-----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, Pk9N8C3BhfkLKku+4JxSUJfOdhrS624WVE2irOK/JqGYABWY7e6t/noY8ISCRZb+ xIBCiOdybhvqeFyAYZPj8A== 0000897101-03-000418.txt : 20030512 0000897101-03-000418.hdr.sgml : 20030512 20030512160140 ACCESSION NUMBER: 0000897101-03-000418 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20030329 FILED AS OF DATE: 20030512 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WOODHEAD INDUSTRIES INC CENTRAL INDEX KEY: 0000108215 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRONIC COMPONENTS, NEC [3679] IRS NUMBER: 361982580 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-05971 FILM NUMBER: 03692893 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 woodhead032192_10q.txt WOODHEAD INDUSTRIES, INC. FORM 10-Q ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended 3/29/2003 --------- OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________________ to __________________ Commission File Number 0-5971 ------ WOODHEAD INDUSTRIES, INC. ------------------------ (Exact name of registrant as specified in its charter) DELAWARE 36-1982580 -------- ------------------- (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) THREE PARKWAY NORTH #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 and former fiscal year, if changed since last report.) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes _X_ No___. Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act) Yes _X_ No___. The number of common shares outstanding as of April 25, 2003 was 11,901,088. ================================================================================ 1 TABLE OF CONTENTS PART I - FINANCIAL INFORMATION Item 1 - Financial Statements Consolidated Balance Sheets 3 Consolidated Statements of Income 4 Consolidated Statements of Cash Flows 5 Consolidated Statements of Comprehensive Income 6 Notes to Financial Statements 7 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations 15 Item 3 - Quantitative and Qualitative Disclosures about Market Risk 19 Item 4 - Internal Controls and Procedures 19 PART II - OTHER INFORMATION Item 1 - Legal Proceedings 20 Item 4 - Submission of matters to a vote of security holders 21 Item 6 - Exhibits and Reports on Form 8-K 21 SIGNATURES 22 Certificate Pursuant to Section 302 - Philippe Lemaitre 23 Certificate Pursuant to Section 302 - Robert H. Fisher 24 2 PART I - FINANCIAL INFORMATION ITEM 1 - FINANCIAL STATEMENTS WOODHEAD INDUSTRIES, INC. CONSOLIDATED BALANCE SHEETS As of March 29, 2003 and September 28, 2002 (Amounts in Thousands)
Unaudited ASSETS 3/29/2003 9/28/2002 ------------------------- CURRENT ASSETS Cash and short-term investments $ 23,022 $ 13,152 Accounts receivable, net 31,257 30,770 Inventories 14,523 14,825 Prepaid expenses 2,402 2,870 Refundable income taxes 2,066 1,971 Deferred income taxes 3,119 3,119 - ----------------------------------------------------------------------------------------- TOTAL CURRENT ASSETS 76,389 66,707 Property, plant and equipment, net 62,013 64,053 Other Intangible assets, net 802 798 Goodwill, net 30,415 28,757 Deferred income taxes 3,454 3,339 Other Assets 1,184 2,997 - ----------------------------------------------------------------------------------------- TOTAL ASSETS $ 174,257 $ 166,651 - ----------------------------------------------------------------------------------------- LIABILITIES AND STOCKHOLDERS' INVESTMENT Current Liabilities Accounts payable $ 9,768 $ 9,119 Accrued expenses 13,469 12,785 Income taxes payable 1,873 1,640 Current portion of long-term debt 4,200 4,200 - ----------------------------------------------------------------------------------------- TOTAL CURRENT LIABILITIES 29,310 27,744 Long-term debt 36,600 36,600 Deferred income taxes 2,080 1,771 Other liabilities 3,182 3,191 - ----------------------------------------------------------------------------------------- TOTAL LIABILITIES 71,172 69,306 STOCKHOLDERS' INVESTMENT: Common stock at par (shares issued: 11,901 at 3/29/2003 and 11,817 at 9/28/02) 11,901 11,817 Additional paid-in capital 17,395 16,526 Deferred stock compensation (930) (218) Accumulated other comprehensive loss (347) (4,292) Retained earnings 75,066 73,512 - ----------------------------------------------------------------------------------------- Total stockholders' investment 103,085 97,345 - ----------------------------------------------------------------------------------------- TOTAL LIABILITIES AND STOCKHOLDERS' INVESTMENT $ 174,257 $ 166,651 - -----------------------------------------------------------------------------------------
The accompanying notes are an integral part of these statements. 3 WOODHEAD INDUSTRIES, INC. CONSOLIDATED STATEMENTS OF INCOME For the Three and Six Months ended March 29, 2003 and March 30, 2002 (Amounts in Thousands, except per share data, unaudited)
THREE MONTHS ENDED SIX MONTHS ENDED ------------------------- ------------------------- 3/29/2003 3/30/2002 3/29/2003 3/30/2002 ------------------------- ------------------------- NET SALES $ 45,810 $ 42,579 $ 88,042 $ 81,200 Cost of Sales 28,900 26,986 55,404 51,122 -------- -------- -------- -------- GROSS PROFIT 16,910 15,593 32,638 30,078 OPERATING EXPENSES 14,334 13,285 28,102 26,434 RESTRUCTURING CHARGE -- 1,015 -- 1,015 -------- -------- -------- -------- TOTAL OPERATING EXPENSES 14,334 14,300 28,102 27,449 INCOME FROM OPERATIONS 2,576 1,293 4,536 2,629 OTHER EXPENSES Interest Expense 701 801 1,401 1,579 Interest Income (51) (21) (90) (33) Other (Income) / Expenses, Net (579) 89 (1,087) 337 -------- -------- -------- -------- INCOME BEFORE TAXES 2,505 424 4,312 746 -------- -------- -------- -------- PROVISION FOR INCOME TAXES 974 260 1,355 446 -------- -------- -------- -------- INCOME FROM CONTINUING OPERATIONS $ 1,531 $ 164 $ 2,957 $ 300 DISCONTINUED OPERATIONS: Income From Discontinued AKAPP Operations (Including Gain on Disposal of $725) -- -- 733 -- Income Tax Expense -- -- 3 -- -------- -------- -------- -------- Income From Discontinued Operations -- -- 730 -- -------- -------- -------- -------- NET INCOME $ 1,531 $ 164 $ 3,687 $ 300 EARNINGS PER SHARE, BASIC From Continuing Operations $ 0.13 $ 0.01 $ 0.25 $ 0.03 From Discontinued Operations $ -- $ -- .06 $ -- As Reported $ 0.13 $ 0.01 $ 0.31 $ 0.03 EARNINGS PER SHARE, DILUTED From Continuing Operations $ 0.13 $ 0.01 $ 0.25 $ 0.03 From Discontinued Operations $ -- $ -- .06 $ -- As Reported $ 0.13 $ 0.01 $ 0.31 $ 0.03 WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING Basic 11,897 11,620 11,862 11,597 Diluted 12,020 11,830 11,947 11,812 DIVIDENDS PER SHARE $ 0.09 $ 0.09 $ 0.18 $ 0.18
The accompanying notes are an integral part of these statements. 4 WOODHEAD INDUSTRIES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS For the Six Months ended March 29, 2003 and March 30, 2002 (Amounts in Thousands, unaudited)
