-----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, J/YSYZeMC/5FdTXqnASfX+JHmen4757x0H0eH/jxxozvfMC4cQHoRtpc9tiqPIxr 9zfjYidobGgFT1BNtww5PQ== 0000891804-98-001555.txt : 19980812 0000891804-98-001555.hdr.sgml : 19980812 ACCESSION NUMBER: 0000891804-98-001555 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19980627 FILED AS OF DATE: 19980811 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: 0927 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-05971 FILM NUMBER: 98681957 BUSINESS ADDRESS: STREET 1: THREE PKWY NORTH STREET 2: STE 550 CITY: DEERFIELD STATE: IL ZIP: 60015 BUSINESS PHONE: 8472369300 MAIL ADDRESS: STREET 1: THREE PWKY NORTH STREET 2: STE 550 CITY: DEERFIELD STATE: IL ZIP: 60015 FORMER COMPANY: FORMER CONFORMED NAME: WOODHEAD DANIEL CO DATE OF NAME CHANGE: 19710624 10-Q 1 WOODHEAD INDUSTRIES, INC. 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES ACT OF 1934 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ACT OF 1934 For the Quarter Ended June 27, 1998 Commission File Number 0-5971 WOODHEAD INDUSTRIES, INC. - ------------------------------------------------------------------------------- DELAWARE 36-1982580 - ------------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer Identification incorporation or organization) Number) THREE PARKWAY NORTH, SUITE 550, DEERFIELD, IL. . 60015 - ------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number including area code (847) 236-9300 - ------------------------------------------------------------------------------- (Former name, former address or former fiscal year, if changes since last reports) 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 Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes X No On July 25, 1998 there were 10,618,181 shares of the Registrant's common stock outstanding.
PART I. FINANCIAL INFORMATION WOODHEAD INDUSTRIES, INC. CONDENSED CONSOLIDATED BALANCE SHEETS June 27, 1998 and September 27, 1997 ASSETS (Amounts in thousands) Unaudited CURRENT ASSETS 6/27/98 9/27/97 ---------- ------- Cash and short-term securities $ 5,141 $ 8,284 Accounts receivable 24,807 20,051 Inventories (Note 3) 20,391 18,067 Prepaid expenses 5,954 5,054 --------- --------- Total current assets $ 56,293 $ 51,456 --------- --------- OTHER ASSETS $ 203 $ 271 PROPERTY, PLANT & EQUIPMENT, at cost $ 84,786 $ 74,514 Less: Accumulated depreciation (46,884) (44,016) --------- --------- Net property, plant and equipment $ 37,902 $ 30,498 --------- --------- GOODWILL $ 28,490 $ 6,774 --------- --------- TOTAL ASSETS $ 122,888 $ 88,999 --------- ========= LIABILITIES & STOCKHOLDERS' INVESTMENT CURRENT LIABILITIES Accounts payable $ 7,835 $ 6,465 Accrued expenses 13,780 13,041 Income taxes (85) 223 Portion of long-term debt payable within one year -- -- --------- --------- Total current liabilities $ 21,530 $ 19,729 --------- --------- DEFERRED INCOME TAXES $ 2,169 $ 2,015 --------- --------- LONG-TERM DEBT $ 26,000 $ -- --------- --------- STOCKHOLDERS' INVESTMENT: (Note 6) Preferred stock $ -- $ -- Common stock 10,618 10,541 Additional paid-in capital 3,498 2,765 Cumulative translation adjustment (2,455) (1,487) Retained earnings 61,528 55,436 --------- --------- Total stockholders' investment $ 73,189 $ 67,255 --------- --------- TOTAL LIABILITIES & STOCKHOLDERS' INVESTMENT $ 122,888 $ 88,999 ========= =========
See accompanying notes to condensed consolidated financial statements. -2-
WOODHEAD INDUSTRIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Amounts in thousands except per share data, unaudited) THREE MONTHS ENDED NINE MONTHS ENDED ------------------ ----------------- 6/27/98 6/28/97 6/27/98 6/28/97 ------- ------- ------ ------ NET SALES $37,568 $35,495 $107,960 $103,161 COST OF SALES 21,528 19,581 60,880 56,882 ------- ------- ------- ------- GROSS PROFIT $16,040 $15,914 $ 47,080 $ 46,279 % of Net Sales 42.7% 44.8% 43.6% 44.9% OPERATING EXPENSES 10,257 10,384 30,229 30,734 ------- ------- ------- ------- INCOME FROM OPERATIONS $ 5,783 $ 5,530 $ 16,851 $ 15,545 OTHER (INCOME)/EXPENSES, NET (Note 4) 1,041 273 1,953 825 ------- ------- ------- ------- INCOME BEFORE INCOME TAXES $ 4,742 $ 5,257 $ 14,898 $ 14,720 PROVISION FOR INCOME TAXES 1,922 2,076 5,950 5,848 ------- ------- ------- ------- NET INCOME $ 2,820 $ 3,181 $ 8,948 $ 8,872 ======= ======= ======= ======= NET INCOME PER COMMON AND COMMON EQUIVALENT SHARE (Note 5) BASIC $ 0.27 $ 0.30 $ 0.85 $ 0.85 ======= ======= ======= ======= DILUTED $ 0.25 $ 0.29 $ 0.80 $ 0.80 ======= ======= ======= ======= COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING BASIC 10,608 10,474 10,583 10,450 ======= ======= ======= ======= DILUTED 11,169 11,117 11,182 11,093 ======= ======= ======= ======= DIVIDENDS PER SHARE $ 0.090 $ 0.080 $ 0.270 $ 0.230 ======= ======= ======= =======
See accompanying notes to condensed consolidated financial statements. -3-
WOODHEAD INDUSTRIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW (Amounts in thousands - unaudited) NINE MONTHS ENDED ---------------------- 6/27/98 6/28/97 --------- --------- Cash Flows from Operating Activities: Net income for the period $ 8,948 $ 8,872 Adjustments to reconcile net income to net cash flows from operating activities: Depreciation and amortization 4,442 3,795 Change in Assets and Liabilities: Decreases/(Increases) in: Accounts receivable (480) (937) Inventories (918) (3,464) Prepaid expenses (787) 689 Other assets (642) (62) Increases/(Decreases) in: Accounts payable 534 (959) Accrued expenses (1,749) 1,272 Income taxes (808) (1,079) Deferred income taxes 154 117 -------- -------- Net cash flows provided by operating activities $ 8,694 $ 8,244 -------- -------- Cash Flows from Investing Activities: Purchases of property, plant & equipment $ (8,766) $ (8,275) Acquisition of the mPm Group (26,768) -- Retirements or sales of property, plant and equipment 33 43 -------- -------- Net cash flows used for investing activities $(35,501) $ (8,232) -------- -------- Cash Flows from Financing Activities: Proceeds from long-term debt $ 26,000 $ -- Sales of stock 810 645 Dividend payments (2,856) (2,402) -------- -------- Net cash flows used for financing activities $ 23,954 $ (1,757) -------- -------- Effect of exchange rates $ (290) $ 26 -------- -------- Net Decrease in Cash & Short-Term Securities $ (3,143) $ (1,719) ======== ======== Supplemental disclosures of cash flow information: - -------------------------------------------------- Cash paid during the period for: Interest $ 339 $ 30 Income taxes $ 5,980 $ 6,374
See accompanying notes to condensed consolidated financial statements. -4- WOODHEAD INDUSTRIES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS June 27, 1998 (Unaudited) (1) The condensed consolidated balance sheets at June 27, 1998, and September 27, 1997, and the condensed consolidated statements of income and cash flow for the periods ended June 27, 1998, and June 28, 1997, reflect, in the opinion of Woodhead Industries, Inc. (the "Company" or "Registrant"), all adjustments necessary to present fairly the financial position for such periods. All such adjustments were of a normal recurring nature. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to S.E.C. rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. It is suggested that these condensed consolidated financial statements be read in conjunction with the consolidated financial statements and notes thereto included in the Company's latest annual report on Form 10-K. (2) The results of operations for the three-month periods ended June 27, 1998 and June 28, 1997, are not necessarily indicative of the results to be expected for the full year. (3) The estimated breakdown of raw materials and work-in-process and finished goods inventories at June 27, 1998, and September 27, 1997, is as follows: (in thousands) 6/27/98 9/27/97 ------- ------- Raw materials $13,749 $12,391 Work-in-process and finished goods 11,250 10,138 ------- ------- Inventories before LIFO reserve 24,999 22,529 Less: Reserve to reduce to LIFO (4,608) (4,462) ------- ------- Inventories, net $20,391 $18,067 ======== ======= (4) Interest expense was $405,000 for the quarter ended June 27, 1998, and $22,000 for the quarter ended June 28, 1997. (5) Income per share is based upon the weighted average number of shares outstanding for the basic calculation (10,608,000 and 10,583,000 for the quarter and nine months ended June 27, 1998 respectively, and 10,474,000 and 10,450,000 for the quarter and nine months ended June 28, 1997, respectively) and the weighted average number of shares outstanding plus the effect of common share equivalents during the period for the diluted calculation (11,169,000 and 11,182,000 for the quarter and nine months ended June 27, 1998, respectively, and 11,117,000 and 11,093,000 for the quarter and nine months ended June 28, 1997, respectively). (6) 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 $l.00 per share. No shares of preferred stock have been issued. Common shares outstanding at June 27, 1998 and September 27, 1997 were 10,618,000 and 10,541,000, respectively. -5- (7) The Company uses financial instruments to hedge, and therefore attempts to reduce, its overall exposure to the effects of currency fluctuations on cash flows. The Company does not use derivative financial instruments for speculative purposes. Furthermore, it does not hedge its foreign currency denominated transactions in a manner that entirely offsets the effects of changes in foreign currency exchange rates. The Company uses foreign currency forward contracts to hedge a portion of the currency risks of transactions denominated in foreign currencies . Gains and losses on these foreign currency hedges are generally offset by corresponding losses and gains on the underlying transaction. The foreign exchange financial instruments which hedge various investments in foreign subsidiaries are marked to market monthly and the results are recorded in the equity section. In addition, the Company's international operations, in many instances, acts as a natural hedge because both sales and operating expenses are denominated in local currency. Therefore, although an unfavorable change in the exchange rate of a foreign currency against the U.S. dollar will result in lower sales when translated to U.S. dollars, operating expenses will also be lower in these circumstances. (8) The Company has a Revolving Credit Agreement (The "Agreement") with a bank which was increased from $15,000,000 to $40,000,000 in the second quarter of 1998. The Agreement bears interest at the bank's prime or offered rate. The Agreement expires on February 28, 2001. During the third quarter of 1998, the Company borrowed $26,000,000 under the Agreement at an average interest rate of 6%. Interest expenses for the nine months ending June 27, 1998 was $526,895. The proceeds from the borrowing were used to finance the acquisition of all of the issued and outstanding capital stock of mPm S.p.A. and mPm group S.p.A. and certain assets of their subsidiaries (collectively, "the mPm Group"). (9) On February 27, 1998, pursuant to a share Purchase Agreement dated February 6, 1998, Woodhead Italia, S.r.l., a wholly owned subsidiary of the Company, incorporated in Italy, acquired the mPm Group in exchange for an aggregate cash payment to Sellers of 52,637,000,000 Italian Lire (approximately $29.2 million). The mPm Group manufactures, distributes and sells industrial connectors and related products. The mPm Group has operations in Italy, Germany and the United Kingdom. Results of operations subsequent to the acquisition date are included in the Company's condensed consolidated statement of income for the nine months ended June 27, 1998. The following unaudited pro forma condensed information has been prepared as if the acquisition had occurred at the beginning of fiscal year 1997, with pro forma adjustments to give effect to amortization of goodwill valued in the acquisition and interest expense on the related borrowings from the Company's Revolving Credit Agreement. Nine Months Ended (Amounts in thousands except per share data) 6/27/98 6/28/97 --------- --------- Net