-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Hfo4jqWm2uHnnqIReDgZvhyZMPKQMQ0GNa8htbqOWGZ6joDw+PZsXJXEaBoE5SZ8 dpPgi9+Dso52UeJLkFlkUA== 0000891804-97-000472.txt : 19971229 0000891804-97-000472.hdr.sgml : 19971229 ACCESSION NUMBER: 0000891804-97-000472 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19970927 FILED AS OF DATE: 19971224 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: WOODHEAD INDUSTRIES INC CENTRAL INDEX KEY: 0000108215 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC LIGHTING & WIRING EQUIPMENT [3640] IRS NUMBER: 361982580 STATE OF INCORPORATION: DE FISCAL YEAR END: 1001 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 000-05971 FILM NUMBER: 97744626 BUSINESS ADDRESS: STREET 1: 2150 E LAKE COOK RD SUITE 400 CITY: BUFFALO GROVE STATE: IL ZIP: 60089 BUSINESS PHONE: 7084658300 MAIL ADDRESS: STREET 1: 2150 E LAKE COOK RD SUITE 400 CITY: BUFFALO GROVE STATE: IL ZIP: 60089 FORMER COMPANY: FORMER CONFORMED NAME: WOODHEAD DANIEL CO DATE OF NAME CHANGE: 19710624 10-K 1 10-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED SEPTEMBER 27, 1997 Commission file number 0-5971 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 WOODHEAD INDUSTRIES, INC. (Exact name of registrant as specified in its charter) DELAWARE 36-1982580 -------------------------------- ------------------------------- (State or other jusistriction of (I.R.S. Employer Identification incorporation or organization) Number) 2150 E. LAKE COOK RD., SUITE 400, BUFFALO GROVE, IL. 60089 -------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (847) 465-8300 Securities registered pursuant to Section 12(g) of the Act: Common Stock, Par Value $1.00 NASDAQ - National Preferred Stock Purchase Rights Market System ------------------------------- ----------------------------- (Title of class) (Exchange on which registered) 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 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 --- --- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein and will not be contained, to the best of the Registrant's knowledge, in the Proxy Statement incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] The aggregate market value of the voting stock held by non-affiliates of the Registrant as of November 22, 1997 was $207,764,872. Shares outstanding as of November 22, 1997 were 10,569,914. DOCUMENTS INCORPORATED BY REFERENCE Portions of the Registrant's definitive proxy statement dated December 19, 1997, for the annual meeting of stockholders to be held January 23, 1998, and portions of the Annual Report to Stockholders for the year ended September 27, 1997 are incorporated by reference in Parts I, II, III, and IV. ANNUAL REPORT FORM 10-K FOR THE YEAR ENDED SEPTEMBER 27, 1997 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION TABLE OF CONTENTS ITEM NO. PAGE 1. Business............................................................. 2-4 2. Description of Property.............................................. 4 3. Legal Proceedings.................................................... 5 4. Submission of Matters to a Vote of Securities Holders................ 5 5. Market for Registrant's Common Equity and Related Stock Matters.......................................................... 6-7 6. Selected Financial Data.............................................. 7 7. Management's Discussion and Analysis of Financial Condition and Results of Operations......................................... 7 8. Financial Statements and Supplementary Data.......................... 7 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure......................................... 7 10. Directors and Executive Officers of the Registrant................... 8-9 11. Executive Compensation............................................... 9 12. Security Ownership of Certain Beneficial Owners and Management....... 9 13. Certain Relationships and Related Transactions....................... 9 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K. (Index of Exhibits is on Pages 16-18)............... 9-13 The term "Company" is used herein to refer to Woodhead Industries, Inc. (the Registrant) and its subsidiaries unless the context indicates otherwise. 1 PART I ITEM 1. BUSINESS GENERAL Woodhead Industries, Inc. was incorporated in Illinois in 1922 and reincorporated in Delaware in 1978. The corporation and its subsidiaries are primarily engaged in the manufacture and sale of devices for the control and distribution of electrical power for industry. There were no material changes in the manner in which the Company conducted its business during fiscal 1997. INDUSTRY SEGMENTS The Company consists of one business segment which can best be described as specialty power and signaling devices. That segment accounted for 99% of the sales and 98% of the earnings in 1997 and during the past five years has averaged 99% of sales and 96% of earnings. Molded rubber products, an immaterial business segment and therefore not reported separately, accounted for the remainder of the sales and earnings. PRODUCTS The Company's products are designed for and used primarily in industrial applications for the distribution of power, for signaling and for motion control. They can be classified into three groups: electrical specialties, reels and power systems, and molded rubber products. The electrical specialty product classification includes, among other items, portable handlamps, low-voltage safety lights, wiring devices, weatherproof receptacles, circuit testers, portable power distribution equipment, pendant push-button enclosures, general-purpose power and control connectors, and custom copper and fiber optic cable assemblies. Reels and power systems include such products as electric cord and cable reels, electric cable festooning systems, collector rings, static discharge reels, tool balancers, ergonomic workstations, hose reels, and multiple-cable carrier systems. There is widespread applicability for the Company's products throughout a broad range of industries such as petro-chemical, automotive, steel, airline, chemical, food processing, utility, communications, mining, heavy construction, health care, and recreation. A majority of the products are used in plant maintenance and production with the balance becoming a component part of another product. 2 Part I - cont'd. The percent of sales and income for the three product classifications over the past five years is as follows:
SALES INCOME --------------------------------------- -------------------------------------- 1997 1996 1995 1994 1993 1997 1996 1995 1994 1993 Electrical specialties 70 67 66 68 68 80 77 81 78 75 Reels and power systems 29 31 33 31 30 18 18 16 18 20 Molded rubber products 1 2 1 1 2 2 5 3 4 5
DISTRIBUTION All of the Company's products are heavy-duty, industrial grade. These products are sold directly to users, to original equipment manufacturers, and through selected distributors, mainly in the United States, Canada, Europe and Asia with some sales going to other parts of the world. These distributors are serviced by manufacturers' agencies whose sales personnel solicit sales for the Company's products and promote them to the ultimate users. These agencies also represent other manufacturers whose lines, in general, are complementary to the Company's products. AVAILABILITY OF MATERIALS Parts and materials for the Company's products are readily available from a variety of suppliers. It has been a practice to develop and use more than one source of supply for any item considered critical. PATENTS/TRADEMARKS/LICENSING On certain of its products, the Company holds patents, trademarks, and licensing arrangements which, while valuable, are not considered essential to the maintenance or future growth of the business. SEASONALITY The business is not considered to be seasonal. INVENTORIES Products of the type manufactured and sold by the Company are also available through other manufacturers as well. As a result, delivery time as well as quality and customer service are important to the success of the business and therefore require that sufficient inventories be maintained to insure fast turnaround time on orders. CUSTOMER PROFILE The Company's sales are broad-based with no single customer accounting for a significant portion of total sales and no single industry accounting for a majority of its business. BACKLOG On November 22, 1997, there were unshipped orders totaling approximately $9.2 million. Last year's backlog at approximately the same date was $10.0 million. 3 Part I - cont'd. COMPETITION Products similar to those sold by the Company are manufactured and sold by other companies as well, resulting in a very competitive environment. However, the Company believes its ability to manufacture high quality products that serve specialized needs of industry through its highly efficient distribution channels differentiates the Company from its competitors. RESEARCH AND DEVELOPMENT For the years ended September 27, 1997, September 28, 1996, and September 30, 1995, the Company expended approximately $3,025,000, $2,513,000, and $2,404,000, respectively, on the development of new products and the improvement of existing products. These expenditures included the compensation of engineers, designers, and drafters who were engaged in product development. EMPLOYEES The Company has approximately 1,259 full-time employees. FOREIGN AND EXPORT BUSINESS See footnote 8, page 29 of the Annual Report to Stockholders for the year ended September 27, 1997, which is incorporated herein by reference and filed as an exhibit to this report. ITEM 2. DESCRIPTION OF PROPERTY The Company owns facilities in the following locations: Land Owned Plant Floor Area Northbrook, Illinois 4.7 acres 125,000 sq. ft. Kalamazoo, Michigan 39.1 acres 116,000 sq. ft. Franklin, Massachusetts 6.6 acres 60,000 sq. ft. El Paso, Texas 5.0 acres 50,000 sq. ft. Belvidere, Illinois 3.5 acres 36,000 sq. ft. Juarez, Mexico .8 acres 40,000 sq. ft. Netherlands 1.3 acres 30,000 sq. ft. Wales, U.K. 4.5 acres 42,000 sq. ft. All of the above properties are owned in fee except the land in Wales, U.K. which is held under a lease expiring in 2105. In 1997, a 10.7 acre parcel of land was purchased in Juarez, Mexico. In addition, 1.2 acres of land was leased in Bretten, Germany. Both parcels were acquired for construction of new facilities which currently is in progress. The Company also leases approximately 20,000 square feet in Ontario, Canada; 12,500 square feet in Remchingen, Germany; 10,500 square feet in Grand Rapids, Michigan; 7,000 square feet in Buffalo Grove, Illinois; 6,500 square feet in Lagny-Sur-Marne, France; 5,900 square feet in Singapore; and 200 square feet in Japan. All plants are considered to be well-equipped and well-maintained. They are of masonry or steel construction. In the judgment of management, sufficient capacity is available at the above locations to cover the Company's needs at least through fiscal 1998. 4 Part I - cont'd. ITEM 3. LEGAL PROCEEDINGS The Company is subject to federal and state hazardous substance cleanup laws that impose liability for the costs of cleaning up contamination resulting from past spills, disposal or other releases of hazardous substances. In this regard, the Company has incurred, and expects to incur, assessment, remediation and related costs at one of the Company's facilities. In 1991, the Company reported to state regulators a release at that site from an underground storage tank ("UST"). The UST and certain contaminated soil subsequently were removed and disposed of at an off-site disposal facility. The Company's independent environmental consultant has been conducting an investigation of soil and groundwater at the site with oversight by the state Department of Environmental Quality ("DEQ"). The investigation indicates that additional soil and groundwater at the site have been impaired by chlorinated solvents, including tetrachloroethane and trichloroethylene, and other compounds. Also, the Company learned that a portion of the site had been used as a disposal area by the previous owners of the site. The Company's consultant has remediated the soils in this area and believes that it is an additional source of contamination of groundwater, both on-site and off-site. In addition, the investigation of the site indicates that the groundwater contaminants have migrated off-site. The Company has implemented a groundwater remediation system for the on-site contamination, and continues to monitor and analyze conditions to determine the continued efficacy of this system. The Company has selected a remediation alternative for the off-site groundwater contamination and is currently reviewing this alternative with the DEQ. The Company also is conducting additional investigations to determine the extent of other sources of contamination in addition to the removed UST and the above-referenced disposal area, including possible evidence of past or current releases by others in the vicinity around the Company's facilities. The Company's consultant estimates that a minimum of approximately $890,000 of investigation and remediation expenses remain to be incurred, both on-site and off-site. The Company has a reserve for such purposes and has notified the previous owners of the site and various insurers of possible claims by the Company relating to the remediation of the site. The consultant's cost estimate was based on a review of currently available data, which is limited, and assumptions concerning the extent of contamination, geological conditions, and the costs and effectiveness of certain treatment technologies. The cost estimate is subject to substantial uncertainty until the extent of contamination and geological conditions are fully understood, feasible remedial alternatives are assessed, and the DEQ approves a remediation plan. The Company is continuing to investigate the environmental conditions at the site and will adjust its reserve if necessary. The Company may incur significant additional assessment, remediation and related costs at the site, and such costs could materially and adversely affect the Company's consolidated net income for the period in which such costs are incurred. At this time, the Company, however, cannot estimate the time or potential magnitude of such costs, if any. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS There were no matters submitted to a vote of the security holders either through solicitation of proxies or otherwise during the fourth quarter of the fiscal year ended September 27, 1997. 