------------------------- Six Months ended ------------------------- 03/29/2003 03/30/2002 - -------------------------------------------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income for the period $ 3,687 $ 300 Adjustments to reconcile net income to net cash flows from operating activities: Income from discontinued operations (730) -- Depreciation and amortization 5,299 4,999 Deferred tax expense 194 147 (Increase) Decrease in: Accounts receivable (688) 1,418 Inventories 294 3,408 Prepaid expenses 372 (27) Deferred income taxes and other assets 283 (1,133) (Decrease) Increase in: Accounts payable 653 (1,530) Accrued expenses 680 109 Income taxes payable 188 (459) Deferred income taxes and other liabilities (73) 257 - -------------------------------------------------------------------------------------------- Net cash flows provided by operating activities 10,159 7,489 - -------------------------------------------------------------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property, plant & equipment (2,238) (4,295) Dispositions of property, plant & equipment 8 77 Proceeds from sale of AKAPP, net of cash given $485 4,187 -- - -------------------------------------------------------------------------------------------- Net cash provided by (used for) investing activities 1,957 (4,218) - -------------------------------------------------------------------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES: Increase in long-term debt -- 824 Sales of stock 242 648 Dividend payments (2,134) (2,087) - -------------------------------------------------------------------------------------------- Net cash (used for) provided by financing activities (1,892) (615) - -------------------------------------------------------------------------------------------- EFFECT OF EXCHANGE RATES (354) 1,631 - -------------------------------------------------------------------------------------------- NET INCREASE IN CASH AND SHORT-TERM INVESTMENTS 9,870 4,287 Cash and short-term investments at beginning of period 13,152 4,156 Cash and short-term investments at end of period $ 23,022 $ 8,443 - -------------------------------------------------------------------------------------------- SUPPLEMENTAL CASH FLOW DATA Cash paid during the period for: Interest $ 1,367 $ 1,559 Income taxes $ 871 $ 172
The accompanying notes are an integral part of these statements. 5 WOODHEAD INDUSTRIES, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME For the Three and Six Months ended March 29, 2003 and March 30, 2002 (Amounts in Thousands, unaudited)
------------------------- ------------------------- THREE MONTHS ENDED SIX MONTHS ENDED ------------------------- ------------------------- 3/29/2003 3/30/2002 3/29/2003 3/30/2002 - ----------------------------------------------------------------------------------- ------------------------- Net income $ 1,531 $ 164 $ 3,687 $ 300 Other comprehensive income (loss): Accumulated foreign currency translation adjustment, before tax 2,295 (1,006) 5,515 (2,316) Unrealized gain / (loss) on cash flow hedging Instrument (414) 367 (1,570) 248 - ------------------------------------------------------------------------------------------------------------------ Comprehensive income (loss), net of tax $ 3,412 $ (475) $ 7,632 $(1.768) - ------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these statements. 6 WOODHEAD INDUSTRIES, INC. NOTES TO FINANCIAL STATEMENTS (Amounts in Thousands, except per share data, unaudited) 1. BASIS OF PRESENTATION Our consolidated financial statements include the accounts of all subsidiaries, including those operating outside the United States, each of which is wholly owned. All material intercompany transactions have been eliminated in consolidation. We prepare our financial statements in conformity with United States Generally Accepted Accounting Principles. In preparing the financial statements, we must use some estimates and assumptions that may affect reported amounts and disclosures. Among others, we use estimates when accounting for depreciation, amortization, employee benefits, asset valuation allowances, and loss contingencies. We are also subject to risks and uncertainties that may cause actual results to differ from those estimates. Interim results are not necessarily indicative of results for a full year. Certain amounts in the prior period financial statements have been reclassified to conform to the current period presentation. The accompanying unaudited, consolidated financial statements have been prepared pursuant to rules and regulations of the Securities and Exchange Commission and, therefore, do not include all information and footnote disclosures normally included in audited financial statements. In the opinion of management, all normal and necessary adjustments have been made to ensure a fair statement of the results for the interim period. The information included in this Form 10-Q should be read in conjunction with Management's Discussion and Analysis of Financial Condition and Results of Operations, and Financial Statements and Notes thereto included in the Woodhead Industries, Inc. 2002 Form 10-K and Forms 10-K/A. 2. RECENT ACCOUNTING PRONOUNCEMENTS In November 2002 the FASB issued FASB Interpretation No. 45, GUARANTOR'S ACCOUNTING AND DISCLOSURE REQUIREMENTS FOR GUARANTEES, INCLUDING INDIRECT GUARANTEES OF INDEBTEDNESS OF OTHERS (FIN 45). FIN 45 provides guidance on the disclosures to be made by a guarantor in its interim and annual financial statements about its obligations under certain guarantees that it has issued and also clarifies that the guarantor is required to recognize, at the inception of a guarantee, a liability for the fair value of the obligation undertaken in issuing the guarantee. We have adopted the requirements of FIN 45 and made the appropriate disclosures in the Financial Statements and Notes included in this Form 10-Q. We believe that the amount of our warranty settlements and reserve are not material and are therefore not included as a disclosure to these interim financial statements. In December 2002 the FASB issued SFAS No. 148 ACCOUNTING FOR STOCK-BASED COMPENSATION - TRANSITION AND DISCLOSURE (SFAS 148), which amends SFAS No. 123, ACCOUNTING FOR STOCK-BASED COMPENSATION. SFAS No. 148 provides alternative methods of transition for companies that voluntarily change to the fair value-based method of accounting for stock-based employee compensation, and also requires expanded disclosures in both interim and annual financial statements. We are required to adopt the expanded disclosure requirements of SFAS No. 148 for the quarter ending March 29, 2003. Our expanded disclosure regarding pro forma amounts for the effects of not recording FAS 123 expense is included in Footnote No. 7. 7 3. INVENTORIES Inventories at the balance sheet dates were comprised of the following: 3/29/03 9/28/02 - -------------------------------------------------------------------------------- Inventories valued using FIFO $ 9,029 $ 9,576 - -------------------------------------------------------------------------------- Inventories valued using LIFO: At FIFO cost 9,022 8,965 Less: Reserve to reduce to LIFO (3,528) (3,716) - -------------------------------------------------------------------------------- LIFO Inventories 5,494 5,249 - -------------------------------------------------------------------------------- Total Inventories $ 14,523 $ 14,825 - -------------------------------------------------------------------------------- Inventory composition using FIFO Raw materials 10,067 10,340 Work-in-process and finished goods 7,984 8,201 - -------------------------------------------------------------------------------- Total Inventories at FIFO $ 18,051 $ 18,541 - -------------------------------------------------------------------------------- Had we used the FIFO method for all inventories, net income would have been $0.1 million lower for the six months ended 3/29/2003. In the second quarter 2003 LIFO had no effect on net income. Net income would have been $0.2 million and $0.5 million lower in the three and six months ended 3/30/2002. 