UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[ x ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: December 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-18083
Williams Controls, Inc.
(Exact name of registrant as specified in its charter)
Delaware 84-1099587
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
14100 SW 72nd Avenue, Portland, Oregon 97224
- --------------------------------------- ----------
(Address of principal executive office) (zip code)
Registrant's telephone number, including area code:
(503) 684-8600
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
The number of shares outstanding of the registrant's common stock as of January
31, 2000: 19,917,478
Williams Controls, Inc.
Index
Page
Number
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets, December 31, 1999
(unaudited) and September 30, 1999 1
Unaudited Consolidated Statements of Operations,
three months ended December 31, 1999 and 1998 2
Unaudited Consolidated Statements of Cash Flows,
three months ended December 31, 1999 and 1998 3
Notes to Unaudited Consolidated Financial Statements 4-7
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations 8-10
Part II. Other Information
Item 1. Legal Proceedings 11
Item 2. Changes in Securities and Use of Proceeds 11
Item 3. Defaults Upon Senior Securities 11
Item 4. Submission of Matters to a Vote of Security Holders 11
Item 5. Other Information 11
Item 6. Exhibits and Reports on Form 8-K 11
Signature Page 12
Part I
Item 1.
Williams Controls Inc.
Consolidated Balance Sheets
(Dollars in thousands, except share and per share information)
December 31, September 30,
1999 1999
(unaudited)
------------------- ---------------------
ASSETS
Current Assets:
Cash and cash equivalents $ 827 $ 2,323
Trade and other accounts receivable, less allowance of $453 and
$484 at December 31, 1999 and September 30, 1999, respectively 10,353 11,187
Inventories 10,756 9,828
Deferred income taxes and other 4,438 4,325
Net assets held for disposition 237 360
------------------- ---------------------
Total current assets 26,611 28,023
Property plant and equipment, net 20,472 20,775
Investment in and note receivable from affiliate 5,932 6,152
Net assets held for disposition 461 500
Goodwill and intangible assets, net 5,619 5,764
Deferred income taxes 3,093 3,025
Other assets 229 265
=================== =====================
Total assets $62,417 $64,504
=================== =====================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $10,033 $ 9,223
Accrued expenses 3,452 3,449
Current portion of long-term debt and capital leases 5,350 5,193
Estimated loss on disposal 484 1,000
------------------- --------------------
Total current liabilities 19,319 18,865
Long-term debt and capital lease obligations 22,281 24,743
Other liabilities 2,887 2,690
Commitments and contingencies
Shareholders' equity:
Preferred stock ($.01 par value, 50,000,000 authorized;
78,500 issued and outstanding at December 31, 1999 and
September 30, 1999) 1 1
Common stock ($.01 par value, 50,000,000 authorized;
19,913,728 and 19,898,728 issued at December 31,
1999 and September 30, 1999, respectively) 199 199
Additional paid-in capital 21,611 21,574
Accumulated deficit (3,004) (2,691)
Treasury stock (130,200 shares at December 31, 1999 and
September 30, 1999) (377) (377)
Note receivable (500) (500)
------------------- --------------------
Total shareholders' equity 17,930 18,206
------------------- --------------------
Total liabilities and shareholders' equity $62,417 $64,504
=================== ====================
The accompanying notes are an integral part of these balance sheets.
1
Williams Controls, Inc.