5 Part II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCK MATTERS (a) The Company's common stock trades on the NASDAQ stock market under the symbol WDHD. The daily quotations as reported by NASDAQ are published in the Wall Street Journal and other leading financial publications. On April 26, 1995, the board of directors declared a three-for-two stock split effected in the form of a 50% common stock dividend, payable May 22, 1995, to holders of record on May 8, 1995. On January 22, 1993, the board of directors declared a two-for-one stock split effected in the form of a 100% stock dividend, payable March 1, 1993, to holders of record on February 12, 1993. All share and per share amounts in this filing have been adjusted to give retroactive effect to these stock splits. Preferred Stock Purchase Rights have been distributed to stockholders and deemed to be attached to the shares of Common Stock of the Registrant. If and when the rights become exercisable, the holders initially would be entitled to purchase one unit consisting of one one-thousandths of a share ("unit") of Series A Junior Participating Preferred Stock at a purchase price of $65 per unit, subject to adjustment. See footnote 5, page 26 of the Annual Report to Stockholders for the year ended September 27, 1997, for further explanation. This footnote is incorporated herein by reference and filed as an exhibit to this report. The range in the market price per share of the common stock during the past two years was as follows: 1997 1996 ----------------------------- ------------------------------ Fiscal Fiscal Quarter High Low Quarter High Low 1st 14 1/4 12 1/4 1st 16 3/4 13 7/8 2nd 16 3/4 13 1/4 2nd 15 13 3rd 19 1/4 14 3/4 3rd 15 1/2 10 4th 21 1/8 17 3/4 4th 13 3/4 11 3/4 (b) The number of holders of record of the Company's securities as of December 10, 1997, was as follows: Title of Class Number of Stockholders Common Stock 559 Preferred Stock Purchase Rights 559 6 Part II - cont'd. (c) The cash dividends declared for the past two years were as follows: 1997 1996 --------------------------- --------------------------- Fiscal Quarter Rate Fiscal Quarter Rate 1st $0.080 1st $0.065 2nd $0.080 2nd $0.070 3rd $0.090 3rd $0.070 4th $0.090 4th $0.070 ------ ------ Total $0.340 Total $0.275 ====== ====== ITEM 6. SELECTED FINANCIAL DATA The "Financial Profile" appearing on pages 14 and 15 of the Annual Report to Stockholders for the year ended September 27, 1997, is incorporated herein by reference and filed as an exhibit to this report. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS "Management's Discussion of Operations and Financial Position" appearing on pages 12 and 13 of the Annual Report to Stockholders for the year ended September 27, 1997, is incorporated herein by reference and filed as an exhibit to this report. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The "Report of Independent Public Accountants" included on page 11 and the consolidated financial statements with accompanying footnotes appearing on pages 16 through 30 of the Annual Report to Stockholders for the year ended September 27, 1997, are incorporated herein by reference and filed as an exhibit to this report. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. 7 Part III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Information appearing under the heading "Nominees and Continuing Directors" on pages 1 through 4 of the Registrant's definitive proxy statement dated December 19, 1997, for the annual meeting of stockholders to be held on January 23, 1998, is hereby incorporated herein by reference and made a part hereof. The following information is provided with respect to the executive officers of the Company: Position Held Name of Officer Age Position Since C. Mark DeWinter 55 Chairman, President and July, 1993 Chief Executive Officer Robert G. Jennings 59 Vice President, Finance and July, 1987 Chief Financial Officer Robert J. Tortorello 48 Vice President, General January, 1991 Counsel and Secretary Robert A. Moulton 48 Vice President, Human May, 1987 Resources Gregory E. Baker 34 Vice President, Corporate October, 1997 Development and Strategic Planning Joseph P. Nogal 42 Treasurer/Controller and July, 1993 Assistant Secretary All officers are elected each year at the Annual Meeting of the Board of Directors which is held immediately following the annual meeting of stockholders. The next Annual Meeting of the Board of Directors will be held on January 23, 1998. The business experience of those executive officers who are not directors or nominees is as follows: Mr. Robert G. Jennings joined the Company in July, 1987. He previously had served as Vice President, Finance and Treasurer for MagneTek, Inc. from 1984 to 1987 and was Vice President, Treasurer and Controller for Louis Allis Division, Litton Industries from 1973 to 1984. Mr. Robert J. Tortorello became the Company's General Counsel and Secretary in June, 1987. He was elected a Vice President of the Company in January, 1991. Before joining the Company, he was Assistant Vice President and Assistant to the Chairman at Beatrice Companies, Inc. from 1986 to 1987. Prior to that he had been a Senior Attorney at Beatrice since 1978. Mr. Robert A. Moulton joined the company in October, 1986 as Manager, Human Resources and was elected Vice President in May, 1987. He was formerly a Director, Personnel at G. D. Searle and Company from 1981 to 1986. 8 Part III - cont'd. Mr. Gregory E. Baker joined the Company in October, 1997 as Vice President, Corporate Development and Strategic Planning. He previously had served as Director, Supply Chain Optimization and also Manager, Corporate Development for Tenneco Packaging from 1995 to 1997. Prior to that he held a variety of positions with both AlliedSignal and Texas Instruments from 1986 to 1995. Mr. Joseph P. Nogal became the Company's Treasurer/Controller in January, 1991. He was elected the Assistant Secretary of the Company in July, 1993. From 1986 to 1990, he had served as Controller of the Company's Canadian Operations. Prior to 1986, he had held various positions within the Company since he joined it in 1978. Information appearing under the heading "Section 16(a) Beneficial Ownership Reporting Compliance" on page 6 and 7 of the Registrant's definitive proxy statement dated December 19, 1997, for the annual meeting of stockholders to be held on January 23, 1998, is hereby incorporated herein by reference and made a part hereof. ITEM 11. EXECUTIVE COMPENSATION The information contained under the headings "Directors' Compensation" on page 6 and "Executive Compensation" on pages 9 through 17 of the Registrant's definitive proxy statement dated December 19, 1997, for the annual meeting of stockholders to be held January 23, 1998, is incorporated herein by reference and made a part hereof. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The table and footnotes appearing under the heading "Stock Ownership of Management and Certain Beneficial Owners" appearing on page 7 and 8 of the Registrant's definitive proxy statement dated December 19, 1997, for the annual meeting of stockholders to be held January 23, 1998, are hereby incorporated by reference and made a part hereof. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information contained under the heading "Nominees and Continuing Directors" appearing on pages 1 through 4 of the Registrant's definitive proxy statement dated December 19, 1997, for the annual meeting of stockholders to be held January 23, 1998, is incorporated by reference and made a part hereof. Part IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a) Documents filed as part of this Report: 1. Financial Statements (filed herewith as part of Exhibit 13): Consolidated Balance Sheets - at September 27, 1997, September 28, 1996, and September 30, 1995. 9 Part IV - cont'd. Consolidated Statements of Income - for the years ended September 27, 1997, September 28, 1996, and September 30, 1995. Consolidated Statements of Stockholders' Investment - for the years ended September 27, 1997, September 28, 1996, and September 30, 1995. Consolidated Statements of Cash Flow - for the years ended September 27, 1997, September 28, 1996, and September 30, 1995. Notes to Consolidated Financial Statements. 2. Financial Statement Schedules The following consolidated financial information for the years ended September 27, 1997, September 28, 1996, and September 30, 1995, is submitted herewith: PAGE Report of Independent Public Accountants on Schedule and Supplementary Notes 13 Schedule II Valuation and Qualifying Accounts 11 Supplementary Notes to Consolidated Financial Statements 12 All other schedules have been omitted because they are not applicable, not required, or the information is included elsewhere in the financial statements or notes thereto. Separate financial statements of the Registrant have been omitted since the Registrant is primarily a holding company and its subsidiaries, included in the consolidated financial statements, are wholly-owned subsidiaries. 3. The Exhibits are listed in the index of exhibits required by Item 601 of Regulation S-K included at pages 16, 17, and 18, which are incorporated herein by reference and made a part hereof. (b) No reports on Form 8-K were filed during the three months ended September 27, 1997. (c) Reference is made to Item 14(a) 3 above. (d) Reference is made to Item 14(a) 2 above. 10
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS For the three years ended September 27, 1997 (in thousands) ADDITIONS ------------------------ Balance at Charged to Charged to Balance Beginning Costs and Other at End Description Of Period Expenses Accounts Deductions Of Period - ------------------------- ---------- ---------- --------- ---------- --------- Reserve for excess and obsolete inventory: Year ended September 27, 1997 $ 1,192 $ 499 - $(423) (1) $ 1,270 2 (2) Year ended September 28, 1996 $ 1,076 $ 499 - $(376) (1) $ 1,192 (7) (2) Year ended September 30, 1995 $ 1,119 $ 402 - $(425) (1) $ 1,076 (20)(2) - ------------- (1) Represents write-offs less recoveries. (2) Foreign currency translation adjustment.
11 SUPPLEMENTARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ACCRUED EXPENSES Accrued expenses at September 27, 1997, September 28, 1996, and September 30, 1995, consisted of the following: (in thousands) 1997 1996 1995 ---- ---- ---- Payroll $3,872 $3,014 $3,386 Pension and profit sharing 2,305 1,828 1,399 Environmental 890 800 1,519 Litigation & related expenses 163 159 936 Commissions 1,261 995 780 Insurance 277 428 474 Other 4,273 4,030 4,015 ----- ----- ----- $13,041 $11,254 $12,509 ======= ======= ======= 12 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULE AND SUPPLEMENTARY NOTES To Woodhead Industries, Inc.: We have audited in accordance with generally accepted auditing standards, the consolidated financial statements of Woodhead Industries, Inc. and subsidiaries included in the Woodhead Industries, Inc. Annual Report to Stockholders for the year ended September 27, 1997 incorporated by reference in this Form 10-K, and have issued our report thereon dated November 11, 1997. Our audit was made for the purpose of forming an opinion on those statements taken as a whole. The schedule and supplementary notes included on pages 11 through 12 of this Form 10-K are presented for purposes of complying with the Securities and Exchange Commission's rules and are not part of the basic financial statements. This schedule and these notes have been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, fairly state in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole. ARTHUR ANDERSEN LLP Chicago, Illinois November 11, 1997 13 INDEMNIFICATION UNDERTAKING For the purposes of complying with the amendments to the rules governing Form S-8 (effective July 13, 1990) under the Securities Act of 1933 (the "Act"), the undersigned Registrant hereby undertakes as follows, which undertaking shall be incorporated by reference into Registrant's Registration Statement on Form S-8 No. 333-26379 (filed May 2, 1997): Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. 14 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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. WOODHEAD INDUSTRIES, INC. BY /s/ Robert G. Jennings BY /s/ Joseph P. Nogal Robert G. Jennings Joseph P. Nogal Vice President, Finance Treasurer/Controller (Chief Financial Officer) (Principal Accounting Officer) Date 12/4/97 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by all of the following directors on behalf of the Registrant and in the capacities and on the dates indicated: Signature Title Date /s/ C. Mark DeWinter Chairman 12/4/97 C. Mark DeWinter President and C.E.O. /s/ Charles W. Denny Director 12/9/97 Charles W. Denny /s/Eugene P. Nesbeda Director 12/5/97 Eugene P. Nesbeda /s/ Sarilee K. Norton Director 12/15/97 Sarilee K. Norton /s/ Alan L. Shaffer Director 12/11/97 Alan L. Shaffer /s/ Robert D. Tuttle Director 12/15/97 Robert D. Tuttle /s/ Richard A. Virzi Director 12/15/97 Richard A. Virzi 15 EXHIBIT INDEX Exhibit Number Description Page - ------- ----------- ---- (3) Articles of incorporation and bylaws (a) Certificate of Incorporation including amendments through January 22, 1993, are hereby incorporated by reference to Exhibit (4)a of Registrant's Form S-8 filed April 22, 1994, as Registration #33-77968. (b) By-laws of the Company, as amended, for the fiscal year ended September 27, 1997, are filed as an exhibit to this report. 19-29 (4) Instruments defining the rights of security holders, including indentures (a) Credit Agreement between Registrant and Harris Trust and Savings Bank dated October 29, 1993, and amended on October 31, 1997, providing for a revolving credit line not exceeding $15,000,000. The above document described in this paragraph (4a) is not filed herewith by Registrant, but Registrant undertakes to furnish copies thereof to the Securities and Exchange Commission upon request. (b) The Preferred Stock Purchase Rights Plan adopted April 24, 1996, as set forth in Exhibit 4 of the Quarterly Report on Form 10-Q filed on May 14, 1996, is incorporated herein by reference and made a part hereof. (10) Material contracts (a) The 1981 Incentive Stock Compensation Plan, as amended, as set forth in Exhibit 4(b) of Registrant's Form S-8 filed September 26, 1988, as Registration #33-24737, is incorporated herein by reference and made a part hereof. (b) The 1987 Stock Compensation Plan as set forth in Exhibit A of Registrant's definitive proxy statement dated December 21, 1987, for the annual meeting of stockholders held January 22, 1988, which is incorporated herein by reference and made a part hereof. (c) The 1990 Stock Awards Plan as set forth in Exhibit A of Registrant's definitive proxy statement dated December 19, 1990 for the annual meeting of stockholders held January 25, 1991, which is incorporated herein by reference and made a part hereof. 16 EXHIBIT INDEX (cont'd.) Exhibit Number Description Page - ------- ----------- ---- (10) (d) Amendments to: The 1981 Incentive Stock Compensation Plan, the 1987 Stock Compensation Plan, and the 1990 Stock Awards Plan, all as set forth in Exhibit C of Registrant's definitive proxy statement dated December 22., 1993, for the annual meeting of stockholders held January 28,1994, which are incorporated herein by reference and made a part hereof. (e) The 1993 Stock Awards Plan as set forth in Exhibit A of Registrant's definitive proxy statement dated December 22, 1993, for the annual meeting of stockholders held January 28, 1994, which is incorporated herein by reference and made a part hereof. (f) The 1996 Stock Awards Plan as set forth in Exhibit A of Registrant's definitive proxy statement dated December 20, 1996, for the annual meeting of stockholders held January 24, 1997, which is incorporated herein by reference and made a part hereof. (g) The 1993 Directors Stock Option Plan for non-employee Directors as set forth as Exhibit B of Registrant's definitive proxy statement dated December 22, 1993 for the annual meeting of stockholders held January 28, 1994, which is incorporated herein by reference and made a part hereof. (h) The Management Incentive Plan effective for fiscal 1997 as described on page 17 of the Registrant's definitive proxy statement dated December 20, 1996, for the annual meeting of stockholders held January 24, 1997, which page is incorporated herein by reference and made a part hereof. (i) The Plan of Compensation for Outside Directors, as set forth in Item (10) of the exhibits to the Form 10-K Annual Report for the year ending September 18, 1985, which is incorporated herein by reference and is made a part hereof. (j) The 1990 Supplemental Executive Retirement Plan ("SERP") as set forth on page 15 of Registrant's definitive proxy statement dated December 21, 1995, for the annual meeting of stockholders held January 26, 1996, which page is incorporated herein by reference and made a part hereof. 