Sales $115,855 $117,926 Income Before Income Taxes 13,635 14,616 Net Income $ 7,862 $ 8,378 Net income per common and fully diluted common equivalent share $ 0.70 $ 0.76 -6- (10) Subsequent to the quarter ended June 27, 1998, the Company acquired the business and certain assets of the SST division of S-S Technologies, located in Ontario, Canada. Total consideration was approximately $34.9 million which included 400,000 restricted shares of the Company's common stock. The funds used to finance the transaction were obtained under a new bank credit facility obtained by Woodhead Canada Limited, a wholly owned subsidiary of the Company. SST manufactures, distributes and sells interface cards, gateways and related software for connecting devices and controllers to industrial networks. -7- WOODHEAD INDUSTRIES, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FINANCIAL CONDITION Working capital increased by $3.0 million for the first nine months of fiscal 1998. The current ratio of 2.6/1 for the period, was the same at the end of the prior fiscal year. Long-term debt rose to $26.0 million from the prior year-end due to the Company's acquisition of mPm S.r.l resulting in a total capitalization to equity (debt plus equity) ratio of 26.2%. Return on assets decreased to 11.9% from 14.9% and return on equity declined to 17.9% from 19.7% for the comparable 12-month periods ending June 27, 1998 and June 28, 1997, respectively. The Company's financial position remains strong and significant borrowing capacity is available should the need arise. The Company is a party to an environmental matter which obligates it to investigate, remediate or mitigate the effects on the environment of the release of certain substances at one of the Company's facilities. For additional information concerning the environmental matter, see "Item 1. Legal Proceedings". OPERATING RESULTS Third quarter net sales rose 5.8% to $37.6 million from $35.5 million reported for the same period last year. Domestic sales decreased 10.8% during the quarter, primarily due to the weakness in demand for the Company's Brad Harrison products. International sales increased 49.2% over the third quarter of fiscal 1997 and constituted 39.1% of the total sales for the quarter just ended. This increase was due to the addition of sales by mPm S.r.l. which was acquired in February of this year, and continued strength in our other European markets, which offset the decline in our sales in Asia. In local currencies, international sales increased 52.0% over the same period last year. The backlog of unfilled orders was $12.3 million compared with $8.8 million at fiscal year-end 1997 and $10.1 million reported one year ago. Selling prices increased less than 1% when compared to the same period one year ago. Gross profit of $16.0 million was $.1 million or 0.8% greater than the same quarter last year. Gross profit margins decreased to 42.7% from 44.8%, primarily due to the dilutive effect of the lower gross profit percentage at mPm S.r.l. Operating expenses decreased 1.2% to $10.3 million from $10.4 million in the third quarter of fiscal 1998. As a percent of net sales, operating expenses decreased to 27.3% from 29.3%, due to the lower rate of operating expenses at mPm S.r.l. Other expenses of $1.0 million were $.7 million more than the same period a year ago. This increase was primarily due to the increased interest and amortization expenses related to the acquisition of mPm S.r.l. Net income decreased from last year's third quarter by 11.3%. The Company's decrease in net income was in large part due to the increase in other expenses arising from the acquisition of mPm S.r.l. Basic earnings per share were $0.27 compared with $0.30 in the third quarter of last year, a 10.0% decrease. Earnings per share on a diluted basis were $0.25 compared with $0.29 in the third quarter of last year, a 13.8% decrease. -8- OTHER The Company is currently assessing and addressing the impact of the Year 2000 issue on its business. The Year 2000 issue refers to the