Consolidated Statements of Operations
(Dollars in thousands, except share and per share information)
(unaudited)
Three months Three months
Ended Ended
December 31, December 31,
1999 1998
-------------- --------------
Sales $15,877 $14,399
Cost of sales 12,131 10,015
-------------- --------------
Gross margin 3,746 4,384
Operating expenses:
Research and development 1,697 648
Selling 440 497
Administration 1,107 915
-------------- --------------
Total operating expenses 3,244 2,060
-------------- --------------
Earnings from continuing operations 502 2,324
Other (income) expenses:
Interest income (70) (125)
Interest expense 629 473
Other (income) expense, net (8) 112
Equity interest in loss of affiliate 220 190
-------------- --------------
Total other expenses 771 650
-------------- --------------
Earnings (loss) from continuing operations
before income tax expense (benefit) (269) 1,674
Income tax expense (benefit) (103) 643
-------------- --------------
Net earnings (loss) from continuing operations (166) 1,031
Dividends on preferred stock 147 150
-------------- --------------
Net earnings (loss) allocable to common
shareholders $ (313) $ 881
============== ==============
Net earnings (loss) per common share - basic $(0.02) $ 0.05
============== ==============
Weighted average shares used in per share
calculation basic 19,776,843 18,248,760
============== ==============
Net earnings (loss) per common share - diluted $(0.02) $ 0.05
============== ==============
Weighted average shares used in per share
calculation - diluted 19,776,843 21,312,041
============== ==============
The accompanying notes are an integral part of these statements.
2
Williams Controls, Inc.
Consolidated Statements of Cash Flows
(Dollars in thousands)
(Unaudited)
Three months Three months
Ended Ended
December 31, 1999 December 31, 1998
------------------- -------------------
Cash flows from operating activities:
Net earnings (loss) $(166) $1,031
Adjustments to reconcile net earnings to net cash from continuing
operations:
Depreciation and amortization 721 384
Equity interest in loss of affiliate 220 190
Changes in working capital of continuing operations:
Receivables 834 1,244
Inventories (928) 464
Accounts payable and accrued expenses 813 (1,855)
Other 153 (78)
------------------- -------------------
Net cash provided by operating activities of continuing operations 1,647 1,380
Cash flows from investing activities:
Payments for property, plant and equipment (199) (695)
Cash flows from financing activities:
Repayments of long-term debt and capital lease obligations (2,480) (3,093)
Borrowing under term notes - 2,500
Preferred dividends (147) (150)
Proceeds from issuance of common stock 37 75
------------------- -------------------
Net cash used in financing activities of continuing operations (2,590) (668)
Net cash used in discontinued operations (354) (47)
------------------- -------------------
Net decrease in cash and cash equivalents (1,496) (30)
Cash and cash equivalents at beginning of period 2,323 1,281
=================== ===================
Cash and cash equivalents at end of period $ 827 $1,251
=================== ===================
Supplemental disclosure of cash flow information:
Interest paid $ 648 $ 486
=================== ===================
Income taxes paid $ 15 $ 347
=================== ===================
Capital leases for equipment $ 175 $ -
=================== ===================
The accompanying notes are an integral part of these statements.
3
Williams Controls, Inc.
Notes to Unaudited Consolidated Financial Statements
Three Months ended December 31, 1999 and 1998
(Dollars in thousands, except share and per share amounts)
Cautionary Statement: This report contains forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of
1995. Forward-looking statements include, without limitation, those
statements relating to development of new products, the financial
condition of the Company, the ability to increase distribution of the
Company's products, integration of businesses the Company acquires,
disposition of any current business of the Company, including its
Agricultural Equipment segment. These forward-looking statements are
subject to the business and economic risks faced by the Company. The
Company's actual results could differ materially from those anticipated
in these forward-looking statements as a result of the factors described
above and other factors described elsewhere in this report.
1. Organization
Williams Controls, Inc., including its wholly-owned subsidiaries,
Williams Controls Industries, Inc. ("Williams"); Aptek Williams, Inc.
("Aptek"); Premier Plastic Technologies, Inc. ("PPT"); ProActive
Acquisition Corporation ("ProActive"); Williams Automotive, Inc.;
GeoFocus, Inc. ("GeoFocus"); NESC Williams, Inc. ("NESC"); Williams
Technologies, Inc. ("Technologies"); Williams World Trade, Inc. ("WWT");
Kenco/Williams, Inc. ("Kenco"); Techwood Williams, Inc. ("TWI"); Agrotec
Williams, Inc. ("Agrotec") and its 80% owned subsidiaries Hardee
Williams, Inc. ("Hardee") and Waccamaw Wheel Williams, Inc. ("Waccamaw")
is hereinafter referred to as the "Company" or "Registrant."