17 EXHIBIT INDEX (cont'd) Exhibit Number Description Page - ------- ----------- ---- (10) (k) Severance Agreement as set forth in Item (10) of the exhibits to Form l0-K Annual Report for the year ending October 1, 1994, which is incorporated herein by reference and is made a part hereof, with C. Mark DeWinter dated September 7, 1989. Robert G. Jennings, Robert A. Moulton, Joseph P. Nogal, Terry L. Spandet, and Robert J. Tortorello have substantially identical contracts. (11) Statement regarding computation of per share earnings 30 (13) The following items incorporated by reference herein from the Annual Report to Stockholders for the year ended September 27, 1997 (the "1997 Annual Report"), are filed as Exhibits to this report: (a) Information under the footnote entitled "Information about the Company's Operations in Different Geographic Areas" set forth on Page 29 of the 1997 Annual Report; (b) Information under the footnote entitled "Capital Stock" set forth on Page 26 of the 1997 Annual Report; (c) Information under the section entitled "Financial Profile" set forth on Pages 14-15 of the 1997 Annual Report; (d) Information under the section entitled "Management's Discussion of Operations and Financial Position" set forth on Pages 12-l3 of the 1997 Annual Report; (e) Report of Independent Public Accountants set forth on Page 11 of the 1997 Annual Report; (f) Consolidated Financial Statements set forth Pages 16-19 of the 1997 Annual Report; and (g) Notes to Consolidated Financial Statements set forth on Pages 20-30 of the 1997 Annual Report. (21) Subsidiaries of the Registrant 31 (23) Consent of Arthur Andersen LLP 32 (27) Financial Data Schedule for the year ended September 27, 1997, filed as an exhibit to this report. 18 EX-3 2 BY-LAWS BY-LAWS WOODHEAD INDUSTRIES, INC. (Including all amendments through June 10, 1997) Article I OFFICES The corporation shall maintain a principal office in the State of Delaware as required by law. The corporation may also have offices in such other places either within or without the State of Delaware as the Board of Directors may from time to time designate or as the business of the corporation may require. Article II SEAL The seal of the corporation shall be circular in form and shall have the name of the corporation on the circumference and the words "Corporate Seal Delaware" in the center. The seal may be used by causing it or a facsimile thereof, to be impressed or affixed or in any other manner reproduced. Article III MEETINGS OF STOCKHOLDERS Section 1. PLACE. Meetings of the stockholders of the corporation shall be held at such place either within or without the State of Delaware as may from time to time be designated by the Board of Directors and stated in the notice of meeting. Section 2. ANNUAL MEETING. Commencing in 1986, an annual meeting of the stockholders of the corporation shall be held in each year at 10:00 A.M. on the fourth Friday in January (or if that be a legal holiday, then on the next business day) or at such other date and time as shall be designated from time to time by the Board of Directors and stated in the notice of meeting, for the election of directors and for the transaction of such other business as may properly be brought before the meeting. Section 3. STOCKHOLDER ACTION: SPECIAL MEETINGS. Any action required or permitted to be taken by the stockholders of the corporation must be effected at a duly called annual or special meeting of such holders and may not be effected by any consent in writing by such holders. Except as otherwise required by law and subject to the rights of the holders of any class or series of stock having a preference over the Common Stock as to dividends or upon liquidation, special meetings of stockholders of the corporation may be called only by the Board of Directors pursuant to a resolution approved by a majority of the entire Board of Directors. Section 4. NOTICE. Written notice of all meetings of the stockholders shall be mailed to or delivered to each stockholder entitled to vote at such meeting not less than ten nor more than sixty days before the date of the meeting. Notice of any special meeting shall state in general terms the purposes for which the meeting is to be held. Section 5. LIST OF STOCKHOLDERS. The officer who has charge of the stock ledger of the corporation shall prepare and make, at least ten days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. 19 Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. Section 6. QUORUM. The holders of a majority of the issued and outstanding shares of the capital stock of the corporation entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum for the transaction of business at all meetings of the stockholders except as may otherwise be provided by law, by the Certificate of Incorporation or by these by-laws; but if there be less than a quorum, the holders of a majority of the stock so present or represented may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented. When a quorum is present at any meeting, the vote of the holders of a majority of the stock having voting power present in person or represented by proxy shall decide any question brought before such meeting, unless the question is one upon which by express provision of the statutes or of the certificate of incorporation, a different vote is required in which case such express provision shall govern and control the decision of such question. Section 7. VOTING. At all meetings of the stockholders, every registered owner of shares entitled to vote may vote in person or by proxy and shall have one vote for each such share standing in his name on the books of the corporation, but no proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period. The Board of Directors, or, if the Board shall not have made the appointment, the chairman presiding at any meeting of stockholders, shall have power to appoint two or more persons to act as inspectors or tellers, to receive, canvass, and report the votes cast by the stockholders at such meeting; but no candidate for the office of director shall be appointed as inspector or teller at any meeting for the election of directors. Section 8. CHAIRMAN OF MEETING. The Chairman of the Board of Directors, or, in his absence, the President, or in the absence of both the Chairman of the Board of Directors and the President, a Vice President shall preside at all meetings of the stockholders; and, in the absence of the Chairman of the Board of Directors, the President and Vice President, the Board of Directors may appoint any stockholder to act as chairman of the meeting. Section 9. SECRETARY OF THE MEETING. The Secretary of the corporation shall act as secretary of all meetings of the stockholders; and, in his absence, the chairman may appoint any person to act as secretary of the meeting. Article IV BOARD OF DIRECTORS Section l. MANAGEMENT OF CORPORATION. The business and affairs of the corporation shall be managed by or under the direction of its Board of Directors. Section 2. NUMBER AND CLASSIFICATION OF BOARD. The Board of Directors shall consist of not more than twelve (12) members, and no less than five (5) members. The Board of Directors shall be divided into three classes: class I, class II and class III. Such classes shall be as nearly equal in number as possible. The Directors in each class shall stand for election in successive 20 years. At each annual election, the directors chosen to succeed those whose terms have expired shall be identified as being in the same class as the directors whom they succeed and shall be elected for a term expiring at the third succeeding annual meeting of stockholders or thereafter in each case when their respective successors are elected and qualified. When the number of directors is changed any increase or decrease in the number of directorships shall be apportioned among the classes so as to make all classes as nearly equal in number as possible. Section 3. REMOVAL. Subject to the rights of any class or series of stock having a preference over the Common Stock as to dividends or upon liquidation to elect directors under specified circumstances, any director may be removed from office, with or without cause, and only by the affirmative vote of the holders of eighty percent of the combined voting power of the then outstanding shares of stock entitled to vote generally in the election of directors, voting together as a single class. Section 4. NOMINATIONS. Subject to the rights of holders of any class or series of stock having a preference over the Common Stock as to dividends or upon liquidation nominations for the election of directors may be made by the Board of Directors or a proxy committee appointed by the Board of Directors or by any stockholder entitled to vote in the election of directors generally. However, any stockholder entitled to vote in the election of directors generally may nominate one or more persons for election as directors at a meeting only if written notice of such stockholder`s intent to make such nomination or nominations has been given, either by personal delivery or by United States mail, postage prepaid, to the Secretary of the corporation not later than (i) with respect to an election to be held at an annual meeting of stockholders, 90 days in advance of such meeting, and (ii) with respect to an election to be held at a special meeting of stockholders for the election of directors, the close of business on the seventh day following the date on which notice of such meeting is first given to stockholders. Each such notice shall set forth: (a) the name and address of the stockholder who intends to make the nomination and of the person or persons to be nominated: (b) a representation that the stockholder is a holder of record of stock of the corporation entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice; (c) a description of all arrangements or understandings between the stockholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by the stockholder; (d) such other information regarding each nominee proposed by such stockholder as would be required to be included in a proxy statement filed pursuant to the proxy rules of the Securities and Exchange Commission, had the nominee been nominated, or intended to be nominated, by the Board of Directors; and (e) the consent of each nominee to serve as a director of the corporation if so elected. The chairman of the meeting may refuse to acknowledge the nomination of any person not made in compliance with the foregoing procedure. Section 5. VACANCY. A reduction in the number of directors to a number less than nine (9) but more than five (5) shall not be deemed to create a vacancy on the board. Whenever any vacancy or other appointment to the Board of Directors shall occur, by reason of death, resignation, or increase in the number of directors or otherwise, it may be filled by a majority of the remaining directors, though less than a quorum, or by a sole remaining director, and the director(s) so chosen shall hold office until the next annual election (or if the directors are divided into classes, until the next election of the class for which such director has been chosen), and until his successor shall be elected and qualified. All appointments to the Board of Directors shall be ratified by the stockholders at their annual meeting next following such appointment. 21 Section 6. PLACE OF MEETINGS. The Board of Directors may hold meetings, both regular and special, and keep the books of the corporation either within or without the State of Delaware. Section 7. ANNUAL MEETING. The annual meeting of the Board of Directors, of which no notice shall be necessary, shall be held immediately following the annual meeting of the stockholders or immediately following any adjournment thereof for the purpose of the organization of the Board and the election or appointment of officers for the ensuing year and for the transaction of such other business as may conveniently and properly be brought before such meeting. Section 8. REGULAR MEETING. Regular meetings of the Board of Directors may be held without notice at such time and at such place as shall from time to time be determined by the board. Section 9. SPECIAL MEETINGS. Special meetings of the Board of Directors may be called by order of the Chairman of the Board, the President, or by one-third of the directors for the time being in office. The Secretary shall give notice of the time and place of each special meeting by mailing the same at least two days before the meeting or by telephoning or telegraphing the same at least one day before the meeting to each director. Section 10. CONDUCT OF MEETINGS. At meetings of the Board of Directors, the Chairman of the Board, the President, or a designated Vice President shall preside. A majority of the members of the Board of Directors shall constitute a quorum for the transaction of business, but less than a quorum may adjourn any meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present, whereupon the meeting may be held, as adjourned, without further notice. At any meeting at which every director shall be present, even though without any notice, any business may be transacted. An act of a majority of the directors present at which there is a quorum shall be the act of the Board of Directors, except as may be otherwise specifically provided by statute, or by the certificate of incorporation or the by-laws. Section 11. COMPENSATION. The directors shall receive such compensation for their services as directors and as members of any committee appointed by the Board as may be prescribed by the Board of Directors and shall be reimbursed by the corporation for ordinary and reasonable expenses incurred in the performance of their duties. No such payment shall preclude any director from serving the corporation in any other capacity and receiving compensation therefor. Section 12. INDEMNIFICATION AND INSURANCE. (a) Right To Indemnification. Each person who was or is made a party or is threatened to be made a party to or is otherwise involved (including involvement as a witness) in any action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter a "proceeding"), by reason of the fact that he or she is or was a director or officer