4. PROPERTY, PLANT AND EQUIPMENT 3/29/03 9/28/02 - -------------------------------------------------------------------------------- Property, plant and equipment, at cost $141,186 $138,373 Less: Accumulated depreciation and amortization (79,173) (74,320) - -------------------------------------------------------------------------------- Property, plant and equipment, net $ 62,013 $ 64,053 - -------------------------------------------------------------------------------- During the six-month period just ended we disposed of approximately $0.5 million of unused, fully depreciated fixed assets, and the accompanying accumulated depreciation. We did not record any material gain or loss on these disposals. In addition we disposed of $1.0 million of net property plant and equipment in the sale of AKAPP (see Footnote No.9) 5. LONG TERM DEBT Effective March 30, 2002 we amended our revolving credit agreement with a bank to increase the maximum ratio of debt to EBITDA, as defined, from 2.5 to 2.9, and reduce the minimum interest coverage ratio, as defined, from 3.0 to 2.0. This amendment expired on March 29, 2003, when the maximum debt to EBITDA ratio reverted back to 2.5 and the minimum interest coverage ratio reverted back to 3.0. We are in compliance with all provisions of our funding arrangements. At March 29, 2003 we had unused revolving credit agreements with a bank that provide for borrowings of up to $25.0 million at the bank's prime or offered rate. Included in our financial statements is a 6.64% senior guaranteed note, which is held by a subsidiary and has a parental guarantee. In addition, there is a 6.81% senior guaranteed note held by the parent company, which is guaranteed by our U.S. subsidiaries. 8 6. EARNINGS PER SHARE Basic earnings per share exclude dilution, and diluted earnings per share reflect the potential dilution that could occur if stock options were exercised. The reconciliation between basic and diluted earnings per share is as follows:
Three Months Ended Six Months Ended -------------------- ----------------------- 03/29/03 03/30/02 03/29/03 03/30/02 - ---------------------------------------------------------------------------------------------------- Income from Continuing Operations $ 1,531 $ 164 $ 2,957 $ 300 Income from Discontinued Operations $ -- $ -- 730 $ -- -------------------- ----------------------- Net Income $ 1,531 $ 164 $ 3,687 $ 300 ==================== ======================= Earnings per share, basic From continuing operations $ 0.13 $ 0.01 $ 0.25 $ 0.03 From discontinued operations $ -- $ -- $ 0.06 $ -- -------------------- ----------------------- As reported $ 0.13 $ 0.01 $ 0.31 $ 0.03 -------------------- ----------------------- Earnings per share, diluted From continuing operations $ 0.13 $ 0.01 $ 0.25 $ 0.03 From discontinued operations $ -- $ -- $ 0.06 $ -- -------------------- ----------------------- As reported $ 0.13 $ 0.01 $ 0.31 $ 0.03 -------------------- ----------------------- Weighted-average number of shares outstanding 11,897 11,620 11,862 11,597 Dilutive common stock options 123 210 85 215 -------------------- ----------------------- Weighted-average number of shares outstanding Plus dilutive common stock options 12,020 11,830 11,947 11,812 - ----------------------------------------------------------------------------------------------------
7. CAPITAL STOCK Our total authorized stock is 40,000,000 shares, consisting of 10,000,000 shares of preferred stock, par value $0.01 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. Common stock issued was 11,901,000 and 11,817,000 on March 29, 2003 and September 28, 2002, respectively. We apply Accounting Principles Board Opinion No. 25: Accounting for Stock Issued to Employees, and related interpretations, including FASB Interpretation (FIN) 44: Accounting for Certain Transactions Involving Stock Compensation in accounting for the plans. Accordingly, we did not recognize compensation expense related to option grants. We adopted SFAS No. 148: Accounting for Stock Based Compensation, which amended SFAS No. 123 Accounting for Stock Based Compensation. The following table, per SFAS 148, summarizes results as if we had recorded compensation expense for option grants during the six months ended March 29, 2003 and March 30, 2002: 03/29/2003 03/30/2002 - --------------------------------------------------------------------- Net Income As reported $ 3,687 $ 300 Stock based employee compensation cost (492) (301) ----------------------- Pro forma $ 3,195 $ (1) Basic earnings per share As reported $ 0.31 $ 0.03 Stock based employee compensation cost (0.04) (0.03) ----------------------- Pro forma $ 0.27 -- Diluted earnings per share As reported $ 0.31 $ 0.03 Stock based employee compensation cost (0.04) (0.03) ----------------------- Pro forma $ 0.27 -- - --------------------------------------------------------------------- 9 The pro forma effect of stock option grants on results of operations may not be representative of the pro forma effect on results of operations for future years. 8. SEGMENT AND GEOGRAPHIC DATA Segment information is presented in accordance with Statement of Financial Accounting Standards (SFAS) No. 131: Disclosure about Segments of an Enterprise and Related Information. This statement requires us to report certain financial information in a similar manner as we report it to the chief operating decision maker for the purpose of evaluating performance and allocating resources to the various business segments. We identified the Chief Executive Officer as the chief operating decision maker. Our operating segments are based on the organization of business groups comprised of similar products and services. Revenues in our Industrial Communications and Connectivity Products Segment (Connectivity Segment, or Connectivity) are primarily derived from sales of system components used with devices in open networks for automated manufacturing and distribution applications. Revenues in our Electrical Safety & Specialty Products Segment (Electrical Segment, or Electrical) are primarily derived from sales of specialized products to support enhanced safety and productivity on the factory floor. In fiscal 2002 we changed our segment reporting to include Asian operations in the Connectivity Segment to recognize the change in that operations business mix. Asian operations had been part of our Electrical Segment. The amounts for fiscal 2002 have been reclassified to reflect this change. Sales between segments were not significant. Sales in geographic areas were determined by customer location. No single customer accounted for 10 percent or more of our total revenue. Sales in foreign countries did not meet minimum disclosure requirements. We did not allocate certain corporate expenses, primarily those related to the overall management of the corporation, to the segments or geographic areas. Both segments share certain production facilities and equipment (PP&E). These assets, and related additions and depreciation, were allocated based on unit production. Geographic data on assets is based on the physical location of those assets. Corporate assets were primarily investments in subsidiaries and cash. 10 THREE MONTHS (Amounts in Thousands, unaudited) Segment data Net Sales Income from Operations ---------------------- ---------------------- Three Months Ended Three Months Ended ---------------------- ---------------------- 03/29/03 03/30/02 03/29/03 03/30/02 ---------------------- ---------------------- Connectivity $ 31,989 $ 27,353 $ 1,130 $ 171 Electrical 13,821 15,226 1,627 1,357 Corporate and other (181) (235) - ---------------------------------------------------- ---------------------- Total $ 45,810 $ 42,579 $ 2,576 $ 1,293 - ---------------------------------------------------- ---------------------- Additions to Depreciation long-lived assets and Amortization ---------------------- ---------------------- Three Months Ended Three Months Ended ---------------------- ---------------------- 03/29/03 03/30/02 03/29/03 03/30/02 ---------------------- ---------------------- Connectivity $ 850 $ 789 $ 2,024 $ 1,920 Electrical 442 640 595 618 Corporate and other 16 7 50 67 - ------------------------------------------------------------------------------- Total $ 1,308 $ 1,436 $ 2,669 $ 2,605 - -------------------------------------------------------------------------------- Total Assets ---------------------- 03/29/03 03/30/02 ---------------------- Connectivity $125,569 $119,915 Electrical 26,368 31,652 Corporate and other 22,320 15,084 - ---------------------------------------------------- Total $174,257 $166,651 - ---------------------------------------------------- Three Months Ended - ------------------------------------------------------------------------------- Reconciliation of Income from Operations to Net Income 03/29/03 03/30/02 - ------------------------------------------------------------------------------- Income from operations $ 2,576 $ 1,293 Less: Interest income (expense), net (650) (780) Other income (expense), net 579 (89) Income taxes (974) (260) - ------------------------------------------------------------------------------- Net Income $ 1,531 $ 164 - ------------------------------------------------------------------------------- Geographic Data Net Sales Total Assets ---------------------- ------------------ Three Months Ended 03/29/03 09/28/02 ---------------------- --------------------------------- 03/29/03 03/30/02 United States $ 57,840 $ 51,553 - -------------------------------------------- Canada 25,293 24,848 United States $ 28,168 $ 27,988 Italy 31,330 29,303 Mexico 20,274 20,035 All other countries 17,642 14,591 France 20,575 19,752 - -------------------------------------------- All other Total $ 45,810 $ 42,579 countries 18,945 21,160 - -------------------------------------------- --------------------------------- Total $174,257 $166,651 --------------------------------- 11 SIX MONTHS (Amounts in Thousands, unaudited) Segment data Net Sales Income from Operations ---------------------- ---------------------- Six Months Ended Six Months Ended ---------------------- ---------------------- 03/29/03 03/30/02 03/29/03 03/30/02 ---------------------- ---------------------- Connectivity $ 60,388 $ 52,080 $ 1,529 $ 366 Electrical 27,654 29,120 3,480 2,436 Corporate and other (473) (173) - ---------------------------------------------------- ---------------------- Total $ 88,042 $ 81,200 $ 4,536 $ 2,629 - ---------------------------------------------------- ---------------------- Additions to Depreciation long-lived assets and Amortization ---------------------- ---------------------- Six Months Ended Six Months Ended ---------------------- ---------------------- 03/29/03 03/30/02 03/29/03 03/30/02 ---------------------- ---------------------- Connectivity $ 1,485 $ 2,363 $ 4,004 $ 3,653 Electrical 712 1,912 1,194 1,217 Corporate and other 41 20 101 129 - ---------------------------------------------------- ---------------------- Total $ 2,238 $ 4,295 $ 5,299 $ 4,999 - ---------------------------------------------------- ---------------------- Total Assets ---------------------- 03/29/03 03/30/02 ---------------------- Connectivity $125,569 $119,915 Electrical 26,368 31,652 Corporate and other 22,320 15,084 - ---------------------------------------------------- Total $174,257 $166,651 - ---------------------------------------------------- Six Months Ended - ------------------------------------------------------------------------------- Reconciliation of Income from Operations to Net Income 03/29/03 03/30/02 - ------------------------------------------------------------------------------- Income from operations $ 4,536 $ 2,629 Less: Interest income (expense), net (1,311) (1,546) Other income (expense), net 1,087 (337) Income taxes (1,355) (446) ---------------------- Income from continuing operations 2,957 300 ---------------------- Discontinued operations Income from discontinued AKAPP operations (including gain on disposal of $725) 733 -- Income tax expense (3) -- ---------------------- Income from discontinued operations 730 -- - ------------------------------------------------------------------------------- Net Income $ 3,687 $ 300 - ------------------------------------------------------------------------------- Geographic Data Net Sales Total Assets ---------------------- ------------------ Six Months Ended 03/29/03 09/28/02 ---------------------- --------------------------------- 03/29/03 03/30/02 United States $ 57,840 $ 51,553 - -------------------------------------------- Canada 25,293 24,848 United States $ 54,689 $ 52,064 Italy 31,330 29,303 Mexico 20,274 20,035 All other countries 33,353 29,136 France 20,575 19,752 - -------------------------------------------- All other Total $ 88,042 $ 81,200 countries 18,945 21,160 - -------------------------------------------- --------------------------------- Total $174,257 $166,651 --------------------------------- 12 9. SALE OF AKAPP OPERATIONS On September 29, 2002 the company adopted SFAS No. 144, ACCOUNTING FOR THE IMPAIRMENT OR DISPOSAL OF LONG-LIVED ASSETS. SFAS No. 144 states that the results of operations of a component of an entity that has either been disposed of or is classified as held for sale shall be reported in discontinued operations if both the following conditions are met: (a) the operations and cash flows of the component have been (or will be) eliminated from the ongoing operations of the entity as a result of the disposal transaction and (b) the entity will not have any significant continuing involvement in the operations of the component after the disposal transaction. In November 2002 we sold our Dutch subsidiary, AKAPP, to a third party. We sold the AKAPP operation for $4.9 million in cash, which included the payment of a $2.6 million inter-company loan and the receipt of $2.3 million in cash. As a result of this transaction we recorded a $0.7 million gain on disposal, which in accordance with SFAS No. 144 has been reported as Income from Discontinued Operations. The results of operations related to AKAPP for fiscal 2003 have also been recorded as Income from Discontinued Operations. The results of operations for AKAPP in fiscal 2002 have not been reclassified to discontinued operations because (as shown below) they are not material. ------------------ ------------------ Three Months Ended Six Months Ended - ------------------------ ------------------ ------------------ 03/30/02 03/30/02 - ------------------------ ------------------ ------------------ Sales 1,302 2,496 Income Before Taxes 47 48 Net Income 29 32 - ------------------------ ------------------ ------------------ 10. RESTRUCTURING CHARGES During the second quarter of 2002 we recorded a restructuring charge in the amount of $1.0 million to primarily account for severance and related costs of eliminating about 10% of our salaried positions worldwide. Additionally we identified 31 positions in our manufacturing plant in Northbrook, Illinois, which were eliminated with the continued migration of product to our new manufacturing plant in Juarez, Mexico. This workforce reduction represented an acceleration of initiatives that we started over the previous six months to improve our efficiencies and reduce expenses. We anticipated that the salaried personnel reduction would produce annual savings of about $3 million. The restructuring resulted in the layoffs of 93 people, of which 70 people were severed as of March 30, 2002. The restructuring was completed during fiscal 2002 and there is currently no reserve left for any of these restructuring charges. The following table details the activity in the Restructuring Accrual Accounts at March 30, 2002: Restructuring Reserve ------------- Balance at 9/29/2001 $ -- Charged to expense in Q2 2002 1,015 Cash paid in Q2 2002 456 ------------- Remaining balance at 3/30/2002 $ 559 ============= 13 11. INCOME TAX EXPENSE Our effective tax rate was 31.4% and 59.8% for the first six months of 2003 and 2002, respectively. The decrease in our effective tax rate for the first six months of 2003 was due mainly to the effects of utilizing $0.3 million of foreign tax credits in the first quarter of 2003. The increase in the effective tax rate for the first six months of 2002 was due mainly to the effects of not benefiting net operating losses of certain foreign entities for which realizability is considered uncertain. 