Subj: WPI GROUP Announces Fiscal Year 1998 Revenue and Earnings
Date: 12/11/98 8:41:07 AM Eastern Standard Time
WPI GROUP Announces Fiscal Year 1998 Revenue and Earnings
MANCHESTER, N.H.--(BUSINESS WIRE)--Dec. 11, 1998--
Final Results Affected By Write-offs And Reserves
New Operating Group Management Structure Announced
WPI GROUP, INC. announced today that for fiscal 1998, revenue
reached $94.9 million, an increase of 52% from fiscal 1997 revenue of
$62.5 million. Net income for fiscal 1998 was $2.5 million or $0.40
per share, compared to net income of $1.1 million and earnings per
share of $0.18 in fiscal 1997.
For the 1998 fourth fiscal quarter, WPI reported net sales of
$25.4 million, up 37% from the $18.6 million reported in the
comparable period in fiscal 1997. Net loss for the fourth quarter was
$846,000 or ($0.14) per share, versus a net loss of $1.5 million or
($0.26) per share in the same period in fiscal 1997.
Several factors affected fourth quarter operating results.
Despite record revenues, sales for the quarter were lower than
planned. The acquisition of HUSKY COMPUTERS in 1997 substantially
increased the proportion of overall revenues from European customers.
This business is weak in the summer months. As a result, fourth
quarter revenues, historically WPI's strongest, were affected by these
seasonal factors. In addition, the Company experienced sales weakness
in some of its Industrial Technology Group's product lines. Earnings
were also affected negatively by foreign currency translations.
WPI GROUP, INC. Chairman and CEO, Michael Foster,
commented,"Although WPI achieved record revenues in fiscal 1998, we
were disappointed by the fourth quarter operating results. In light of
these results, management has taken a number of additional actions to
further strengthen the WPI balance sheet, reduce costs, improve our
operational management and lay the groundwork for continued growth in
fiscal 1999. They are all steps that management believes necessary to
improve earnings in future periods.
"Non-operational initiatives included the write off of
approximately $1.3 million in capitalized development expenses related
to a helpdesk software product at WPI DECISIONKEY. Although the
marketing of this software product continues, the slow development of
sales has caused management to reassess the capitalization of this
product's development costs. Several balance sheet reserve categories
were increased by approximately $800,000, including inventory
adjustments of $300,000 and increased warranty reserves of $300,000."
Foster continued, "These steps should not obscure the real
progress that was made by WPI management in fiscal 1998. Revenues grew
52% and gross margins were up 1.6% to 41.5% -- a WPI record. The
revenue growth came as a result of the internal growth of our rugged,
handheld computers and diagnostic products, and from our successful,
strategic acquisitions in the instruments area. Although some of the
sales weakness is continuing in the INDUSTRIAL TECHNOLOGY GROUP and in
Europe, the business outlook for all of fiscal 1999 is strong and we
expect WPI to post record sales and earnings in fiscal 1999.
"Additionally, we now are completing a reorganization of our
rugged, handheld terminal and computer operations into a single,
worldwide business unit with full responsibility for all design,
manufacturing, marketing and sales activities. Simultaneously, we are
integrating our power conversion equipment and electronic ballast
operations into a single business unit, also with complete
responsibility for all design, manufacturing, sales and marketing
activities. The INFORMATION SOLUTIONS GROUP reorganization eliminates
the last overlapping engineering, sales and marketing areas in our
handheld operations. It also gives us administrative cost savings and
enables us to more efficiently market our products. We believe these
changes will further strengthen WPI's worldwide leadership position in
rugged handhelds. The INDUSTRIAL TECHNOLOGY GROUP reorganization
allows us to immediately broaden our overall sales and marketing
coverage, while strengthening our engineering, manufacturing, customer
service and quality control operations. The reorganizations in both
operating GROUPS will not require any one-time charges and the Company
believes that they will have a positive impact on profitability during
1999."
WPI GROUP, INC. (NASDAQ:WPIC) manufactures and markets high
value-added products used in mission-critical systems through two
operating groups: INFORMATION SOLUTIONS and INDUSTRIAL TECHNOLOGY.
INFORMATION SOLUTIONS offers the world's broadest range of rugged,
handheld terminals, PCs and notebook computers designed for use in
harsh environments across a wide array of industries and it supplies
applications software in selected vertical markets. It also provides
industry-leading diagnostic hardware and software to the
transportation industry. The INDUSTRIAL TECHNOLOGY GROUP manufactures
avionics components and subsystems, inertial sensors, panel meters,
industrial power conversion systems, electronic ballasts and precision
solenoids for a variety of industrial and consumer products.
The statements contained in this release concerning the company's
goals, strategies and expectations for business and financial results
are "forward-looking statements" based on current expectations. No
assurances can be given that the results in any forward-looking
statements will be achieved and actual results could differ
materially. Please review the reports that the company files with the
securities and exchange commission for information concerning factors
which could affect the company's business.
-0-
*T
WPI GROUP, INC. CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
Three Months Ended Year Ended
Sept. 27, Sept. 28, Sept. 27, Sept. 28,
1998 1997 1998 1997
NET SALES $ 25,401,200 $ 18,590,210 $ 94,895,957 $ 62,483,388
COST OF
GOODS SOLD 14,999,110 11,109,130 55,511,061 37,551,545
GROSS PROFIT 10,402,090 7,481,080 39,384,896 24,931,843
OPERATING
EXPENSES:
Research and
new product
development 1,148,874 1,009,790 5,132,322 4,005,281
Selling,
general and
administration 7,844,746 6,961,392 25,515,716 16,877,096
Write-off of
software
development
costs 1,312,283 -- 1,312,283 --
Restructuring
costs -- 725,540 -- 725,540
Total operating
expenses 10,305,903 8,696,722 31,960,321 21,607,917
OPERATING
INCOME (LOSS) 96,187 (1,215,642) 7,424,575 3,323,926
OTHER INCOME
(EXPENSE):
Interest expense (1,179,241) (780,783) (3,624,829) (2,016,210)
Foreign currency
loss (180,000) -- (180,000) --
Other, net 73,987 77,221 91,738 663,045
INCOME (LOSS)
BEFORE
PROVISION FOR
INCOME TAXES (1,189,067) (1,919,204) 3,711,484 1,970,761
PROVISION
(BENEFIT) FOR
INCOME TAXES (343,000) (390,000) 1,225,000 855,000
NET INCOME
(LOSS) $ (846,067) $ (1,529,204) $ 2,486,484 $ 1,115,761
EARNINGS PER
SHARE:
Basic $ (0.14) $ (0.26) $ 0.41 $ 0.19
Diluted $ (0.14) $ (0.26) $ 0.40 $ 0.18
SHARES USED
IN COMPUTATION
OF EARNINGS
PER SHARE:
Basic 6,025,209 5,985,398 6,015,192 5,972,310
Diluted 6,025,209 5,985,398 6,194,766 6,162,978
*T
--30--nmb/ny*
CONTACT: Michael Foster, Chairman & CEO
Dennis Deegan, President & COO
603/627-3500
or
Contact:
Devin Sullivan 212-836-9608 (The Equity Group Inc.)
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