of the corporation or, while a director or officer of the corporation, is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to an employee benefit plan (hereinafter an "indemnitee"), whether the basis of such proceeding is alleged action in an official capacity as a director or officer or in any other capacity while serving as a director or officer, shall, be indemnified and held harmless by the corporation to the fullest extent authorized by the Delaware General Corporation Law, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the corporation to provide broader indemnification rights than permitted prior thereto), against all expense, liability and loss (including attorneys` fees, judgments, fines, ERISA excise taxes or penalties and amounts paid in 22 settlement) reasonably incurred or suffered by such indemnitee in connection therewith and such indemnification shall continue as to an indemnitee who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the indemnitee`s heirs, executors and administrators; provided, however, that, except as provided in paragraph (b) hereof with respect to proceedings to enforce rights to indemnification, the corporation shall indemnify any such indemnitee in connection with a proceeding (or part thereof) initiated by such indemnitee only if such proceeding (or part thereof) was authorized by the board of directors of the corporation. The right to indemnification conferred in this Section shall be a contract right and shall include the right to be paid by the corporation the expenses incurred in connection with any such proceeding in advance of its final disposition (hereinafter an "advancement of expenses"); provided, however, that, if and to the extent that the Delaware General Corporation Law requires, an advancement of expenses incurred by an indemnitee in his or her capacity as a director or officer (and not in any other capacity in which service was or is rendered by such indemnitee, including, without limitation, service to an employee benefit plan) shall be made only upon delivery to the corporation of an undertaking (hereinafter an "undertaking"), by or on behalf of such indemnitee, to repay all amounts so advanced if it shall ultimately be determined by final judicial decision from which there is no further right to appeal (hereinafter a "final adjudication") that such indemnitee is not entitled to be indemnified for such expenses under this Section or otherwise. (b) Right Of Indemnitee To Bring Suit. If a claim for indemnification (including the advancement of expenses) under paragraph (a) of this Section is not paid in full by the corporation within forty-five days after a written claim has been received by the corporation, except in the case of a claim for an advancement of expenses, in which case the applicable period shall be twenty days, the indemnitee may at any time thereafter bring suit against the corporation to recover the unpaid amount of the claim. If successful in whole or in part in any such suit, or in a suit brought by the corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the indemnitee shall be entitled to be paid also the expense of prosecuting or defending such suit. In any suit brought by the indemnitee to enforce a right to indemnification hereunder (but not in a suit brought by the indemnitee to enforce a right to an advancement of expenses) it shall be a defense that the indemnitee has not met the applicable standard of conduct set forth in the Delaware General Corporation Law. In any suit by the corporation to recover an advancement of expenses pursuant to the terms of an undertaking the corporation shall be entitled to recover such expenses upon a final adjudication that the indemnitee has not met the applicable standard of conduct set forth in the Delaware General Corporation Law. Neither the failure of the corporation (including its board of directors, independent legal counsel, or its stockholders) to have made a determination that indemnification of the indemnitee is proper in the circumstances because the indemnitee has met the applicable standard of conduct set forth in the Delaware General Corporation Law, nor an actual determination by the corporation (including its board of directors, independent legal counsel, or its stockholders) that the indemnitee has not met such applicable standard of conduct, shall create a presumption that the indemnitee has not met the applicable standard of conduct or, in the case of such a suit brought by the indemnitee, be a defense to such suit. In any suit brought by the indemnitee to enforce a right to indemnification or to an advancement of expenses hereunder, or by the corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the burden of proving that the indemnitee is not entitled to be indemnified, or to such advancement of expenses, under this Section or otherwise shall be on the corporation. (c) Service For Subsidiaries. Any person serving as a director, officer, employee or agent of another corporation, partnership, joint venture or other 23 enterprise, at least 50% of whose equity interests are owned by the corporation (hereinafter a "subsidiary"), shall be conclusively presumed to be serving in such capacity at the request of the corporation. (d) Reliance. Persons who after the date of the adoption of this provision become or remain directors or officers of the corporation or who, while a director or officer of the corporation, become or remain a director, officer, employee or agent of a subsidiary, shall be conclusively presumed to have relied on the rights to indemnity and advancement of expenses contained in this Section 12 in entering into or continuing such service. The rights to indemnification and to the advancement of expenses conferred in this Section shall apply to claims made against an indemnitee arising out of acts or omissions which occurred or occur both prior and subsequent to the adoption hereof. (e) Non-exclusivity Of Rights. The rights to indemnifcation and to the advancement of expenses conferred in this Section shall not be exclusive of any other right which any person may have or hereafter acquire under this certificate of incorporation or under any statute, by-law, agreement, vote of stockholders or disinterested directors or otherwise. (f) Insurance. The corporation may maintain insurance, at its expense, to protect itself and any director, officer, employee or agent of the corporation or another corporation, partnership, joint venture, trust or other enterprise against any expense, liability or loss, whether or not the corporation would have the power to indemnify such person against such expense, liability or loss under the Delaware General Corporation Law. (g) Indemnification Of Employees And Agents Of The Corporation. The corporation may, to the extent authorized from time to time by the board of directors, grant rights to indemnification and to the advancement of expenses, to any employee or agent of the corporation to the fullest extent of the provisions of this Section with respect to the indemnification and advancement of expenses of directors and officers of the corporation. Section 13. MANIFESTATION OF DISSENT. A director of the corporation who is present at a meeting of the Board of Directors at which action on any corporate matter is taken shall be presumed to have assented to the action taken unless his dissent shall be entered in the minutes of the meeting or unless he shall file his written dissent to such action with the person acting as the secretary of the meeting before the adjournment thereof or shall forward such dissent by registered mail to the Secretary of the corporation immediately after the adjournment of the meeting. Such right to dissent shall not apply to a director who voted in favor of such action. Article V COMMITTEES OF DIRECTORS Section 1. DESIGNATION OF COMMITTEES. The Board of Directors may, by resolution passed by a majority of the whole board, designate one or more committees, each committee to consist of one or more of the directors of the corporation. The board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of a Committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member. Any such committee, to the extent provided in the resolution of the Board of Directors, shall have and may exercise all the powers and authority of the Board of 24 Directors in the management of the business and affairs of the corporation, and may authorize the seal of the corporation to be affixed to all papers which may require it; but no such committee shall have the power or authority in reference to amending the certificate of incorporation, adopting an agreement of merger or consolidation, recommending to the stockholders the sale, lease or exchange of all or substantially all of the corporation`s property and assets, recommending to the stockholders a dissolution of the corporation or a revocation of a dissolution, or amending the by-laws of the corporation; and, unless the resolution or the certificate of incorporation expressly so provide, no such committee shall have the power or authority to declare a dividend or to authorize the issuance of stock. Such committee or committees shall have such name or names as may be determined from time to time by resolution adopted by the Board of Directors. Section 2. MINUTES OF MEETINGS. Each committee shall keep regular minutes of its meetings and report the same to the Board of Directors when required. Section 3. RULES OF PROCEDURE. A majority of the members of any committee may fix its rules of procedure. All action taken by any committee shall be reported to the Board of Directors at a meeting succeeding such action and shall be subject to revision, alteration, and approval by the Board of Directors; provided that no rights or acts of third parties shall be affected by any such revision or alteration. Article VI OPERATING DIVISIONS OF THE CORPORATION Section 1. TITLES. The Board of Directors of the corporation may from time to time confer on the employees of the corporation assigned to any operating division of the corporation, or discontinue, the title of President, Vice President, and any other title or titles deemed appropriate of such operating division. The designation of any such official titles for employees assigned to operating divisions of the corporation shall not be permitted to conflict in any way with any executive or administrative authority established from time to time by the corporation. Any employee so designated as an officer of an operating division shall have authority, responsibilities and duties with respect to his operating division corresponding to those normally vested in the comparable officer of the corporation by these by-laws, subject to such limitations as may be imposed by the Board of Directors of the corporation. Article VII OFFICERS Section 1. ELECTION. The Board of Directors shall elect the officers of the corporation who shall be a president, a vice-president, a secretary and a treasurer. The Board of Directors may also elect a Chairman of the Board and may elect or appoint additional vice-presidents, one or more assistant secretaries and assistant treasurers and such other or additional officers as in its opinion are desirable for the conduct of the business of the corporation. No officer other than the Chairman of the Board need be a director. Section 2. REMOVAL. In its discretion the Board of Directors, by the vote of a majority of the whole Board, may leave unfilled for any such period as it may fix by resolution any office except those of President, Treasurer, and Secretary. Any officer or agent elected or appointed by the Board of Directors shall be subject to removal at any time by the affirmative vote of a majority of the whole Board of Directors. Any officer, agent, or employee, other than officers and agents elected or appointed by the Board of Directors, shall hold office at the discretion of the officer appointing them. 25 Section 3. DUTIES OF CHAIRMAN. The Chairman of the Board of Directors if elected, or failing his election, the President, shall preside at all meetings of the stockholders and of the Board of Directors and shall perform such other duties as may be prescribed from time to time by the Board of Directors or by the by-laws. Section 4. DUTIES OF PRESIDENT. The President shall be the chief executive and administrative officer of the corporation. In the absence of the Chairman of the Board, he shall preside at all meetings of the stockholders and of the Board of Directors. He shall exercise such duties as customarily pertain to the office of President and shall have general and active supervision over the property, business and affairs of the corporation and over its several officers. He may appoint officers, agents, or employees other than those appointed by the Board of Directors. He may sign, execute, and deliver in the name of the corporation powers of attorney, contracts, bonds, and other obligations and shall perform such other duties as may be prescribed from time to time by the Board of Directors or by the by-laws. Section 5. DUTIES OF VICE PRESIDENTS. The Vice Presidents shall have such powers and perform such duties as may be assigned to them by the Board of Directors or the President. In the absence or disability of the President, the Vice President designated by the Board or the President shall perform the duties and exercise the powers of the President. A Vice President may sign and execute contracts and other obligations pertaining to the regular course of his duties. Section 6. DUTIES OF TREASURER. The Treasurer shall, subject to the direction of a designated Vice President, have general custody of all the funds and securities of the corporation and have general supervision of the collection and disbursement of funds of the corporation. He shall endorse on behalf of the corporation for collection checks, notes, and other obligations, and shall deposit the same to the credit of the corporation in such bank or banks or depositories as the Board of Directors may designate. He may sign, with the President, or such other person or persons as may be designated for the purpose by the Board of Directors, all bills of exchange or promissory notes of the corporation. He shall enter or cause to be entered regularly in the books of the corporation full and accurate account of all moneys received and paid by him on account of the corporation; shall at all reasonable time exhibit his books and accounts to any director of the corporation upon application at the office of the corporation during business hours; and, whenever required by the Board of Directors or the President, shall render a statement of his accounts. He shall perform such other duties as may be prescribed from time to time by the Board of Directors or by the by-laws. If required by the Board of Directors he shall give bond for the faithful performance of his duties in such sum and with such surety as shall be approved by the Board of Directors. Section 7. SECRETARY AND ASSISTANT SECRETARY. The Secretary shall, subject to the direction of a designated Vice President, keep the minutes of all meetings of the stockholders and of the Board of Directors, and to the extent ordered by the Board of Directors or the