2. Interim Consolidated Financial Statements
The unaudited interim consolidated financial statements have been
prepared by the Company and, in the opinion of management, reflect all
material adjustments which are necessary to a fair statement of results
for the interim periods presented. The interim results are not
necessarily indicative of the results expected for the entire fiscal
year. Certain information and footnote disclosure made in the last annual
report on Form 10-K have been condensed or omitted for the interim
consolidated statements. Certain costs are estimated for the full year
and allocated to interim periods based on activity associated with the
interim period. Accordingly, such costs are subject to year-end
adjustment. It is the Company's opinion that, when the interim
consolidated statements are read in conjunction with the September 30,
1999 annual report on Form 10-K, the disclosures are adequate to make the
information presented not misleading. The interim consolidated financial
statements include the accounts of the Company and its subsidiaries. All
significant intercompany accounts and transactions have been eliminated.
3. Comprehensive Income (Loss)
In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") 130, "Reporting
Comprehensive Income", which requires companies to report a measure of
all changes in equity except those resulting from investments by owners
and distributions to owners. Total comprehensive income (loss) for the
three months ended December 31, 1999 and 1998 was $(166) and $1,031,
respectively, and consisted solely of net earnings (loss). As of December
31, 1999, accumulated other comprehensive loss was $(3,004) and consisted
of accumulated deficit.
4. Earnings (loss) per Share
Basic earnings per share ("EPS") and diluted EPS are computed using the
methods prescribed by Statement of Financial Accounting Standards No.
128, "Earnings Per Share". Basic EPS is calculated using the
weighted-average number of common shares outstanding for the period and
diluted EPS is computed using the weighted-average number of common
shares and dilutive common equivalent shares outstanding.
4
Following is a reconciliation of basic EPS and diluted EPS from continuing
operations:
Three Months Ended Three Months Ended
December 31, 1999 December 31, 1998
-------------------------------- -------------------------------
Per Per
Share Share
Loss Shares Amount Income Shares Amount
Income (loss) from continuing
Operations $(166) $1,031
Less-Preferred stock dividends (147) (150)
--------- ---------
Basic EPS-
Income (loss) from continuing
Operations available to common
Shareholders $(313) $(0.02) $881 18,248,760 $0.05
19,776,843
========= =========
Effect of dilutive securities -
Stock options and warrants - - - 154,190
Convertible preferred stock - - 150 2,909,091
Diluted EPS - --------- ------------ --------- ----------
Income (loss) from continuing
Operations available to common
Shareholders $(313) 19,776,843 $(0.02) $1,031 21,312,041 $0.05
========= ============ ========= ========= =========== =========
At December 31, 1999 and 1998, the Company had options and warrants
covering 3,558,797 and 1,050,661 shares, respectively of the Company's
common stock outstanding that were not considered in the respective
dilutive EPS calculations since they would have been antidilutive. In
1999, conversion of the preferred shares would have been antidilutive and
therefore was not considered in the computation of diluted earnings per
share.
5. Inventories
Inventories consisted of the following:
December 31, September 30,
1999 1999
------------------- ---------------------
Raw material $ 7,741 $6,867
Work in process 875 697
Finished goods 2,140 2,264
=================== =====================
$10,756 $9,828
=================== =====================
Finished goods include component parts and finished product ready for
shipment.
6. Debt
In February 2000, the Company amended its credit facility with a bank
(the "Bank"). Terms of the amendment extend the due date of Term Loan III
from February 1, 2000 to April 1, 2000, advance the Company $1,000 under
a new term loan ("Term Loan IV") which is due April 1, 2000 and bears
interest at the Bank's prime rate plus 1.25%, advance $800 under Term
Loan I (subject to adjustment for a subsequent appraisal of certain
equipment), and advance certain lesser amounts as a result of the change
in eligibility of certain receivables. Should a private placement of debt
or equity be successful before April 1, 2000, $1,000 of the first $3,000
of net proceeds received by the Company are to be paid to the Bank in
payment of Term Loan IV. 75% of the net proceeds received by the Company
in excess of $3,000 are to be paid to the Bank in payment of Term Loan
III, until retired.
