issued and outstanding and entitled to vote
at the close of business on November 9, 2009, shareholders holding 2,438,412 shares
were present at the Annual Meeting either in person or by proxy. The following
describes the matters considered by the Companys shareholders at the Annual
Meeting, as well as the results of the votes cast at the Annual Meeting:
A. To elect five (5) directors to hold office until the next Annual Meeting of
Shareholders or until their respective successors have been elected and shall
qualify.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name of Nominee:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paul Baszucki
|
|
For
|
|
|
694,317
|
|
|
Withhold
|
|
|
62,775
|
|
|
Broker non-vote
|
|
|
1,681,320
|
|
Thomas C. Bender
|
|
For
|
|
|
696,192
|
|
|
Withhold
|
|
|
60,900
|
|
|
Broker non-vote
|
|
|
1,681,320
|
|
Burton F. Myers II
|
|
For
|
|
|
702,872
|
|
|
Withhold
|
|
|
54,220
|
|
|
Broker non-vote
|
|
|
1,681,320
|
|
Eugene J. Mora
|
|
For
|
|
|
693,176
|
|
|
Withhold
|
|
|
63,916
|
|
|
Broker non-vote
|
|
|
1,681,320
|
|
Michael J. Pudil
|
|
For
|
|
|
700,605
|
|
|
Withhold
|
|
|
56,487
|
|
|
Broker non-vote
|
|
|
1,681,320
|
|
Each director nominee was elected by the shareholders.
B. To ratify the appointment of Schechter Dokken Kanter Andrews & Selcer Ltd as
independent auditors.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For
|
|
|
2,434,908
|
|
|
Against
|
|
|
583
|
|
|
Abstain
|
|
|
2,921
|
|
The shareholders approved the appointment.
11
Item 6.
EXHIBITS.
A. The following exhibits are included herein:
|
|
|
Exhibit 31.1
|
|
Certification of Chief Executive Officer pursuant to Rules 13a-14 and 15d-14 of the Exchange Act.
|
|
|
|
Exhibit 31.2
|
|
Certification of Chief Financial Officer pursuant to Rules 13a-14 and 15d-14 of the Exchange Act.
|
|
|
|
Exhibit 32
|
|
Certificate pursuant to 18 U.S.C. §1350.
|
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly
caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
|
|
|
|
|
WSI INDUSTRIES, INC.
|
|
Date: April 6, 2010
|
/s/ Michael J. Pudil
|
|
|
Michael J. Pudil, CEO
|
|
|
|
|
Date: April 6, 2010
|
/s/ Paul D. Sheely
|
|
|
Paul D. Sheely, Vice President, Finance & CFO
|
|
12
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