President, the minutes of meetings of all committees. He shall cause notice to be given of meetings of stockholders, of the Board of Directors, and of any committee appointed by the Board. He shall have custody of the corporate seal and general charge of the records, documents, and papers of the corporation not pertaining to the performance of the duties vested in other officers, which shall at all reasonable times be open to the examination of any director. He may sign or execute contracts with the President or a Vice President thereunto authorized in the name of the corporation. He, or an Assistant Secretary, shall have authority to affix the corporate seal to any instrument requiring it and when so affixed, it may be attested by his signature or by the signature of such Assistant Secretary. He shall perform such other duties as may be prescribed from time to time by the Board of Directors or by the by-laws. The Assistant Secretary, or if there be 26 more than one, the Assistant Secretaries in the order determined by the Board of Directors shall, in the absence of the Secretary or in the event of his inability or refusal to act, perform the duties and exercise the power of the Secretary. Section 8. BANK ACCOUNTS. In addition to such bank accounts as may be authorized in the usual manner by resolution of the Board of Directors, the Treasurer of the corporation with the approval of the President may authorize such bank accounts to be opened or maintained in the name and on behalf of the corporation as he may deem necessary or appropriate, payments from such bank accounts to be made upon and according to the check of the corporation which may be signed jointly or singly by either the manual or facsimile signature or signatures of such officer or bonded employee or such officers or bonded employees of the corporation as shall be specified in the written instructions of the Treasurer of the corporation with the approval of the President of the corporation. Section 9. VACANCIES. In case any office shall become vacant, the Board of Directors shall have power to fill such vacancies. In case of the absence or disability of any officer, the Board of Directors may delegate the powers or duties of any officer to another officer or a director for the time being. Section 10. EXERCISE OF RIGHTS AS STOCKHOLDERS. Unless otherwise ordered by the Board of Directors, the President or a Vice President thereunto duly authorized by the President shall have full power and authority on behalf of the corporation to attend and to vote at any meeting of stockholders of any corporation in which this corporation may hold stock, and may exercise on behalf of this corporation any and all of the rights and powers incident to the ownership of such stock at any such meeting, and shall have power and authority to execute and deliver proxies and consents on behalf of this corporation in connection with the exercise by this corporation of the rights and powers incident to the ownership of such stock. The Board of Directors, from time to time, may confer like powers upon any other person or persons. Article VIII CAPITAL STOCK Section 1. STOCK CERTIFICATES. Every holder of stock in the corporation shall be entitled to have a certificate, signed by, or in the name of the corporation by, the chairman of the Board of Directors, or the president or a vice-president and the Treasurer or an assistant treasurer, or the secretary or an assistant secretary of the corporation, certifying the number of shares owned by him in the corporation. Section 2. FACSIMILE SIGNATURES. Any of or all the signatures on the certificate may be facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the corporation with the same effect as if he were such officer, transfer agent or registrar at the date of issue. Section 3. TRANSFER AGENT. The Board of Directors shall have power to appoint one or more Transfer Agents and also to appoint one or more Registrars for the transfer and registration of certificates of stock of any class, and may require that stock certificates shall be countersigned and registered by one or more of such Transfer Agents and, if one or more Registrars has also been appointed by the Board of Directors, by one or more of such Registrars. Section 4. TRANSFER OF STOCK. Shares of capital stock of the corporation 27 shall be transferable on the books of the corporation only by the holder of record thereof in person or by a duly authorized attorney, upon surrender and cancellation of certificates for a like number of shares. Section 5. LOST CERTIFICATES. In case any certificate for the capital stock of the corporation is alleged to be lost, stolen, or destroyed, the Board of Directors may, before directing a new certificate to be issued in place thereof, require of the owner thereof such proof of the fact and a bond in such sum as it may direct as indemnity to the corporation and to its Transfer Agent and Registrar, if any, against any claim that may be made against them or any of them with respect to the certificate alleged to have been lost, stolen or destroyed. Section 6. HOLDER OF RECORD. The corporation shall be entitled to treat the holder of record of any share or shares of stock as the holder thereof in fact and shall not be bound to recognize any equitable or other claim to or interest in such shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise expressly provided by law. Section 7. FIXING RECORD DATE. In order that the corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than sixty nor less than ten days before the date of such meeting, nor more than sixty days prior to any other action. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting. Article IX MISCELLANEOUS Section 1. FISCAL YEAR. The Board of Directors shall have power to fix, and from time to time change, the fiscal year of the corporation. Unless otherwise fixed by the Board, the fiscal year of the corporation shall begin on the Sunday next following the Saturday closest to September 30 in each year and shall end on the Saturday closest to September 30 in the next ensuing calendar year. Section 2. GIVING OF NOTICES. Whenever, under the provisions of the statutes or of the certificate of incorporation or of these by-laws, notice is required to be given to any director or stockholder, it shall not be construed to mean personal notice, but such notice may be given in writing, by mail, addressed to such director or stockholder, at his address as it appears on the records of the corporation, with postage thereon prepaid, and such notice shall be deemed to be given at the time when the same shall be deposited in the United States mail. Notice to directors may also be given by telephone or telegram. Section 3. WAIVER OF NOTICE. Whenever any notice is required to be given under the provisions of the statutes or of the certificate of incorporation or of these by-laws, a written waiver thereof, signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent to notice. Section 4. ACTION OF DIRECTORS BY WRITTEN CONSENT. Unless otherwise restricted by the certificate of incorporation or these by-laws, any action 28 required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting, if all members of the board or committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the board or committee. Article X AMENDMENT Subject to the provisions of the Certificate of Incorporation, these by-laws may be altered, amended or repealed at any regular meeting of the stockholders (or at any special meeting thereof duly called for that purpose) by a majority vote of the shares represented and entitled to vote at such meeting; provided that in the notice of such special meeting notice of such purpose shall be given. Subject to the laws of the State of Delaware, the Certificate of Incorporation and these by-laws, the Board of Directors may by majority vote of those present at any meeting at which a quorum is present amend these by-laws, or enact such other by-laws as in their judgment may be advisable for the regulation of the conduct of the affairs of the corporation. 29 EX-11 3 STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
COMPUTATION OF PER SHARE EARNINGS (in thousands except per share information) FOR THE YEARS ENDED ------------------------------------------------------------------- 1997 1996 1995 ------------------ ------------------- ------------------- FULLY FULLY FULLY PRIMARY DILUTED PRIMARY DILUTED PRIMARY DILUTED Net Income $12,280 $12,280 $10,671 $10,671 $ 9,228 $ 9,228 ======= ======= ======= ======= ======= ======= Weighted average common shares outstanding 10,466 10,466 10,393 10,393 10,351 10,351 Incremental shares issuable for stock options outstanding (Treasury Stock Method) 536 657 538 538 465 532 ------- ------- ------- ------ ------ ------- Common and common equivalent shares 11,002 11,123 10,931 10,931 10,816 10,883 ======= ======= ======= ====== ====== ------- Earnings per share $ 1.12 $ 1.10 $ .98 $ .98 $ .85 $ .85 ====== ====== ======= ======= ====== =======
30 EX-13 4 EXHIBIT 13 REPORT OF MANAGEMENT The management of Woodhead Industries, Inc. is responsible for the integrity of the information presented in this Annual Report, including the Company's financial statements. These statements have been prepared in conformity with generally accepted accounting principles and include, where necessary, informed estimates and judgments by management. The Company maintains systems of accounting and internal controls designed to provide assurance that assets are properly accounted for as well as to insure that the financial records are reliable for preparing financial statements. The systems are augmented by qualified personnel and are reviewed on a periodic basis. Our independent auditors, Arthur Andersen LLP, conduct annual audits of our financial statements in accordance with generally accepted auditing standards, which include the review of internal controls for the purpose of establishing audit scope, and issue an opinion on the fairness of such financial statements. The Audit Committee of the Board of Directors, which is composed solely of outside Directors, meets periodically with management and the independent auditors to review the manner in which they are performing their responsibilities and to discuss auditing, internal accounting controls, and financial reporting matters. The independent auditors periodically meet alone with the Audit Committee and have free access to the Audit Committee at any time. /s/ C. MARK DEWINTER /s/ ROBERT G. JENNINGS C. MARK DEWINTER ROBERT G. JENNINGS Chairman, President and Vice President, Finance and Chief Executive Officer Chief Financial Officer REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To Woodhead Industries, Inc.: We have audited the accompanying consolidated balance sheets of WOODHEAD INDUSTRIES, INC. (a Delaware corporation) AND SUBSIDIARIES as of September 27, 1997, September 28, 1996, and September 30, 1995, and the related consolidated statements of income, stockholders' investment, and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of WOODHEAD INDUSTRIES, INC. AND SUBSIDIARIES as of September 27, 1997, September 28, 1996, and September 30, 1995, and the results of their operations and their cash flows for the years then ended in conformity with generally accepted accounting principles. /s/ Arthur Andersen LLP Chicago, Illinois November 11, 1997 11 MANAGEMENT'S DISCUSSION OF OPERATIONS AND FINANCIAL POSITION FISCAL 1997 RESULTS COMPARED WITH 1996 SALES The Company's sales of $136.9 million exceeded fiscal 1996 results by $13.2 million or 10.7 percent. Domestic sales drove the majority of the revenue gain increasing by 14.9 percent and equal to 72.3 percent of total sales. This is in sharp contrast to last year's slight decline in domestic revenue. Sales in Europe and Asia increased marginally reflecting market weakness in Europe and the start of the currency crisis in Asia. While international revenues in native currencies increased 3.4 percent, these were somewhat offset by the strong U.S. dollar. During the year, competitive pressures remained high, resulting in minimal price increases of less than one percent. The backlog of unfilled orders was $8.8 million at year end compared with $8.6 million at the close of fiscal 1996. GROSS PROFIT The substantial gain in gross profit of $6.8 million or 12.4 percent to $62.0 million in 1997 reflects improvement in both sales volume and the gross profit rate. The increase in the gross profit rate to 45.3 percent in 1997 from 44.6 percent in 1996 resulted from improved product mix derived from higher sales of the Company's Brad Harrison(R) product line. Other factors also contributing to the higher gross profit rate were new higher-margin products, $.4 million reduction in LIFO expense, increased production efficiencies and higher plant utilization. OPERATING EXPENSES Operating expenses were $40.5 million in 1997 -- an increase of $3.2 million or 8.5 percent over 1996. Investment in engineering and product development was increased by 20.4 percent over 1996 levels reflecting the Company's continued focus on new products. However, operating expenses as a percent of net sales decreased from 30.2 percent to 29.6 percent primarily due to limited increases in marketing and selling expenses. OTHER EXPENSE/INCOME Other expenses increased slightly from $1.0 million in 1996 to $1.1 million in 1997. Lower expenses in both amortization, $.2 million, and provision for environmental cleanup, $.2 million, benefitted the Company. These two items helped offset the absence of $.8 million in other income in 1996 due to the favorable resolution of a 1991 lawsuit. NET INCOME Record sales coupled with a higher gross profit rate increased net income $1.6 million or 15.1 percent to $12.3 million in 1997. During the year, the Company's effective tax rate increased from 36.6 percent to 39.6 percent. Higher state taxes combined with the absence of foreign tax credits utilized in 1996 were the causes for the higher rate. FINANCIAL POSITION There was a $3.4 million increase in working capital during 1997 which brought the total to $31.7 million. Strong cash flow allowed the Company to begin construction at two new manufacturing facilities and expand another location in the U.K. The Company's $15 million revolving credit line was unused during the year. Looking forward, internal cash flow is expected to be more than adequate to fund the operating requirements of the company in 1998. 12 FISCAL 1996 RESULTS COMPARED WITH 1995 Sales in fiscal 1996 of $123.7 million were 3.1% ahead of the $120.0 million in 1995. International sales, including the Elitec acquisition, increased by 15.3% and equalled 30.3% of total sales. The strong international sales were offset by a decline in domestic volume resulting from a weak industrial marketplace. During the year the Company realized price increases of approximately 1%. The backlog of unfilled orders was $8.6 million at year end. This $.7 million increase over 1995's level resulted from a strengthening of domestic orders during the Company's fourth quarter. Gross Profit increased 5.1% to $55.1 million from $52.5 million in 1995. Reflecting the Company's continued investment in manufacturing processes, an improvement in the gross profit rate was driven by increased manufacturing productivity, cost reductions through product redesign, cost efficiencies through vendor partnerships and overhead expense control. Operating expenses of $37.3 million in 1996 were 5.8% higher than the $35.3 million spent in 1995. An increased rate of 30.2% versus 29.4% as a percent of net sales in 1995 reflects continued investment in new product development combined with aggressive sales and marketing programs. Other expenses declined in 1996 to $1.0 million from $2.8 million in the prior year. A favorable impact on interest income of $.3 million, a reversal of a lawsuit accrual of $.8 million, and reduced provisions for environmental cleanup of $.5 million all benefitted the Company in 1996. Net income of $10.7 million was $1.5 million or 16% greater than in 1995. A portion of the increase resulted from improved sales and a higher gross profit rate which were partially offset by increased expenses in sales and marketing. The improvement in other expense/income contributed significantly to the 1996 increase in net income. The Company's effective tax rate increased to 36.6% from 35.7% in 1995. Working capital increased to $28.3 million from $19.7 million in 1995. The current ratio improved to 2.5/1 from 1.9/1 in 1995. The Company's $15 million revolving credit line was unused at year end. COMMON STOCK PRICE RANGE BY QUARTER (Amounts in dollars) The Company's common stock trades on the NASDAQ Stock Market under the symbol WDHD. The daily quotations as reported by NASDAQ are published in the Wall Street Journal and other leading financial publications. The range in the market price per share of the stock and dividends paid during the past two years were as follows: Price FY 1997 High Low Dividend 1ST 14 1/4 12 1/4 $.07 2ND 16 3/4 13 1/4 $.08 3RD 19 1/4 14 3/4 $.08 4TH 21 1/8 17 3/4 $.09 Price FY 1996 High Low Dividend 1ST 16 3/4 13 7/8 $.065 2ND 15 13 $.065 3RD 15 1/2 10 $.07 4TH 13 3/4 11 3/4 $.07 13 FINANCIAL PROFILE (Amounts in thousands except per share, employees, and stockholders) OPERATIONS