5
In addition, under the amendment to the credit facility with the Bank,
certain financial covenants were revised. The amendment requires the
Company to maintain certain tangible net worth, which requirement was
$10,400 at December 31, 1999; achieve certain consolidated net income
(loss) from continuing operations, which requirement was $(500) for the
three months ended December 31, 1999; and maintain a debt service
coverage ratio (as defined in the agreement). The Company was in
compliance with all of its financial covenants as of and for the three
months ended December 31, 1999. In addition, the amendment to the credit
facility provides for additional capital leases during each fiscal year
not to exceed $2,500. The Company will pay the Bank $50 for the amendment
to the credit facility.
7. Sale Leaseback and Financing
In April 1997 the Company sold the Portland, Oregon manufacturing
facility in a sale/leaseback transaction for $4,600. The transaction was
accounted for as a financing and the capitalized lease obligations of
$4,600 were recorded as long-term liabilities. In April 1998, under the
terms of the agreement, a mortgage note was provided to the purchaser in
the amount of $3,200, which was reported as a note receivable at
September 30, 1998. In December 1998, a repurchase option was exercised
on the property for $4,700 consisting of cash of $1,500 and the note
receivable of $3,200. Accordingly, the note receivable of $3,200 and the
capital lease obligation of $4,600 have been eliminated from the balance
sheet at September 30, 1999. The costs associated with the building
repurchase are reported in other expenses during the three months ended
December 31, 1998. In December, 1998 the Company borrowed $2,500 from a
bank under amended term loans to finance the repurchase of the Portland,
Oregon manufacturing facility and for working capital purposes.
Approximately $1,222 of the additional financing was borrowed under an
amendment to our existing Term Loan I, the increased principal amount of
which is payable in equal monthly installments of $60 with the remaining
balance of the entire Term Loan I of $3,150 due at maturity on July 11,
2001. Approximately $1,278 of the additional financing was provided under
an amended Term Loan II which is payable in 18 equal installments of $71,
plus variable interest (8.5% at December 31, 1999).
8. Acquisition
In July, 1999, the Company purchased the ProActive Pedals division of
Active Tools Manufacturing Co., Inc. ProActive Pedal is a designer and
developer of patented adjustable foot pedal systems and modular pedal
systems. The purchase price included $5,750 in cash, plus the assumption
of approximately $286 in liabilities. In addition, the Company entered
into a patent license with the patent holder that required an initial
payment of $600 and minimum annual royalty payments of $95 per year for
ten years. Assets acquired include tooling designs, technology and patent
rights on adjustable foot pedal systems, as well as designs of modular
foot pedal systems. The acquisition was accounted for using the purchase
method of accounting and the results of operations of ProActive have been
included in the consolidated results of operations of the Company from
the acquisition date. The purchase price allocation resulted in a $1,750
charge to operations for acquired in-process research and development,
determined by independent appraisal, for the year ended September 30,
1999. The technological feasibility of the acquired technology, which has
no alternative future use, had not been established prior to the
purchase. The allocation of the purchase price also resulted in $1,820
being allocated to developed technology, which is being amortized over a
seven year period. The excess of the purchase price over the fair value
of the assets acquired and liabilities assumed of $2,162 was recorded as
goodwill and is being amortized on a straight line basis over a 15 year
period.
The following unaudited proforma results of operations for the three
months ended December 31, 1998 include the results of ProActive Pedals
assuming such acquisition occurred as of October 1, 1998 and excludes the
acquired in-process research and development charge.