12. CONTINGENT LIABILITIES We are 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, we have incurred, and expect to incur, assessment, remediation and related costs at one of our facilities. In 1991, we 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. We have 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, unrelated to the UST release, additional soil and groundwater at the site have been impaired by chlorinated solvents, including tetrachloroethane and trichloroethylene, and other compounds. Also, our investigation revealed that the previous owners of the site had used a portion of the site as a disposal area. We have remediated the soils in this area but we believe that it is a source of contamination of groundwater, both on-site and off-site. Our investigation indicates that there were releases by the previous owners in areas over which additions were subsequently built. These releases have impacted groundwater that has migrated off-site. We have implemented a groundwater remediation system for the on-site contamination. We continue to monitor and analyze conditions to determine the continued efficacy of the system. We also have implemented a groundwater remediation system for the off-site contamination. We continue to analyze other remedial alternatives for the off-site groundwater contamination and are reviewing these alternatives with the DEQ. We previously filed a complaint in federal district court seeking contribution from the previous owners of the site for the cost of the investigation and remediation of the site. We settled that litigation through a consent judgment against the former owners. Also, we have asserted claims against insurers of the former owners for the amounts specified in the consent judgment. The insurers have denied coverage and three of them filed a declaratory judgment action to that effect against us in federal district court. We have a reserve for the $1.4 million of investigation and remediation expenses we have estimated to be incurred over the next 15 years to address the environmental issue at our site in Michigan. We based our estimate on the future costs expected to be incurred to investigate, monitor and remediate the site. Our cost estimate continues to be subject to substantial uncertainty because of the extent of the contamination area, the variety and nature of geological conditions throughout the contamination area, changes in remediation technology and the state's Department of Environmental Quality feedback. Funding this activity will come from operating cash flows and only changes to the reserve estimate will affect the results of operations. We indemnify certain customers with regard to product liability. We have insurance policies to cover this exposure, which includes a minimal deductible to be paid by us. 13. SUBSEQUENT EVENT On April 9, 2003 we announced our decision on the future of the Aero-Motive Company, a wholly owned subsidiary. In addition to selling the smaller product lines that do not align strategically with our long-term goals, we will integrate the remaining manufacturing operations primarily into our Juarez, Mexico facility. The sale and integration process will take several months and it is estimated that the Aero-Motive facility in Kalamazoo, Michigan will remain open until early in calendar year 2004. 14 ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW - -------- We develop, manufacture and market electronic and industrial communications products, primarily serving the global automation and control markets with connectivity solutions and specialty electrical products. Through our Industrial Communications and Connectivity Segment (Connectivity Segment, or Connectivity) we provide the industrial automation industry with a single, worldwide source for industrial communications and connectivity solutions. Our product lines, comprising five industry-leading brands, SST(TM), Brad Harrison(R), mPm(TM), RJ Lnxx(R) and applicom(R) make us the premier supplier of application-specific connectivity solutions. Our Electrical Safety & Specialty Segment (Electrical Segment, or Electrical) manufactures highly customized products to support enhanced safety and productivity on the factory floor. We sell our products to stocking distributors, original equipment manufacturers (OEM) and system integrators. Our direct sales force, as well as manufacturers' agencies, service our customers and promote our products to end-customers. We have operations in nine countries outside the United States, and fluctuations in foreign currency exchange rates can impact our results of operations and financial condition. RESULTS OF OPERATIONS - --------------------- Second quarter fiscal 2003 results compared with second quarter fiscal 2002 - --------------------------------------------------------------------------- results - ------- SALES Sales in the second quarter of fiscal 2003 were $45.8 million, an increase of 7.6% compared to second quarter 2002 sales revenue of $42.6 million. The increase was mainly due to favorable results in our Connectivity Segment and the strengthening of foreign exchange rates, which accounted for $2.6 million of the increase compared to last year. Fiscal 2002 included $1.3 million of AKAPP sales, a subsidiary that was sold in the first quarter of 2003. Overall unit volume increased, while competitive pressures lowered selling prices by less than one percent when compared to last year. New products introduced during the last three years accounted for $6.1 million of revenue in the second quarter of fiscal year 2003 compared to $9.6 million in revenue in the second quarter last year. Sales in our Connectivity Segment increased 16.9% while sales in our Electrical Segment declined by 9.2%. The decline in Electrical sales was primarily due to the elimination of revenue from AKAPP operations. SALES BY REGION In the United States, sales were $28.2 million in the second quarter of fiscal 2003 and $28.0 million last year, a 0.7% increase. The United States manufacturing sector continues to be a difficult environment to operate in as various economic indicators showed a contraction in this sector during the quarter. We recorded 39% and 34% of our revenues in foreign currencies during the second quarters of fiscal 2003 and 2002, respectively. Our international revenue was up 20.9% in the second quarter of fiscal 2003 when compared to last year. This increase was mainly due to the strong results in Europe and the favorable impact of foreign exchange rate changes. BACKLOG The backlog of unfilled orders stood at $17.0 million at the end of this quarter as compared to $14.9 million a year ago, which translates to 24 and 20 average days of sales for the second quarters of 2003 and 2002, respectively. This increase in backlog was primarily due to increase in orders for the Connectivity Segment. GROSS PROFIT Gross profit as a percent of sales was 36.9% in the second quarter of fiscal 2003 and 36.6% last year. This increase is mainly due to the improved efficiencies related to increased volume levels and productivity improvements, particularly from the migration of production to our Juarez, Mexico facility in 2002. Partially offsetting these improvements was the benefit from a $0.4 million LIFO credit in 2002, which did not occur in the second quarter of 2003. 