1997 1996 1995 1994 Net sales $ 136,886 $ 123,680 $ 120,003 $ 105,689 --------- --------- --------- --------- Cost of sales 74,914 68,549 67,541 59,070 --------- --------- --------- --------- Gross profit 61,972 55,131 52,462 46,619 % of net sales 45.3% 44.6% 43.7% 44.1% --------- --------- --------- --------- Operating and other expenses 41,647 38,299 38,110 35,096 % of net sales 30.4% 31.0% 31.8% 33.2% Income before income taxes 20,325 16,832 14,352 11,523 % of net sales 14.8% 13.6% 12.0% 10.9% --------- --------- --------- --------- Provision for income taxes 8,045 6,161 5,124 4,273 --------- --------- --------- --------- Net income 12,280 10,671 9,228 7,250 % of net sales 9.0% 8.6% 7.7% 6.9% % of average assets 14.7% 14.1% 13.6% 12.2% Return on stockholders' average investment 19.6% 19.7% 19.8% 18.2% --------- --------- --------- --------- Earnings per common and common equivalent share $ 1.12 $ .98 $ .85 $ .68 --------- --------- --------- --------- Dividends per share .32 .27 .26 .23 --------- --------- --------- --------- Common and common equivalent shares 11,002 10,931 10,816 10,666 --------- --------- --------- --------- Memo: Interest (income) expense (290) (161) 97 178 % of net sales (.2)% (.1)% .1% .2% Depreciation and amortization 4,809 4,813 4,475 4,199 % of net sales 3.5% 3.9% 3.7% 4.0% Engineering and development 3,025 2,513 2,404 2,148 % of net sales 2.2% 2.0% 2.0% 2.0% YEAR-END POSITION Total assets $ 88,999 $ 78,385 $ 73,411 $ 62,263 --------- --------- --------- --------- Total liabilities 21,744 20,508 23,007 19,316 --------- --------- --------- --------- Working capital 31,727 28,321 19,654 14,572 --------- --------- --------- --------- Current ratio 2.6 TO 1 2.5 to 1 1.9 to 1 1.8 to 1 --------- --------- --------- --------- Stockholders' investment 67,255 57,877 50,404 42,947 --------- --------- --------- --------- Long-term debt -- -- -- 63 --------- --------- --------- --------- Book value per share $ 6.38 $ 5.55 $ 4.86 $ 4.15 --------- --------- --------- --------- Number of employees 1,259 1,125 1,126 1,079 --------- --------- --------- --------- Number of stockholders 548 584 571 598 --------- --------- --------- --------- The accompanying notes are an integral part of these statements. 14 1993 1992 1991 1990 Net sales $ 89,864 $ 79,518 $ 73,499 $ 72,168 -------- -------- -------- -------- Cost of sales 50,238 43,756 41,753 41,034 -------- -------- -------- -------- Gross profit 39,626 35,762 31,746 31,134 % of net sales 44.1% 45.0% 43.2% 43.1% -------- -------- -------- -------- Operating and other expenses 30,125 28,007 26,552 22,708 % of net sales 33.5% 35.2% 36.1% 31.5% Income before income taxes 9,501 7,755 5,194 8,426 % of net sales 10.6% 9.8% 7.1% 11.7% -------- -------- -------- -------- Provision for income taxes 3,698 3,000 2,374 3,406 Net income 5,803 4,755 2,820 5,020 % of net sales 6.5% 6.0% 3.8% 7.0% % of average assets 11.1% 10.3% 6.6% 12.6% Return on stockholders' average investment 16.6% 15.2% 9.7% 18.4% -------- -------- -------- -------- Earnings per common and common equivalent share $ .55 $ .47 $ .29 $ .52 -------- -------- -------- -------- Dividends per share .23 .23 .23 .21 -------- -------- -------- -------- Common and common equivalent shares 10,467 10,040 9,615 9,672 -------- -------- -------- -------- Memo: Interest (income) expense 39 (138) 43 (299) % of net sales .0% (.2)% .1% (.4)% Depreciation and amortization 3,777 3,229 3,062 2,461 % of net sales 4.2% 4.1% 4.2% 3.4% Engineering and development 2,105 2,041 1,749 1,577 % of net sales 2.3% 2.6% 2.4% 2.2% YEAR-END POSITION Total assets $ 56,360 $ 48,564 $ 43,709 $ 41,216 -------- -------- -------- -------- Total liabilities 19,700 15,460 14,147 12,638 -------- -------- -------- -------- Working capital 10,538 14,129 11,443 15,542 -------- -------- -------- -------- Current ratio 1.7 to 1 2.1 to 1 2.0 to 1 2.5 to 1 -------- -------- -------- -------- Stockholders' investment 36,660 33,104 29,562 28,578 -------- -------- -------- -------- Long-term debt 2,047 500 500 -- -------- -------- -------- -------- Book value per share $ 3.57 $ 3.31 $ 3.05 $ 2.98 -------- -------- -------- -------- Number of employees 947 764 816 788 -------- -------- -------- -------- Number of stockholders 634 640 710 751 -------- -------- -------- -------- 1989 1988 1987 Net sales $71,443 $71,178 $69,887 -------- ------- ------- Cost of sales 42,070 42,015 42,325 -------- ------- ------- Gross profit 29,373 29,163 27,562 % of net sales 41.1% 41.0% 39.4% -------- ------- ------- Operating and other expenses 22,195 22,993 21,805 % of net sales 31.1% 32.3% 31.2% Income before income taxes 7,178 6,170 5,757 % of net sales 10.0% 8.7% 8.2% -------- ------- ------- Provision for income taxes 2,878 2,490 2,591 -------- ------- ------- Net income 4,300 3,680 3,166 % of net sales 6.0% 5.2% 4.5% % of average assets 10.3% 8.2% 6.8% Return on stockholders' average investment 17.7% 17.1% 12.9% -------- ------- ------- Earnings per common and common equivalent share $ .45 $ .39 $ .29 -------- ------- ------- Dividends per share .20 .20 .20 Common and common equivalent shares 9,492 9,387 10,740 -------- ------- ------- Memo: Interest (income) expense 543 1,107 824 % of net sales .8% 1.6% 1.2% Depreciation and amortization 2,362 2,335 2,328 % of net sales 3.3% 3.3% 3.3% Engineering and development 1,377 1,574 1,524 % of net sales 1.9% 2.2% 2.2% YEAR-END POSITION Total assets $38,534 $44,720 $44,806 -------- ------- ------- Total liabilities 12,530 22,187 24,327 -------- ------- ------- Working capital 13,245 17,029 16,614 -------- ------- ------- Current ratio 2.3 to 1 2.6 to 1 2.4 to 1 -------- ------- ------- Stockholders' investment 26,004 22,533 20,479 -------- ------- ------- Long-term debt 153 9,394 10,821 -------- ------- ------- Book value per share $ 2.68 $ 2.40 $ 2.18 -------- ------- ------- Number of employees 732 810 840 -------- ------- ------- Number of stockholders 822 920 980 -------- ------- -------
15 CONSOLIDATED FINANCIAL STATEMENTS CONSOLIDATED BALANCE SHEETS As of September 27, 1997, September 28, 1996, and September 30, 1995. (Amounts in thousands)
1997 1996 1995 ASSETS Current assets: Cash and short-term securities $ 8,284 $ 10,050 $ 4,202 Accounts receivable, less allowances of $911 in 1997, $695 in 1996, and $572 in 1995 20,051 18,777 18,965 Inventories (Note 1) 18,067 12,707 12,613 Prepaid expenses 5,054 5,516 5,132 -------- -------- -------- Total current assets $ 51,456 $ 47,050 $ 40,912 -------- -------- -------- Other assets $ 271 $ 557 $ 1,039 -------- -------- -------- Property, plant and equipment (Note 1) $ 74,514 $ 64,499 $ 61,464 Less: Accumulated depreciation 44,016 40,834 37,429 -------- -------- -------- Net property, plant and equipment $ 30,498 $ 23,665 $ 24,035 -------- -------- -------- Goodwill (Note 1) $ 6,774 $ 7,113 $ 7,425 -------- -------- -------- TOTAL ASSETS $ 88,999 $ 78,385 $ 73,411 LIABILITIES AND STOCKHOLDERS' INVESTMENT Current liabilities: Accounts payable $ 6,465 $ 6,162 $ 7,033 Accrued expenses 13,041 11,254 12,509 Income taxes payable 223 1,313 1,647 Portion of long-term debt payable within one year (Note 2) -- -- 69 -------- -------- -------- Total current liabilities $ 19,729 $ 18,729 $ 21,258 -------- -------- -------- Deferred income taxes (Note 3) $ 2,015 $ 1,779 $ 1,749 -------- -------- -------- Long-term debt, less portion payable within one year shown above (Note 2) $ -- $ -- $ -- -------- -------- -------- Stockholders' investment (Notes 1,2,5 and 7): Preferred stock $ -- $ -- $ -- Common stock at par, (Shares issued - 10,541) 10,541 10,419 10,374 Additional paid-in capital 2,765 1,571 1,248 Cumulative translation adjustment (1,487) (616) 140 Retained earnings 55,436 46,503 38,642 -------- -------- -------- Total stockholders' investment $ 67,255 $ 57,877 $ 50,404 -------- -------- -------- TOTAL LIABILITIES AND STOCKHOLDERS' INVESTMENT $ 88,999 $ 78,385 $ 73,411 -------- -------- -------- The accompanying notes are an integral part of these statements.
16 CONSOLIDATED STATEMENTS OF INCOME For the years ended September 27, 1997, September 28, 1996, and September 30, 1995. (Amounts in thousands except per share data)
1997 1996 1995 Net sales $ 136,886 $ 123,680 $ 120,003 --------- --------- --------- Cost of sales 74,914 68,549 67,541 --------- --------- --------- Gross profit $ 61,972 $ 55,131 $ 52,462 Percent of net sales 45.3% 44.6% 43.7% --------- --------- --------- Operating expenses: Engineering and product development $ 3,025 $ 2,513 $ 2,404 Marketing and sales 22,811 21,384 19,764 General and administrative 14,677 13,434 13,121 --------- --------- --------- Total operating expenses $ 40,513 $ 37,331 $ 35,289 Percent of net sales 29.6% 30.2% 29.4% --------- --------- --------- Income from operations $ 21,459 $ 17,800 $ 17,173 Percent of net sales 15.7% 14.4% 14.3% --------- --------- --------- Other expenses (income): Interest (income) expense $ (290) $ (161) $ 97 Other, net 1,424 1,129 2,724 --------- --------- --------- Net other expense $ 1,134 $ 968 $ 2,821 --------- --------- --------- Income before income taxes $ 20,325 $ 16,832 $ 14,352 Percent of net sales 14.8% 13.6% 12.0% Provision for income taxes (Note 3) 8,045 6,161 5,124 --------- --------- --------- Net income $ 12,280 $ 10,671 $ 9,228 Percent of net sales 9.0% 8.6% 7.7% --------- --------- --------- EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE (NOTE 1) $ 1.12 $ .98 $ .85 ========= ========= ========= The accompanying notes are an integral part of these statements.
17 CONSOLIDATED FINANCIAL STATEMENTS For the years ended September 27, 1997, September 28, 1996, and September 30, 1995. (Amounts in thousands) CONSOLIDATED STATEMENTS OF STOCKHOLDERS' INVESTMENT
ADDITIONAL CUMULATIVE TOTAL COMMON PAID-IN TRANSLATION RETAINED TREASURY STOCKHOLDERS' STOCK CAPITAL ADJUSTMENT EARNINGS STOCK INVESTMENT Balance October 1, 1994 $ 7,470 $ 4,987 ($ 347) $ 35,521 ($ 4,684) $ 42,947 Net income for the year -- -- -- 9,228 -- 9,228 Translation adjustment -- -- 487 -- -- 487 Cash dividends, $.257 per share -- -- -- (2,657) -- (2,657) Stock option plans 23 326 -- -- 50 399 Retirement of Treasury Stock (569) (4,065) -- -- 4,634 0 Three-for-two stock split (Note 5) 3,450 -- -- (3,450) -- 0 -------- -------- -------- -------- -------- -------- Balance September 30, 1995 $ 10,374 $ 1,248 $ 140 $ 38,642 $ 0 $ 50,404 Net income for the year -- -- -- 10,671 -- 10,671 Translation adjustment -- -- (756) -- -- (756) Cash dividends, $.27 per share -- -- -- (2,810) -- (2,810) Stock option plans 45 323 -- -- -- 368 -------- -------- -------- -------- -------- -------- Balance September 28, 1996 $ 10,419 $ 1,571 ($ 616) $ 46,503 $ 0 $ 57,877 Net income for the year -- -- -- 12,280 -- 12,280 Translation adjustment -- -- (871) -- -- (871) Cash dividends, $.32 per share -- -- -- (3,347) -- (3,347) Stock option plans 122 1,194 -- -- -- 1,316 -------- -------- -------- -------- -------- -------- BALANCE SEPTEMBER 27, 1997 $ 10,541 $ 2,765 ($ 1,487) $ 55,436 $ 0 $ 67,255 ======== ======== ======== ======== ======== ======== The accompanying notes are an integral part of these statements
18 CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended September 27, 1997, September 28, 1996, and September 30, 1995. (Amounts in thousands) 1997 1996 1995 CASH FLOWS FROM OPERATING ACTIVITIES: Net income for the year $ 12,280 $ 10,671 $ 9,228 -------- -------- -------- Adjustments to reconcile net income to net cash flows from operating activities: Depreciation and amortization 4,809 4,813 4,475 (Increase) decrease in: Accounts receivable (1,274) 188 (1,361) Inventories (5,360) (94) (1,938) Prepaid expenses 462 (384) (1,224) Other assets (62) -- (147) Increase (decrease) in: Accounts payable 303 (871) 511 Accrued expenses 1,787 (1,255) 1,576 Income taxes payable (1,090) (334) 486 Deferred income taxes 236 30 180 -------- -------- -------- Net cash flows from operating activities $ 12,091 $ 12,764 $ 11,786 -------- -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property, plant & equipment $(11,610) $ (5,132) $ (6,620) Payments for businesses acquired -- -- (599) Retirements or sales of property, plant & equipment 58 887 260 -------- -------- -------- Net cash (used for) provided by investing activities $(11,552) $ (4,245) $ (6,959) -------- -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: (Decrease) increase in short-term debt $ -- $ (69) $ (37) (Decrease) increase in long-term debt -- -- (63) Sales of stock 1,316 368 399 Dividend payments (3,347) (2,810) (2,657) -------- -------- -------- Net cash (used for) provided by financing activities $ (2,031) $ (2,511) $ (2,358) -------- -------- -------- EFFECT OF EXCHANGE RATES $ (274) $ (160) $ 279 -------- -------- -------- NET (DECREASE) INCREASE IN CASH AND SHORT-TERM SECURITIES $ (1,766) $ 5,848 $ 2,748 Cash and short-term securities at beginning of year 10,050 4,202 1,454 -------- -------- -------- Cash and short-term securities at end of year $ 8,284 $ 10,050 $ 4,202 SUPPLEMENTAL CASH FLOW DATA Cash paid during the year for: Interest $ 45 $ 43 $ 97 Income taxes 7,906 5,877 5,179 -------- -------- -------- The accompanying notes are an integral part of these statements.