1998
-------
Sales $14,502
Operating income 1,523
Earnings from continuing operations 532
Net earnings per share - basic 0.02
Net earnings per share - diluted 0.02
The purchase was financed through the private placement of 1,331,149
shares of the Company's common stock with net proceeds of approximately
$3,379. In addition, the Company borrowed $2,500 from its bank under a
new term loan facility ("Term Loan III").
9. Reclassifications
Certain amounts previously reported in the financial statements as of and
for the three months ended December 31, 1998 have been reclassified to
conform to current fiscal year presentation.
6
10. Segment Information
Three months Three months
Ended Ended
December 31, December 31,
1999 1998
--------------- --------------
Sales by classes of similar products from continuing operations
Vehicle components $15,024 $13,771
Electrical components and GPS 853 628
=============== ==============
$15,877 $14,399
=============== ==============
Earnings (loss) from continuing operations
Vehicle components $1,649 $3,142
Electrical components and GPS (1,147) (818)
=============== ==============
$502 $2,324
=============== ==============
Identifiable assets
Vehicle components $52,634 $46,771
Electrical components and GPS 9,085 8,175
--------------- --------------
Total assets - continuing operations 61,719 54,946
--------------- --------------
Agricultural equipment - discontinued operations 698 8,681
--------------- --------------
Total assets $62,417 $63,627
=============== ==============
Capital expenditures
Vehicle components $195 $655
Electrical components and GPS 4 40
=============== ==============
Total capital expenditures $199 $695
=============== ==============
Depreciation and amortization
Vehicle components $618 $300
Electrical components and GPS 103 84
=============== ==============
Total depreciation and amortization $721 $384
=============== ==============
7
Item 2.
Williams Controls, Inc.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
(Dollars in thousands, except per share amounts)
Financial Position and Capital Resources
Financial Condition, Liquidity and Capital Resources
The Company's principal sources of liquidity are funds generated from
operations, borrowings under our credit facilities, and capital leases for
equipment purchases from various leasing companies. Primarily as a result of the
acquisition of ProActive Pedals in July, 1999, the Company has a bridge loan
outstanding at December 31, 1999. In addition, partly as a result of significant
capital expenditures and increased inventories in the last quarter of fiscal
1999, the Company has extended payments due to several major vendors
significantly past the scheduled payment date.
In February 2000, the Company amended its credit facility with a bank (the
"Bank"). Terms of the amendment extend the due date of Term Loan III from
February 1, 2000 to April 1, 2000, advance the Company $1,000 under a new term
loan (Term Loan IV) which is due April 1, 2000 and bears interest at the Bank's
prime rate plus 1.25%, advance $800 under Term Loan I (subject to adjustment for
a subsequent appraisal of certain equipment), and advance certain lesser amounts
as a result of the change in eligibility of certain receivables.
In addition, the Company has begun the process of raising additional capital in
a private placement of convertible, subordinated debt. Should a private
placement of debt or equity be successful before April 1, 2000, $1,000 of the
first $3,000 of net proceeds received by the Company are to be paid to the Bank
in payment of Term Loan IV. 75% of the net proceeds received by the Company in
excess of $3,000 are to be paid to the Bank in payment of Term Loan III, until
retired. Should the Company not be successful in raising additional capital, the
Company would request an extension of Term Loan III and Term Loan IV from the
Bank.
The Company anticipates that cash generated from operations, bank borrowings,
and leases will be sufficient to satisfy the Company's other working capital and
capital expenditure requirements for current operations for the next twelve
months. At December 31, 1999, the Company's working capital was $7,292 compared
to $9,158 at September 30, 1999 and the current ratio was 1.38 compared to 1.49
at September 30, 1999. The primary reason for the decrease is the reduction in
cash of $1.5 million from September 30, 1999 to December 31, 1999 which was used
to pay principal and interest payments to the Bank.
Cash flows from continuing operations was $1,647 for the three months ended
December 31, 1999 compared to $1,380 for the first three months of fiscal 1999.