inability of many computer programs and systems to process accurately dates later than December 31, 1999. The Year 2000 issue creates risk for the Company from unforeseen problems in its own computer systems and from third parties with whom the Company deals with. Failures of the Company's and /or third parties' computer systems could have a material impact on the Company's ability to do business. The Company is in the process of determining the timetable and cost related to achieving Year 2000 compliance. Certain statements in this Form 10-Q may constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform act of 1995. Such forward-looking statements involve numerous assumptions, known and unknown risks, uncertainties and other factors which may cause actual and future performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, but are not limited to: achieving sales levels to fulfill revenue expectations; the absence of presently unexpected costs or charges, certain of which may be outside the control of the Company; general economic and business conditions; the ability to integrate acquisitions; shifts in market demand for the Company's products and competition. -9- PART II. OTHER INFORMATION WOODHEAD INDUSTRIES, INC. Item 1. 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 $645,000 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. -10- PART II. OTHER INFORMATION WOODHEAD INDUSTRIES, INC. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits (11) Computation of earnings per common and common equivalent share (27) Financial data schedule (Electronic filings only) (b) Reports on Form 8-K filed during the quarter ended June 27, 1998 1. Form 8-K/A on May 13, 1998 Item 7. Financial statements, pro forma financial information and exhibits -11- SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. WOODHEAD INDUSTRIES, INC /s/ Robert G. Jennings 8-11-98 ------------------------- --------- Robert G. Jennings Date Vice President - Finance (Chief Financial Officer) /s/ Joseph P. Nogal 8-11-98 ------------------------- --------- Joseph P. Nogal Date Treasurer/Controller (Chief Accounting Officer) -12- EX-11 2 COMPUTATION OF EARNINGS
EXHIBIT 11 WOODHEAD INDUSTRIES, INC. COMPUTATION OF EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE (Amounts in thousands, except per share data - unaudited) Three Months Ended Three Months Ended 6/27/98 6/28/97 ------------------ ----------------- Basic Diluted Basic Diluted ------- ------- ------- ------- Net Income $ 2,820 $ 2,820 $ 3,181 $ 3,181 ======= ======= ======= ======= Weighted average common shares 10,608 10,608 10,474 10,474 Incremental shares issuable for stock options outstanding (Treasury stock method) -- 561 -- 643 ------- ------- ------- ------- Common and Common Equivalent Shares 10,608 11,169 10,474 11,117 ======= ======= ======= ======= Earnings per common and common equivalent shares $ 0.27 $ 0.25 $ 0.30 $ 0.29 ======= ======= ======= ======= Nine Months Ended Nine Months Ended 6/27/98 6/28/97 ----------------- ----------------- Basic Diluted Basic Diluted ------- ------- ------- ------- Net Income $ 8,948 $ 8,948 $ 8,872 $ 8,872 ======= ======= ======= ======= Weighted average common shares 10,583 10,583 10,450 10,450 Incremental shares issuable for stock options outstanding (Treasury stock method) -- 599 -- 643 ------- ------- ------- ------- Common and Common Equivalent Shares 10,853 11,182 10,450 11,093 ======= ======= ======= ======= Earnings per common and common equivalent shares $ 0.85 $ 0.80 $ 0.85 $ 0.80 ======= ======= ======= =======
-13- EX-27 3 WOODHEAD INDUSTRIES FDS
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF INCOME FOUND ON PAGES 2 AND 3 OF THE COMPANY'S FORM 10Q FOR THE YEAR TO DATE AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 U.S DOLLARS 9-MOS OCT-03-1998 JUN-27-1998 1 5,141 0 24,807 0 20,391 56,293 84,786 46,884 122,888 21,530 0 0 0 10,618 62,571 122,888 107,960 107,960 60,880 60,880 1,953 0 0 14,898 5,950 8,948 0 0 0 8,948 .85 .80
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