15 OPERATING EXPENSES Operating expenses were $14.3 million for both fiscal years. Including expenses for Research and Development these expenses were 31.3% of sales in 2003 compared to last year's 33.6%. This decrease as a percentage to sales was due to the increased sales revenue in the second quarter of 2003. Expenses in the second quarter of 2003 increased due to the upgrading in the sales, marketing and engineering areas and $0.7 million from the effect of foreign exchange rate changes. Offsetting these increases were the non-recurrence of a restructuring charge for $1.0 million to account for severance and related costs to eliminate approximately 10% of our salaried positions worldwide in 2002 and AKAPP operating expenses of $0.4 million. SEGMENT OPERATING INCOME Income from operations in the second quarter of 2003 was $1.1 million in the Connectivity Segment compared to $0.2 million in 2002, and $1.6 million in the Electrical Segment compared to $1.4 million in 2002. The improvement in our Connectivity Segment was due mainly to improved performance at our Canadian operations, the absence of the restructuring charge taken in 2002 and increased volume primarily in Europe. The increase in our Electrical Segment was due mainly to lower costs from the migration of product to Juarez, Mexico and the absence of the 2002 restructuring charge. MISCELLANEOUS INCOME Other income in the second quarter of 2003 was $0.6 million and consisted mainly of a $0.4 million gain realized from exchange rate changes on a U.S. dollar loan that a Canadian subsidiary used to acquire SST in early 1998. The favorable changes in exchange rates in other foreign currencies, primarily the Euro and British pound also contributed to the year-over-year improvement. NET INCOME Net income in the second quarter of 2003 was $1.5 million compared to $0.2 million in 2002. The effective tax rates were 38.9% and 61.3% in the second quarters of 2003 and 2002. The high effective rate in 2002 was primarily the result of not benefiting certain net operating losses of foreign operations for which realizability is considered uncertain. Since most of the product costs and operating expenses in our foreign subsidiaries are incurred in local currencies, the impact of exchange rates on reported net income was partially mitigated. Six months fiscal 2003 results compared with six months fiscal 2002 results - --------------------------------------------------------------------------- SALES Sales for the first six months of fiscal 2003 were $88.0 million compared to $81.2 million for 2002, an 8.4% increase. This increase is due mainly to the increased sales levels at our Connectivity Segment. Favorable foreign exchange rates accounted for $3.9 million or 57.4% of the increase when compared to last year. The increase from exchange rate changes was partially offset by the elimination of AKAPP sales, which were $2.5 million for the first six months of 2002. Year-over-year volume was also negatively impacted by slightly lower selling prices, which resulted from competitive pressure. New products introduced during the last three years accounted for $11.6 million of revenue for the first six months of fiscal 2003 compared to $17.3 million for the first six months of 2002. Sales in our Connectivity Segment increased 16.0% due mainly to favorable exchange rate changes and improved performance in our European operations. Sales in the Electrical Segment declined 5.0%, primarily due to the sale of AKAPP. SALES BY REGION In the United States, sales were $54.7 million for the first six months of fiscal 2003 and $52.1 million last year, a 5.0% increase. The strong performance in the first quarter of 2003 contributed to this improvement over 2002. We recorded 38% and 36% of our revenues in foreign currencies for the first six months of 2003 and 2002, respectively. For the six months of 2003 our international revenue increased 14.5% due mainly to the strong performance in Europe and the effect of foreign currency rate changes. GROSS PROFIT Gross profit as a percent of sales was 37.1% for the first six months of 2003 and 37.0% last year. This slight increase was due mainly to efficiencies related to higher volume and continued productivity improvements including the impact of migrating product to Juarez, Mexico. Partially offsetting these improvements were changes 16 in our LIFO reserve requirement, which increased our gross profit by $0.2 million for the first six months of 2003 compared to an increase in gross profit of $0.8 million in the first six months of 2002. OPERATING EXPENSE Operating expenses, including expenses for Research and Development, were 31.9% of sales for the first six months of 2003 compared to last year's 33.8%. This decrease as a percentage of sales is due to increased sales revenue in the first six months of 2003. Operating expense for the first six months of 2003 were $28.1 million, compared to $27.4 million in 2002 and were negatively impacted by both exchange rates and the upgrading of staff in the sales, marketing and engineering areas. Operating expenses for the first six months of 2002 included restructuring charges of $1.0 million and AKAPP operating expenses of $0.9 million both of which did not occur in the first six months of 2003. SEGMENT INCOME Income from operations for the first six months of 2003 was $1.5 million for the Connectivity Segment compared to $0.4 million in 2002 and $3.5 million for the Electrical Segment compared to $2.4 million in 2002. The increase in our Connectivity Segment was due mainly to higher volumes, the absence of the restructuring charge in 2003 and improved performance in Canada. The increase in our Electrical Segment was due mainly to lower costs from the migration of product to Juarez, Mexico and the absence of the 2002 restructuring charge. MISCELLANEOUS (INCOME) / EXPENSE Other income for the first six months of 2003 was $1.1 million. During the first six months of 2003 foreign exchange gains were $1.0 million compared to a $0.3 million loss due to foreign exchange for the first six months of 2002. DISCONTINUED OPERATIONS In the first quarter of 2003 we sold our AKAPP operations for $4.9 million in cash. This sale resulted in a gain on disposal of $0.7 million and was recorded as Income from Discontinued Operations. The results of operations related to AKAPP for fiscal 2003 have also been recorded as Income from Discontinued Operations. NET INCOME Net income for the first six months of 2003 was $3.7 million compared to $0.3 million in 2002. The effective tax rates were 31.4% and 59.8% for the first six months of 2003 and 2002. The low effective rate in 2003 was partially due to the impact of utilizing foreign tax credits in the first quarter of 2003. The high effective rate in 2002 was primarily the result of not benefiting certain net operating losses of foreign operations for which realizability is considered