In the three months ended December 31, 1999, decreased earnings of $1,197 were
more than offset by increased depreciation and amortization of $337 and changes
in working capital totaling $1,097.
Net cash used in investing activities was $199 for the three months ended
December 31, 1999 compared to $695 for the fiscal 1999 period. All payments were
for property, plant and equipment.
In December, 1998 the Company borrowed $2,500 from the Bank under amended term
loans to finance the repurchase of the Portland, Oregon manufacturing facility
and for working capital purposes.
The Company's discontinued operations used cash of $354 and $47 for the three
months ended December 31, 1999 and 1998, respectively.
Market Risk - The Company has not entered into derivative financial instruments.
The Company may be exposed to future interest rate changes on its debt. The
Company does not believe that a hypothetical 10 percent change in end of period
interest rates would have a material effect on the Company's cash flow.
Recent FASB Pronouncements - In June 1999 the FASB issued Statement of Financial
Accounting Standards No. 137, "Accounting for Derivative Instruments and Hedging
Activities" ("SFAS 137"). SFAS 137 is an amendment to SFAS 133 "Accounting for
Derivative Instruments and Hedging Activities." SFAS 137 establishes accounting
and reporting standards for all derivative instruments. SFAS 137 is effective
for fiscal years beginning after June 15, 2000. The Company does not have any
derivative instruments and accordingly, the adoption of SFAS 137 will have no
impact on the Company's financial position or results of operations.
Year 2000 Conversion - At December 31, 1999, 100% of the Company's mission
critical systems that might have had a material Year 2000 liability were Year
2000 compliant. Total amount spent by the Company in preparation for the Year
2000 conversion was approximately $310. The Company did not experience any
material year 2000 failures. While not all Year 2000 issues were necessarily
expected to arise in January 2000, we believe our efforts to address Year 2000
issues have been successful in avoiding any material adverse effect on our
financial position or results of operations. The Company does not expect any
material adverse effect on our financial positon and results of operations, but
will continue to monitor for Year 2000 issues.
8
Williams Controls, Inc.
Management's Discussion and Analysis of Results of Operations
(Dollars in thousands, except per share amounts)
Results of Operations
Three months ended December 31, 1999 compared to the three months ended December
31, 1998
Sales
Sales from continuing operations increased $1,478, or 10.3%, to $15,877 in the
first quarter of fiscal 2000 from $14,399 in the first quarter of fiscal 1999
primarily due to higher unit sales volumes in the Company's Vehicle Components
segment.
Sales from continuing operations in the Vehicle Components business unit
increased $1,253 or 9.1%, to $15,024 in the first quarter of fiscal 2000 over
levels achieved in the first quarter of fiscal 1999 due to electronic throttle
control ("ETC") unit sales, approximately half of which was from new automotive
and medium truck contracts. Sales from continuing operations in the Company's
Electrical Components and GPS business units increased $225, or 35.8%, primarily
due to revenues in the first quarter of fiscal 2000 as a result of the
completion of the Chicago Metra contract at the GPS subsidiary.
Gross margin
Gross margin from continuing operations was $3,746 or 23.6% of sales in the
first quarter of 2000, compared to $4,384 or 30.5% of sales in the comparable
fiscal 1999 period. Gross margin decreased $638 or 14.6%, in the first quarter
of fiscal 2000 as a result of reduced gross margins at the Vehicle Components
business unit of $771. The primary reasons for the decrease in gross margins at
the Vehicle Components business unit include increased management information
system expenses of approximately $229 for continued support of an enterprise
wide resource planning system, wide area network and year 2000 compliance,
increased depreciation and amortization expense as a result of significant
capital expenditures made in fiscal 1999 and the increase in amortization
expense resulting from the acquisition of ProActive Pedals, and a decrease in
the gross margin realized at the Company's plastic injection molding and tooling
subsidiary of $496.
