WSI Industries Inc. (WSCI) filed Annual Report for the period ended 2009-08-30.
WSI Industries, Inc. conducts operations in contract manufacturing for the ultra-precision and production machining industry. Wsi Industries Inc. has a market cap of $6.7 million; its shares were traded at around $2.31 with and P/S ratio of 0.3. Wsi Industries Inc. had an annual average earning growth of 106.8% over the past 5 years.
Highlight of Business Operations:
In fiscal 2007, the Company secured a new customer in the energy industry. Sales to the energy industry were the predominant factor in the Company’s sales growth in fiscal 2008 and fiscal 2007. The Company had overall increases in sales of 38% and 17% for fiscal 2008 and 2007, respectively. The Company’s other major markets, which include sales to the recreational vehicle and bioscience industries, were relatively stable in fiscal 2008 and fiscal 2007. In fiscal 2009, all areas of the Company’s business were affected by the national recession and we experienced decreases in sales. In fiscal 2009, the Company had an overall decrease in sales of 27%. Sales to the recreational vehicle market totaled approximately 54%, 54% and 76% of total sales in fiscal 2009, 2008 and 2007, respectively. Sales to the aerospace/avionics/defense markets totaled approximately 8%, 9% and 10% of total sales in fiscal 2009, 2008 and 2007, respectively. Sales to the energy industry, which commenced in fiscal 2007, totaled approximately 36%, 34% and 8% of sales in fiscal 2009, 2008 and 2007, respectively. Sales to the bioscience industry amounted to approximately 2% of total sales in fiscal 2009 and 2008 and 4% of sales in fiscal 2007.
A large percentage of our sales have been made to a small number of customers in a small number of highly competitive industries, and the loss of a major customer would adversely affect us. In fiscal years 2009, 2008 and 2007, one customer in the recreational vehicle market accounted for 51%, 53% and 75% of our revenue, respectively. In addition, in fiscal years 2009 and 2008, one customer in the energy industry accounted for 30% and 34% of our revenue, respectively. If there is a loss of one or more of these major customers or a significant decline in sales to either of these major customers it could have an adverse effect on our results from operations.
Net sales in fiscal 2009 were $18.8 million as compared to $25.9 million in the prior year, or a decrease of $7.1 million or 27%. The decrease in fiscal 2009 is attributable primarily to the economic recession, which negatively impacted sales in each of our major markets. Net sales in fiscal 2008 increased $7.1 million or 38% over fiscal 2007. The increase in fiscal 2008 sales came primarily from increases in the Company’s energy business.
Fiscal 2009 sales in the aerospace and defense markets were down 32% again due to the recession and corresponding slump in the aerospace industry. Sales in fiscal 2008 in the Company’s aerospace and defense business increased 14% over the prior year due primarily to increased sales from a new customer added in fiscal 2007 and also to increased sales from a long-time customer.
The Company’s gross margin decreased in fiscal 2009 to 12.6% from the 18.9% in fiscal 2008 due primarily to the lower sales volume and a corresponding higher percentage of fixed costs such as depreciation. The 2008 gross margins were comparable to fiscal 2007 as they were only slightly higher by 0.4%.
The Company recorded income taxes at an effective tax rate of 36% for fiscal 2009, 35% for fiscal 2008 and 38% for fiscal 2007, respectively. The Company maintained its valuation allowance at zero during 2009 and 2008.
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