uncertain. Since most of the product costs and operating expenses in our foreign subsidiaries are incurred in local currencies, the impact of exchange rates on reported net income was partially mitigated. FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES - ---------------------------------------------------- We continue to invest in property and equipment, including new machinery, computer systems and facilities. In 2000, we announced plans to build a second manufacturing facility in Juarez, Mexico to migrate U.S. production to a lower cost labor market. Both Juarez plants are manufacturing resources for all our North America subsidiaries. This project was completed in the second half of fiscal 2002 and there was no spending in the first six months of 2003 compared to $1.3 million spent in the first six months of 2002. Our cash and short-term investments are available for strategic investments, acquisitions, and other potential cash needs that may arise. We believe that existing cash and short-term investments, together with funds generated from operations, will be sufficient to meet our operating requirements through the second quarter of fiscal 2004. At March 29, 2003 we had $40.8 million of long-term debt outstanding and we had unused credit facilities that provide for additional borrowings of up to $25.0 million. Effective March 30 2002 we amended our revolving credit agreement with a bank to increase the maximum ratio of debt to EBITDA, as defined, from 2.5 to 2.9, and reduce the minimum interest coverage ratio, as defined, from 3.0 to 2.0. This amendment expired on March 29, 2003, when the maximum debt to EBITDA ratio reverted back to 2.5, and the minimum interest coverage ratio has reverted back to 3.0. We are in compliance with all provisions of our funding arrangements. We believe, that we 17 will be in compliance with all provisions of our funding arrangements for the next fiscal year. We do not have any exposures to off-balance sheet arrangements, including special purpose entities, or activities that include non-exchange-traded contracts accounted for at fair value. CONTINGENT LIABILITIES AND ENVIRONMENTAL MATTERS - ------------------------------------------------ Our operations are subject to international, federal, state and local environmental laws and regulations. We are party to an environmental matter, which obligates us to investigate, remediate or mitigate the effects on the environment of the release of certain substances at one of our manufacturing facilities. It is possible that this matter could affect cash flows and results of operations. For additional details on the environmental exposure, see PART II - - OTHER INFORMATION: ITEM 1 - LEGAL PROCEEDINGS. FORWARD-LOOKING STATEMENTS - -------------------------- The Securities and Exchange Commission encourages companies to disclose forward-looking information, so that investors can better understand a company's future prospects, and make informed investment decisions. This report, and other written and oral statements that we make from time to time, contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements set out anticipated results based on management's plans and assumptions. We have tried, wherever possible, to identify such statements by using words such as "anticipate", "estimate", "expect", "plan", "believe", and words and terms of similar substance, in connection with any discussion of future operating or financial performance. We cannot guarantee that any forward-looking statement will be realized, although we believe we have been prudent in our plans and assumptions. Achievement of future results is subject to risks, uncertainties, and inaccurate assumptions. In particular, such risks include statements relating to future actions, prospective products, future performance or results of current or anticipated products, sales efforts, expenses, the outcome of contingencies such as legal proceedings, general economic and business conditions, and competition. International-based revenues and substantial international assets result in our exposure to currency exchange rate fluctuations. A new European currency, the Euro, was introduced in January 1999 to replace the separate currencies of eleven individual countries. We continue to evaluate the economic and operational impact of the Euro, including its impact on competition, pricing, and foreign currency exchange risks. There is no guarantee, however, that all problems have been foreseen and corrected, or that no material disruption will occur in our businesses. Growth in costs and expenses, changes in product mix, and the impact of acquisitions, restructuring, divestitures and other unusual items, that could result from evolving business strategies, could affect future results. Changes in the U.S. tax code and the tax laws in other countries can affect our net earnings. Claims have been brought against us and our subsidiaries for various legal, environmental, and tax matters, and additional claims arise from time to time. It is possible that our cash flows and results of operations could be affected by the resolution of these matters. Should known or unknown risks or uncertainties materialize, or should underlying assumptions prove inaccurate, actual results could vary materially from those anticipated, estimated or projected. Investors should bear this in mind as they consider forward-looking statements. This discussion of potential risks and uncertainties is by no means complete but is designed to highlight important factors that may impact our outlook. We undertake no obligation to publicly update forward-looking statements, whether as a result of new information, future events, or otherwise. 18 ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK In our global operating activities and in the normal course of our business, we are exposed to changes in foreign currency exchange rates, which may adversely affect our results of operations and financial condition. We seek to minimize those risks through our regular operating activities and, when deemed appropriate, through the use of derivative financial instruments. We use financial instruments to selectively hedge our foreign currency risk and do not use financial instruments for speculative purposes. We recorded the difference between the carrying values and fair values of related hedged assets and liabilities of $0.4 million in accumulated other comprehensive loss to recognize deferred net income on derivatives designated as cash flow hedges, and a net decrease in other assets of approximately $0.4 million during the quarter just ended. We base the fair value for our cross-currency swap on the cost estimate to terminate the agreement. $46.0 million of our long-term debt is denominated in U.S. Dollars, the remainder is denominated in Euros, and carries fixed interest. We base the fair value of our long-term debt on market, or dealer quotes. The difference between fair and carrying values of our financial instruments, other than the swap, were not material at the balance sheet dates. ITEM 4 - INTERNAL CONTROLS AND PROCEDURES We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our filings under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the periods specified in the rules and forms of the Securities and Exchange Commission. This information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosures. Our management, including our principal executive officer and our principal financial officer, recognizes that any set of controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of our disclosure controls and procedures within 90 days of the filing date of this report. Based on this evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures are effective in alerting them on a timely basis to material information required to be disclosed in our periodic filings. There were no significant changes in our internal controls or in other factors that could significantly affect these controls subsequent to the date of the evaluation referenced in the foregoing paragraph. 