19 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Amounts in thousands, except shares and per share, in all tables) 1. SUMMARY OF ACCOUNTING POLICIES CONSOLIDATION The consolidated financial statements include the accounts of all subsidiaries, each of which is wholly owned. Revenue is recognized when products are shipped. All significant intercompany transactions have been eliminated in consolidation. The Company follows the practice of ending its fiscal year on the Saturday closest to September 30. INVENTORIES The Company values its inventory at the lower of cost or market, cost being determined using first-in first-out (FIFO) or last-in first-out (LIFO) method. The total inventories at the balance sheet dates were as follows:
1997 1996 1995 Inventories valued using FIFO $ 7,588 $ 6,402 $ 5,727 -------- -------- -------- Inventories valued using LIFO: At FIFO cost $ 14,941 $ 11,082 $ 11,530 Less: Reserve to reduce to LIFO 4,462 4,777 4,644 -------- -------- -------- LIFO inventories $ 10,479 $ 6,305 6,886 -------- -------- -------- TOTAL INVENTORIES $ 18,067 $ 12,707 $ 12,613 -------- -------- -------- Inventory composition at FIFO: Raw materials $ 12,391 $ 8,917 $ 8,528 Work-in-process and finished goods 10,138 8,567 8,729 -------- -------- -------- TOTAL $ 22,529 $ 17,484 $ 17,257 ======== ======== ========
PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are recorded at cost. Depreciation is computed using the straight-line method for financial accounting purposes. The estimated useful lives are as follows: Asset description Asset life Buildings and improvements 20 to 40 years Machinery and equipment 3 to 12 years Dies and molds 4 to 5 years Furniture and office equipment 3 to 10 years The cost of property retired or otherwise disposed of is removed from the property accounts, the accumulated depreciation is removed from the related reserves, and the net gain or loss is reflected in income. Maintenance and repairs are charged to expense as incurred. Major renewals and betterments are capitalized. The details of property, plant and equipment at the balance sheet dates were as follows:
1997 1996 1995 Land $ 5,430 $ 1,297 $ 1,358 Buildings and improvements 15,665 14,368 14,816 Machinery and equipment 20,322 18,390 16,180 Dies and molds 17,951 16,690 15,654 Furniture and office equipment 15,146 13,754 13,456 -------- -------- -------- $ 74,514 $ 64,499 $ 61,464
20 GOODWILL Goodwill is the cost of acquired businesses in excess of the fair value of their identifiable net assets and is amortized over a period not exceeding 40 years. The Company regularly reviews the individual components of goodwill and recognizes, on a current basis, any diminution in value. INCOME PER COMMON AND COMMON SHARE EQUIVALENT Income per share is computed on the basis of the weighted average number of shares outstanding plus the effect of common stock equivalents. The weighted average shares used in the computations were 11,002,000 in 1997, 10,931,000 in 1996, and 10,816,000 in 1995. In February 1997, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 128, "Earnings Per Share" (SFAS 128), which will be effective for the Company in the first quarter of fiscal 1998. When adopted, SFAS 128 will replace the presentation of primary earnings per share (EPS) with basic EPS. Basic EPS excludes dilution and is computed by dividing net income available for common stockholders by the weighted average number of common shares outstanding for the period. Diluted EPS, which reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted, will also need to be disclosed. The Company's basic earnings per share are not expected to be materially different from primary earnings per share. CASH FLOWS For purposes of reporting cash flows, cash on hand and short-term securities are combined. Short-term securities may include certificates of deposit, Euro-dollars and commercial paper which must be held for three months or less in order to be considered short-term for cash flows. RESTATEMENTS All share and per share amounts have been adjusted for a three-for-two stock split effected in the form of a stock dividend in May 1995 and a two-for-one stock split effected in the form of a stock dividend in March 1993. USE OF ESTIMATES IN THE FINANCIAL STATEMENTS The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect reported amounts and related disclosures. Actual results could differ from those estimates. 2. LONG-TERM DEBT AND SHORT-TERM BORROWING Long-term debt consisted of the following:
1997 1996 1995 Bank revolving credit agreement $ -- $ -- $ -- Other -- -- 69 -------- -------- -------- Total $ -- $ -- $ 69 Less: Portion of long-term debt payable within one year -- -- 69 -------- -------- -------- NET LONG-TERM DEBT $ -- $ -- $ -- ======== ======== ========
The Company has a Revolving Credit Agreement (the "Agreement") with a bank that provides for borrowings of up to $15,000,000 at the bank's prime rate or offered rate. This Agreement expires on October 31, 2000. The average amount owing to the bank was $0 in 1997, $0 in 1996, and $811,000 in 1995, at weighted average interest rates of 0.0%, 0.0%, and 6.9%, respectively. Under the Agreement, the Company is required, among other things, to maintain consolidated tangible net worth, as defined, of not less than $30,000,000, a debt to EBITDA ratio of not more than 2.5 to 1.0 and an EBIT to interest coverage ratio of 3 to 1. In addition, there are some restrictions on the creation or assumption of any lien or security interest upon any of its assets. Short-term borrowing averaged $19,000 in 1997, $49,000 in 1996, and $6,000 in 1995, at weighted average interest rates of 7.7%, 8.6%, and 9.3%, respectively. 21 3. INCOME TAXES The provision for income taxes for 1997, 1996, and 1995 consisted of the following:
1997 1996 1995 U. S. federal income tax $ 5,257 $ 4,015 $ 3,529 State income taxes 1,191 781 608 Foreign income taxes 1,597 1,365 987 --------- --------- ------- $ 8,045 $ 6,161 $ 5,124 --------- --------- ------- Current provision $ 8,505 $ 5,723 $ 5,467 Deferred provision (460) 438 (343) --------- --------- ------- $ 8,045 $ 6,161 $ 5,124 --------- --------- -------
A reconciliation of the federal statutory rate to the effective tax rate is as follows:
1997 1996 1995 Federal statutory rate 34.0% 34.0% 34.0% State income taxes, net of federal benefit 3.9 3.1 2.8 Difference between U.S. and foreign rates 1.4 1.4 1.3 Other, net .3 (1.9) (2.4) ---- ---- ---- 39.6% 36.6% 35.7% ==== ==== ====
The components of income before income taxes consisted of the following:
1997 1996 1995 Domestic $ 16,445 $ 13,508 $ 11,980 Foreign 3,880 3,324 2,372 -------- -------- -------- $ 20,325 $ 16,832 $ 14,352 ======== ======== ========
The components of the deferred tax provisions consisted of the following:
1997 1996 1995 Excess of book over tax depreciation and amortization $ (19) $ 6 $ (16) Excess of book loss on disposal of property (4) 127 2 Accounts receivable reserves (83) 6 61 Inventory reserves (89) (29) (10) Litigation reserves 58 311 431 Environmental reserves 77 152 (827) Employee benefit reserves (330) (165) 30 Other reserves (70) 30 (14) ------ ------ ------ $ (460) $ 438 $ (343) ====== ====== ======
22 The significant deferred tax assets and liabilities at September 27, 1997, September 28, 1996 and September 30, 1995 were as follows:
1997 1996 1995 Deferred tax liabilities: Accelerated depreciation & amortization $ 2,015 $ 1,779 $ 1,749 -------- -------- -------- Total deferred liabilities $ 2,015 $ 1,779 $ 1,749 -------- -------- -------- Less deferred tax assets: Accounts receivable reserves $ 287 $ 203 $ 160 Inventory reserves 449 348 378 Litigation reserves 65 64 356 Environmental reserves 538 554 827 Employee benefit reserves 1,330 1,023 816 Other reserves -- 677 109 -------- -------- -------- Total deferred assets $ 2,669 $ 2,869 $ 2,646 -------- -------- -------- NET DEFERRED TAX ASSETS $ 654 $ 1,090 $ 897 ======== ======== ========
4. PENSION AND OTHER EMPLOYEE BENEFITS The Company has defined benefit, defined contribution and government mandated plans covering eligible,non-bargaining unit employees. Pension benefits are fully vested after five years and are based upon years of service and highest five-year average compensation. It is the Company's policy to fund its pension costs by making annual contributions based upon the minimum funding provisions of the "Employee Retirement Income Security Act of 1974". The total pension expense of Company sponsored plans was $245,000 in 1997, and was $407,000 and $297,000 in 1996 and 1995 respectively. Net periodic pension cost for the non-union plans for 1997, 1996 and 1995 included the following components:
1997 1996 1995 Service cost-benefits earned during the year $ 372 281 $ 244 Interest cost on projected benefit obligation 433 412 443 Actual (gain) loss on plan assets (1,129) (808) (835) Net amortization and deferral 668 573 635 ------- --- ------- $ 344 458 $ 487 ======= === =======
Assumptions used in accounting for the pension plans are as follows:
1997 1996 1995 Discount rate 7.5% 8.0% 8.0% Rate of increase in compensation levels 5.6% 6.0% 6.0% Expected long-term rate of return on assets 7.5% 7.5% 7.5% ==== ==== ====
23 The following table reconciles the plans' funded status and the amount recognized in the Company's balance sheets at September 27, 1997, September 28, 1996, and September 30, 1995, for its non-union plans:
1997 1996 1995 Actuarial present value of benefit obligations Vested benefits $ 4,733 $ 4,308 $ 4,059 Non-vested benefits 414 385 355 ------- ------- ------- Accumulated benefit obligation $ 5,147 4,693 4,414 Effect of projected future compensation levels 1,255 928 979 ------- ------- ------- Projected benefit obligation $ 6,402 $ 5,621 $ 5,393 Plan assets at fair value 7,478 6,289 5,240 ------- ------- ------- Under (over) funded status $(1,076) $ (668) $ 153 Unrecognized prior service cost (96) (112) (128) Unrecognized net gain (loss) 675 270 (379) Unrecognized net asset at date of application (6) 8 16 ------- ------- ------- (Prepaid) accrued pension cost included in balance sheet $ (503) $ (502) $ (338) ======= ======= =======
In fiscal 1990, a supplemental retirement benefit plan was approved for certain key executive officers which will provide supplemental payments upon retirement, disability, or death. The obligations are not funded apart from the Company's general assets. The Company charged to expense $135,000 in 1997, $121,000 in 1996, and $205,000 in 1995 under the plan. Most of the Company's union employees are covered by union-sponsored, collectively-bargained multi-employer pension plans. The Company contributed and charged to expense $181,000 in 1997, $160,000 in 1996, and $154,000 in 1995, for such plans. These contributions are determined in accordance with the provisions of negotiated labor contracts and generally are based on the number of man-hours worked. Information from the plan's administrators is not available to permit the Company to determine its share of unfunded vested benefits. The annual profit sharing contributions which are the lesser of (a) a percentage of income as defined in the plans or (b) 15% of the aggregate compensation paid to participants during the year, were $1,009,000 in 1997, $798,000 in 1996, and $698,000 in 1995. The Company makes matching contributions of 50% of employees' contributions up to 4% of compensation. Matching contributions were $232,000 in 1997, and were $225,000 and $214,000 in 1996 and 1995, respectively. Plan assets of Company-sponsored plans are invested primarily in common stocks, corporate bonds, and government securities. Although the Company has a right to improve, change or terminate the plans, they are intended to be permanent. OTHER POSTRETIREMENT BENEFITS The Company provides an optional retiree medical program to a majority of its U.S. salaried and non-union retirees. All retirees are required to contribute to the cost of their coverage. These postretirement benefits are unfunded. During the quarter ended January 1, 1994, the Company adopted Statement of Financial Accounting Standards No. 106 (SFAS No. 106), "Employer's Accounting for Postretirement Benefits other than Pensions," on a prospective basis. Adopting this new standard resulted in a cumulative catch-up adjustment of approximately $1,098,000 (pre-tax) which will be amortized over 20 years. 24 In fiscal years 1997, 1996 and 1995, the components of cost of these postretirement benefits, principally healthcare, were as follows:
1997 1996 1995 Service cost $ 64 $ 52 $ 44 Interest cost 111 104 87 Amortization of transition obligation 55 55 54 ------- -------- -------- $ 230 $ 211 $ 185 ======= ======== ========
The funded status of these benefits for the fiscal years ended September 27, 1997, September 29, 1996 and September 30, 1995 were as follows:
1997 1996 1995 Actuarial present value of benefit obligations Retirees $ 595 $ 574 $ 424 Eligible active employees 319 277 298 Other active employees 715 545 471 ------- ------- ------- Accumulated postretirement benefit obligation $ 1,629 $ 1,396 $ 1,193 Plan assets at fair value -- -- -- ------- ------- ------- Under funded status $ 1,629 $ 1,396 $ 1,193 Unrecognized transition obligation (879) (934) (989) Unrecognized net gain (loss) (85) 24 118 ------- ------- ------- Accrued postretirement benefit cost included in balance sheet $ 665 $ 486 $ 322 ======= ======= =======
Assumptions used in the accounting were:
1997 1996 1995 Discount rate 7.5% 8.0% 8.0% Health care trend rate in first year 10.0% 10.0% 11.0% Gradually declining to a trend rate of 6.0% 6.0% 6.0% in the year 2000 2000 2000 ===== ===== ====
The effect of a one percentage point increase in the assumed health care trend rate on:
1997 1996 1995 Aggregate of service and interest cost $ 36 $ 30 $ 25 Accumulated postretirement benefit obligation 297 240 202 ======== ======= ========