The Company's plastic injection molding and tooling subsidiary, the operating
results of which are included in the Vehicle Components business unit, reported
an increased loss from operations of $619 in the first quarter ended December
31, 1999 compared to the prior fiscal quarter as losses continue while gearing
up for future increased sales as a result of new orders. The Company expects
operating losses to continue, at least for the next quarter. Sales, gross margin
(loss) and operating income (loss) for the quarter ended December 31, 1999 were
$1,230, ($432) and ($808), respectively compared to $1,436, $63 and ($189) in
the prior fiscal period.
Operating expenses
Operating expenses for continuing operations were $3,244 for the three months
ended December 31, 1999 compared to $2,060 for the comparable fiscal 1999
period, or an increase of $1,184, or 57.5% as a result of increased research and
development expenses. Operating expenses as a percent of net sales from
continuing operations increased to 20.4% in the first quarter of fiscal 2000
compared to 14.3% in the comparable 1999 quarter.
Research and development expenses for continuing operations increased $1,049, to
$1,697 during the first quarter of fiscal 2000 compared to $648 in the
comparable fiscal 1999 period. As a percent of sales from continuing operations,
research and development expenses increased from 4.5% to 10.7%. Research and
development expenses were increased to design ETC products compatible with
gasoline powered vehicles, develop commercial applications for inertia, tilt and
position sensor products, and develop adjustable foot pedal and ETC systems for
passenger vehicles. The Company is in the early stages of development of these
programs and expects to increase research and development spending by
approximately $4,200 in fiscal 2000. The majority of the additional expense will
be used to develop passenger vehicle electronic throttle controls and adjustable
foot pedals.
9
Interest and Other Expenses
Interest expense from continuing operations increased $156, or 33.0%, to $629 in
the first quarter of fiscal 2000 from $473 in the first quarter of fiscal 1999
primarily because of the increase in capital leases as a percent of total
outstanding debt, which is at a higher average interest rate than bank debt, and
the decrease in allocated interest expense included in discontinued operations
which was $26 and $86 for the quarters ended December 31, 1999 and 1998.
respectively.
Discontinued operations
The Company has received two offers to purchase the Agricultural Equipment
Segment. Both offers are subject to additional due diligence, execution of
definitive agreements, and requisite approvals. The Company has accepted both
offers while not granting exclusivity to either buyer. Both offers are
equivalent in value, and neither offer would result in an additional loss for
the disposal of this discontinued business segment.
Net sales from the Agriculture Equipment business unit declined $327 or 18.4% to
$1,449 in the first quarter of fiscal 2000 compared to $1,776 in the first
quarter of fiscal 1999. The decline in sales was due to lower unit sales
attributable primarily to a weak farm economy. The loss from operations for the
discontinued Agriculture Equipment business unit decreased $161 to $468 due to a
reduction in selling and administration expenses totaling $329.
Net earnings available to common shareholders
Net earnings (loss) allocable to common shareholders was $(313) in the quarter
ended December 31, 1999 compared to $881 in the comparative prior year period
due to decreased gross margins as a percent of sales and increased research and
development expense and interest expense.
The effective income tax rate was 38.4% for the quarters ended December 31, 1999
and 1998.
10
Part II
Item 1. Legal Proceedings
None
Item 2. Changes in Securities and Use of Proceeds
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 - Eighth Amendment to Credit Agreement
27 - Financial Data Schedule
(b) Reports on Form 8-K
None
11
Williams Controls, Inc.
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WILLIAMS CONTROLS, INC.
/s/ Gerard A. Herlihy
----------------------------
Gerard A. Herlihy,
Chief Financial Officer
/s/ Kim L. Childs
----------------------------
Kim L. Childs,
Corporate Controller and
Principal Accounting Officer
Date: February 14, 2000
12
Williams Controls, Inc.
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WILLIAMS CONTROLS, INC.
-----------------------------
Gerard A. Herlihy,
Chief Financial Officer
----------------------------
Kim L. Childs,
Corporate Controller and
Principal Accounting Officer
Date: February 14, 2000
12