19 PART II - OTHER INFORMATION ITEM 1 - LEGAL PROCEEDINGS We are 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, we have incurred, and expect to incur, assessment, remediation and related costs at one of our facilities. In 1991, we 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. We have 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, unrelated to the UST release, additional soil and groundwater at the site have been impaired by chlorinated solvents, including tetrachloroethane and trichloroethylene, and other compounds. Also, our investigation revealed that the previous owners of the site had used a portion of the site as a disposal area. We have remediated the soils in this area but we believe that it is a source of contamination of groundwater, both on-site and off-site. Our investigation indicates that there were releases by the previous owners in areas over which additions were subsequently built. These releases have impacted groundwater that has migrated off-site. We have implemented a groundwater remediation system for the on-site contamination. We continue to monitor and analyze conditions to determine the continued efficacy of the system. We also have implemented a groundwater remediation system for the off-site contamination. We continue to analyze other remedial alternatives for the off-site groundwater contamination and are reviewing these alternatives with the DEQ. We previously filed a complaint in federal district court seeking contribution from the previous owners of the site for the cost of the investigation and remediation of the site. We settled that litigation through a consent judgment against the former owners. Also, we have asserted claims against insurers of the former owners for the amounts specified in the consent judgment. The insurers have denied coverage and three of them filed a declaratory judgment action to that effect against us in federal district court. We have a reserve for the $1.4 million of investigation and remediation expenses we have estimated to be incurred over the next 15 years to address the environmental issue at our site in Michigan. We based our estimate on the future costs expected to be incurred to investigate, monitor and remediate the site. Our cost estimate continues to be subject to substantial uncertainty because of the extent of the contamination area, the variety and nature of geological conditions throughout the contamination area, changes in remediation technology and the state's Department of Environmental Quality feedback. Funding this activity will come from operating cash flows and only changes to the reserve estimate will affect the results of operations. 20 PART II OTHER INFORMATION ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS We held our Annual Meeting of Stockholders on January 24, 2003. The following proposals were adopted by the margins indicated: 1. To vote for the election of the following nominees to the Board of Directors: For Authority Withheld Against Abstain --- ------------------ ------- ------- Charles W. Denny 10,700,675 160,950 0 0 Ann F. Hackett 10,569,981 291,644 0 0 Eugene P. Nesbeda 10,525,413 336,212 0 0 William K. Hall 10,593,872 267,753 0 0 G. Thomas McKane 10,592,249 269,376 0 0 Daniel T. Carroll, Philippe Lemaitre, Linda Y.C. Lim and Sarilee Norton continued their terms as directors after the Annual Meeting of Stockholders. 2. Ratification of the appointment of Ernst & Young LLP as Woodhead Industries, Inc.'s independent public accountants: For Authority Withheld Against Abstain --- ------------------ ------- ------- 10,555,612 0 294,744 11,269 PART II - OTHER INFORMATION ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K A. Exhibits Exhibit 99.1 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Exhibit 99.2 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. B. Reports on Form 8-K During the quarter just ended we did not file any reports on Form 8-K. 21 SIGNATURES Under the requirements of Section 13 or 15(d) of the Securities and Exchange Act of 1934, this report was signed on behalf of the Registrant by the authorized persons below. WOODHEAD INDUSTRIES, INC. Date: May 12, 2003 BY: /s/ Robert H. Fisher BY: /s/Joseph P. Nogal - ------------------------------ ------------------------------ Robert H. Fisher Joseph P. Nogal Vice President, Finance and C.F.O. Vice President, (Principal Financial Officer) Treasurer/Controller (Principal Accounting Officer) 22 CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Philippe Lemaitre, certify that: 1. I have reviewed this quarterly report on Form 10-Q for the period ending March 29, 2003; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have: a) Designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) Evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) Presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent function): a) All significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weakness internal controls; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weakness. /s/ Philippe Lemaitre President and C.E.O. 05-12-03 - ---------------------- Philippe Lemaitre 23 CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Robert H. Fisher, certify that: 1. I have reviewed this quarterly report on Form 10-Q for the period ending March 29, 2003; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have: a) Designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) Evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) Presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent function): a) All significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weakness internal controls; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weakness. /s/ Robert H. Fisher Vice President, Finance and 05-12-03 - --------------------- Chief Financial Officer Robert H. Fisher 24 EX-99.1 3 woodhead032192_ex99-1.txt CERTIFICATION OF CEO Exhibit 99.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Woodhead Industries, Inc. (the "Company") on Form 10-Q for the period ending March 29, 2003, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Philippe Lemaitre, Chief Executive Officer of the Company, certify, to the best of my knowledge, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. BY: /s/ Philippe Lemaitre - ------------------------- Philippe Lemaitre Chief Executive Officer May 12, 2003 This certification accompanies this Report pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended. EX-99.2 4 woodhead032192_ex99-2.txt CERTIFICATION OF CFO Exhibit 99.2 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Woodhead Industries, Inc. (the "Company") on Form 10-Q for the period ending March 29, 2003, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Robert H. Fisher, Chief Financial Officer of the Company, certify, to the best of my knowledge, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. BY: /s/ Robert H. Fisher - ------------------------ Robert H. Fisher Chief Financial Officer May 12, 2003 This certification accompanies this Report pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended. -----END PRIVACY-ENHANCED MESSAGE-----