POSTEMPLOYMENT BENEFITS The Company provides certain postemployment benefits to former or inactive employees after employment but before retirement. If the Company had adopted Statement of Financial Accounting Standards No. 112, "Employers' Accounting for Postemployment Benefits", the effect of the change would have been immaterial. The Company will, on an annual basis, reevaluate its liability under SFAS No. 112 to verify that it remains immaterial. 25 5. CAPITAL STOCK The total authorized stock is 40,000,000 shares, consisting of 10,000,000 shares of preferred stock, par value $.01 per share, and 30,000,000 shares of common stock, par value $1.00 per share. No shares of preferred stock have been issued to date. In May, 1996, the Company adopted a new shareholder rights plan effective upon termination of the previous rights plan and declared a dividend distribution of one preferred stock purchase right ("Right") for each share of common stock outstanding. Each Right represents the right to purchase, if and when the Rights are exercisable, a unit consisting of one one-thousandths of a share ("unit") of Series A Junior Participating Preferred Stock at a purchase price of $65 per unit, subject to adjustment. The exercise price and the number of shares issuable upon the exercise of the Rights are subject to adjustment in certain cases to prevent dilution. The Rights are evidenced by the common stock certificates and are not exercisable, or transferable apart from the common stock, until ten days after a person (i) acquires 15% or more of the common stock or (ii) commences a tender offer which would result in the ownership of 15% or more of the common stock or the Board of Directors determines that any person has become an Adverse Person as that term is defined in the plan. In the event any person becomes the beneficial owner of 15% or more of the common stock or the Board of Directors declares a person to be an Adverse Person, each of the rights (other than Rights held by the party triggering the Rights and certain transferees which are voided) becomes a discount right entitling the holder to acquire common stock having a value equal to twice the Right's exercise price. In the event the Company is acquired in a merger or other business combination transaction (including one in which the Company is the surviving corporation), each Right will entitle its holder to purchase, at the then current exercise price of the Right, that number of shares of common stock of the surviving Company which at the time of such transaction would have a market value of two times the exercise price of the Right. The Rights do not have any voting rights and are redeemable, at the option of the Company, at a price of $0.01 per Right at any time until ten days after a person acquires beneficial ownership of at least 15% of the common stock. The Rights expire on May 29, 2006. So long as the Rights are not separately transferable, the Company will issue one Right with each new share of common stock issued. On April 26, 1995, the Board of Directors declared a three-for-two stock split effected in the form of a 50% common stock dividend, payable May 22, 1995, to holders of record on May 8, 1995. On January 22, 1993, the Board of Directors declared a two-for-one stock split effected in the form of a 100% common stock dividend, payable March 1, 1993, to holders of record on February 12, 1993. All share and per share amounts have been adjusted to give retroactive effect to these stock splits. 26 6. CONTINGENT LIABILITIES The Company is subject to federal and state hazardous substance cleanup laws that impose liability for the costs of cleaning up contamination resulting from past spills, disposal or other releases of hazardous substances. In this regard, the Company has incurred, and expects to incur, assessment, remediation and related costs at one of the Company's facilities. In 1991, the Company reported to state regulators a release at that site from an underground storage tank ("UST"). The UST and certain contaminated soil subsequently were removed and disposed of at an off-site disposal facility. The Company's independent environmental consultant has been conducting an investigation of soil and groundwater at the site with oversight by the state Department of Environmental Quality ("DEQ"). The investigation indicates that additional soil and groundwater at the site have been impaired by chlorinated solvents, including tetrachloroethane and trichloroethylene, and other compounds. Also, the Company learned that a portion of the site had been used as a disposal area by the previous owners of the site. The Company's consultant has remediated the soils in this area and believes that it is an additional source of contamination of groundwater, both on-site and off-site. In addition, the investigation of the site indicates that the groundwater contaminants have migrated off-site. The Company has implemented a groundwater remediation system for the on-site contamination, and continues to monitor and analyze conditions to determine the continued efficacy of this system. The Company has selected a remediation alternative for the off-site groundwater contamination and is currently reviewing this alternative with the DEQ. The Company also is conducting additional investigations to determine the extent of other sources of contamination in addition to the removed UST and the above-referenced disposal area, including possible evidence of past or current releases by others in the vicinity around the Company's facilities. The Company's consultant estimates that a minimum of approximately $890,000 of investigation and remediation expenses remain to be incurred, both on-site and off-site. The Company has a reserve for such purposes and has notified the previous owners of the site and various insurers of possible claims by the Company relating to the remediation of the site. The consultant's cost estimate was based on a review of currently available data, which is limited, and assumptions concerning the extent of contamination, geological conditions, and the costs and effectiveness of certain treatment technologies. The cost estimate is subject to substantial uncertainty until the extent of contamination and geological conditions are fully understood, feasible remedial alternatives are assessed, and the DEQ approves a remediation plan. The Company is continuing to investigate the environmental conditions at the site and will adjust its reserve if necessary. The Company may incur significant additional assessment, remediation and related costs at the site, and such costs could materially and adversely affect the Company's consolidated net income for the period in which such costs are incurred. At this time, the Company, however, cannot estimate the time or potential magnitude of such costs, if any. 27 7. STOCK OPTION PLANS Under the Company's stock option plans, options to purchase common shares may be granted to directors, officers and key employees at a price not less than the market value at date of grant. The maximum term of options granted is ten years. As of September 27, 1997, 1,694,717 unissued common shares are reserved under all stock option plans which includes 503,300 shares available for future grants. The following grants are outstanding and exercisable:
Fiscal Year Number of Option Price Expiration of Grant Shares Per Share Date 1988 7,500 3.17 1998 1989 34,917 3.58 1999 1990 109,600 4.75 2000 1991 134,900 4.25 2001 1992 108,900 5.17 2002 1993 240,450 6.98-8.42 2003 1994 141,750 10.33 2004 1995 139,350 9.33 2005 1996 131,550 14.31 2006 1997 142,500 13.19-15.81 2007 ---------- ----------- ---- 1,191,417 ==========
The following summarizes the options granted, exercised and expired during the last three fiscal years:
Option Price Number of Shares* Per Share* 1997 1996 1995 Granted $13.19-15.81 147,900 135,600 106,700 Exercised 3.17-14.31 122,233 45,500 29,300 Expired -- -- -- --
Subsequent to September 27, 1997, stock options were granted for 148,150 shares at an average price of $20.38 per share. *Option prices and shares from periods prior to the May 1995 3-for-2 stock split have been presented at their respective historical amounts to reflect actual activity. The Company applies Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," and related interpretations in accounting for the plans. Accordingly, no compensation expense has been recognized for the stock option plans. The Company has adopted the disclosure-only provisions of SFAS No. 123, "Accounting for Stock-Based Compensation." If the Company had elected to recognize compensation costs based on the fair value at the date of grant for awards in Fiscal 1997 and 1996, consistent with the provisions of SFAS No. 123, the Company's pro forma net income and earnings per common and common equivalent share would have been $11,802,000 and $1.07 in Fiscal 1997 and $10,284,000 and $.94 in Fiscal 1996. The pro forma effect on net income for Fiscal 1997 and 1996 may not be representative of the pro forma effect on net income of future years. 28 The Company has ten-year and five-year options. For disclosure purposes, the fair value of each stock option grant is estimated on the date of grant using the Black-Scholes option-pricing model. The following weighted-average assumptions were used for the ten-year stock options granted to officers in October of Fiscal 1997 and 1996, respectively: expected volatility of 28.06% and 30.88%; risk-free interest rate of 6.56% and 6.02%; expected average life of 8.6 years; and dividend yield of 2.10% and 1.80%. The weighted-average fair value of the ten-year stock options granted to officers in October of Fiscal 1997 and 1996 was $5.05 and $5.76, respectively. The following weighted-average assumptions were used for the ten-year stock options granted to employees in October of Fiscal 1997 and 1996, respectively: expected volatility of 27.62% and 27.35%; risk-free interest rate of 6.45% and 5.95%; expected average life of 6.4 years; and dividend yield of 2.10% and 1.80%. The weighted-average fair value of the ten-year stock options granted to employees in October of Fiscal 1997 and 1996 was $4.43 and $4.76, respectively. The following weighted-average assumptions were used for the ten-year stock options granted to employees in January of Fiscal 1997 and 1996, respectively: expected volatility of 29.42% and 27.89%; risk-free interest rate of 6.06% and 5.08%; expected average life of 6.4 years; and dividend yield of 1.80% and 1.90%. The weighted-average fair value of the ten-year stock options granted to employees in January of Fiscal 1997 and 1996 was $5.52 and $2.18, respectively. The following weighted-average assumptions were used for the five-year stock options granted in October of Fiscal 1997 and 1996, respectively: expected volatility of 26.29% and 27.08%; risk-free interest rate of 6.31% and 5.85%; expected average life of 4.6 years; and dividend yield of 2.10% and 1.80%. The weighted-average fair value of the five-year stock options granted in October of Fiscal 1997 and 1996 was $3.63 and $4.02, respectively. Under the above models, the total value of the ten-year stock options granted in October of Fiscal 1997 and 1996 was $570,305 and $653,756, respectively. The total value of the ten-year stock options granted in January of Fiscal 1997 and 1996 was $60,720 and $4,360, respectively. The total value of the five-year stock options granted in October of fiscal 1997 and 1996 was $43,560 and $42,210, respectively. 8. INFORMATION ABOUT THE COMPANY'S OPERATIONS IN DIFFERENT GEOGRAPHIC AREAS
United States Foreign Consolidated 1997 SALES TO UNAFFILIATED CUSTOMERS $99,658 $ 37,228 $136,886 NET INCOME 10,824 1,456 12,280 IDENTIFIABLE ASSETS AT SEPTEMBER 27, 1997 65,464 23,535 88,999 ======= ======== ======== 1996 Sales to unaffiliated customers $87,218 $ 36,462 $123,680 Net Income 8,835 1,836 10,671 Identifiable assets at September 28, 1996 56,529 21,856 78,385 ======= ======== ======== 1995 Sales to unaffiliated customers $90,324 $ 29,679 $120,003 Net Income 7,867 1,361 9,228 Identifiable assets at September 30, 1995 53,152 20,259 73,411 ======= ======== ========
29 9. SUMMARY OF QUARTERLY DATA (UNAUDITED) The following is a summary of quarterly data for 1997, 1996, and 1995.
Net Gross Net Net Income Sales Profit Income Per Share 1997 FIRST QUARTER $ 32,163 $ 14,356 $ 2,604 $ .24 SECOND QUARTER 35,503 16,009 3,087 .28 THIRD QUARTER 35,495 15,914 3,181 .29 FOURTH QUARTER 33,725 15,693 3,408 .31 ------------ ---------- --------- ------- TOTAL $ 136,886 $ 61,972 $ 12,280 $ 1.12 ============ ========== ========= ======= 1996 First Quarter $ 29,968 $ 13,177 $ 2,203 $ .20 Second Quarter 31,675 14,045 2,615 .24 Third Quarter 30,557 13,728 2,897 .26 Fourth Quarter 31,480 14,181 2,956 .27 ------------ ---------- --------- ------- Total $ 123,680 $ 55,131 $ 10,671 $ .98 ============ ========== ========= ======= 1995 First Quarter $ 27,667 $ 11,747 $ 1,830 $ .17 Second Quarter 31,413 13,799 2,203 .20 Third Quarter 30,329 13,101 2,305 .21 Fourth Quarter 30,594 13,815 2,890 .27 ------------ ---------- --------- ------- Total $ 120,003 $ 52,462 $ 9,228 $ .85 ============ ========== ========= =======
10. ACQUISITIONS On September 29, 1995, the Company acquired all of the assets of Elitec S.A. for $599,000 excluding cash. Located outside of Paris, France, Elitec is a distributor of industrial connectors and sensors that serve the automation and computer-control needs of many industries. The acquisition was accounted for under the purchase method, and the net assets and results of operations are included in the Company's Consolidated Financial Statements from the date of acquisition. 30 EX-21 5 EXHIBIT 21 SUBSIDIARIES OF THE REGISTRANT The subsidiaries of the Company at September 27, 1997 were: Name of Subsidiary State or Other Jurisdiction in Which Organized AI/FOCS, Inc. State of Delaware Aero-Motive Company State of Michigan Aero-Motive (U.K.) Limited United Kingdom Woodhead France S.A.R.L. France Elitec S.A. France Central Rubber Company State of Illinois Daniel Woodhead Company State of Delaware H. F. Vogel GmbH Electrotechnische Fabrik Germany Woodhead Asia Pte. Ltd. Singapore Woodhead Canada Ltd. Province of Ontario Woodhead de Mexico S.A. de C.V. Mexico Woodhead Industries (The Netherlands) B.V. The Netherlands Akapp Electro Industrie B.V. The Netherlands Woodhead Japan Corporation Japan W.I.S. Corp. U.S. Virgin Islands 31 EX-23 6 EXHIBIT 23 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation by reference of our report dated November 11, 1997 incorporated by reference in this Form 10-K, into the previously filed Woodhead Industries, Inc. Registration Statement on Form S-8 (Registration #333-26379). ARTHUR ANDERSEN LLP Chicago, Illinois December 24, 1997 32 EX-27 7 FDS WOODHEAD INDUSTRIES, INC. WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF INCOME SECTIONS FOUND IN EXHIBIT 13 OF THE COMPANY'S 10K FOR THE YEAR-TO-DATE, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000108215 WOODHEAD INDUSTRIES, INC. 1000 U.S DOLLARS 12-MOS SEP-27-1997 SEP-27-1997 8,284 0 20,962 911 18,067 51,456 74,514 44,016 88,999 19,729 0 0 0 10,541 56,714 88,999 136,886 136,886 74,914 74,914 1,424 0 0 20,325 8,045 12,280 0 0 0 12,280 1.12 1.10
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