-----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, Dt42f/50mfEDbu6wWVEnaSi1nP7lBiZ1dAPZ1oj1RXyEpcBpU2EOS86ZaYH1QURN uO7sR5rRbcr5DI+GWAcxwQ== 0000912057-96-029986.txt : 19961224 0000912057-96-029986.hdr.sgml : 19961224 ACCESSION NUMBER: 0000912057-96-029986 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19960928 FILED AS OF DATE: 19961223 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: WOODHEAD INDUSTRIES INC CENTRAL INDEX KEY: 0000108215 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC LIGHTING & WIRING EQUIPMENT [3640] IRS NUMBER: 361982580 STATE OF INCORPORATION: DE FISCAL YEAR END: 1001 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-05971 FILM NUMBER: 96684663 BUSINESS ADDRESS: STREET 1: 2150 E LAKE COOK RD SUITE 400 CITY: BUFFALO GROVE STATE: IL ZIP: 60089 BUSINESS PHONE: 7084658300 MAIL ADDRESS: STREET 1: 2150 E LAKE COOK RD SUITE 400 CITY: BUFFALO GROVE STATE: IL ZIP: 60089 FORMER COMPANY: FORMER CONFORMED NAME: WOODHEAD DANIEL CO DATE OF NAME CHANGE: 19710624 10-K 1 10-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED SEPTEMBER 28, 1996 Commission file number 0-5971 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 WOODHEAD INDUSTRIES, INC. (Exact name of registrant as specified in its charter) DELAWARE 36-1982580 - ------------------------------- ------------------------------- (State or other jurisdiction of (I.R.S. Employer Identification incorporation or organization) Number) 2150 E. LAKE COOK RD., SUITE 400, BUFFALO GROVE, IL. 60089 ---------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (847) 465-8300 Securities registered pursuant to Section 12(g) of the Act: Common Stock, Par Value $1.00 NASDAQ - National Preferred Stock Purchase Rights Market System ------------------------------- ------------------------------ (Title of Class) (Exchange on which registered) Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, (or such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days, Yes X No --- --- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein and will not be contained, to the best of the Registrant's knowledge, in the Proxy Statement incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] The aggregate market value of the voting stock held by non-affiliates of the Registrant as of November 23, 1996 was $136,276,869. Shares outstanding as of November 23, 1996 were 10,432,679. DOCUMENTS INCORPORATED BY REFERENCE Portions of the Registrant's definitive proxy statement dated December 20, 1996, for the annual meeting of stockholders to be held January 24, 1997, and portions of the Annual Report to Stockholders for the year ended September 28, 1996 are incorporated by reference in Parts I, II, III, and IV. ANNUAL REPORT FORM 10-K FOR THE YEAR ENDED SEPTEMBER 28, 1996 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION TABLE OF CONTENTS ITEM NO. PAGE 1. Business........................................................ 2-4 2. Description of Property ........................................ 4 3. Legal Proceedings .............................................. 5 4. Submission of Matters to a Vote of Securities Holders .......... 5 5. Market for Registrant's Common Equity and Related Stock Matters ........................................................ 6-7 6. Selected Financial Data ........................................ 7 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.................................... 7 8. Financial Statements and Supplementary Data .................... 7 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure .................................. 7 10. Directors and Executive Officers of the Registrant .............. 8-9 11. Executive Compensation .......................................... 9 12. Security Ownership of Certain Beneficial Owners and Management .. 9 13. Certain Relationships and Related Transactions .................. 9 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K. (Index of Exhibits is on Pages 16-18) .......... 9-13 The term "Company" is used herein to refer to Woodhead Industries, Inc. (the Registrant) and its subsidiaries unless the context indicates otherwise. 1 PART I ITEM 1. BUSINESS GENERAL Woodhead Industries, Inc. was incorporated in Illinois in 1922 and reincorporated in Delaware in 1978. The corporation and its subsidiaries are primarily engaged in the manufacture and sale of devices for the control and distribution of electrical power for industry. There were no material changes in the manner in which the Company conducted its business during fiscal 1996. INDUSTRY SEGMENTS The Company consists of one business segment which can best be described as specialty power and signaling devices. That segment accounted for 98% of the sales and 95% of the earnings in 1996 and during the past five years has averaged 98% of sales and 95% of earnings. Molded rubber products, an immaterial business segment and therefore not reported separately, accounted for the remainder of the sales and earnings. PRODUCTS The Company's products are designed for and used primarily in industrial applications for the distribution of power, for signaling and for motion control. They can be classified into three groups: electrical specialties, reels and power systems, and molded rubber products. The electrical specialty product classification includes, among other items, portable handlamps, low-voltage safety lights, wiring devices, weatherproof receptacles, circuit testers, portable power distribution equipment, pendant push-button enclosures, general-purpose power and control connectors, and custom copper and fiber optic cable assemblies. Reels and power systems include such products as electric cord and cable reels, electric cable festooning systems, collector rings, static discharge reels, tool balancers, ergonomic workstations, hose reels, and multiple-cable carrier systems. There is widespread applicability for the Company's products throughout a broad range of industries such as petro-chemical, automotive, steel, airline, chemical, food processing, utility, communications, mining, heavy construction, health care, and recreation. A majority of the products are used in plant maintenance and production with the balance becoming a component part of another product. 2 Part I - cont'd. The percent of sales and income for the three product classifications over the past five years is as follows: SALES INCOME ------------------------ ------------------------ 1996 1995 1994 1993 1992 1996 1995 1994 1993 1992 Electrical specialties 67 66 68 68 67 77 81 78 75 87 Reels and power systems 31 33 31 30 31 18 16 18 20 7 Molded rubber products 2 1 1 2 2 5 3 4 5 6 DISTRIBUTION All of the Company's products are of heavy-duty, industrial grade. These products are sold directly to users, to original equipment manufacturers, and through selected distributors, mainly in the United States, Canada, Europe and Asia with some sales going to other parts of the world. These distributors are serviced by manufacturers' agencies whose sales personnel solicit sales for the Company's products and promote them to the ultimate users. These agencies also represent other manufacturers whose lines, in general, are complementary to the Company's products. AVAILABILITY OF MATERIALS Parts and materials for the Company's products are readily available from a variety of suppliers. It has been a practice to develop and use more than one source of supply for any item considered critical. PATENTS/TRADEMARKS/LICENSING On certain of its products, the Company holds patents, trademarks, and licensing arrangements which, while valuable, are not considered essential to the maintenance or future growth of the business. SEASONALITY The business is not considered to be seasonal. INVENTORIES Products of the type manufactured and sold by the Company are also available through other manufacturers as well. As a result, delivery time as well as quality and customer service are important to the success of the business and therefore require that sufficient inventories be maintained to insure fast turnaround time on orders. CUSTOMER PROFILE The Company's sales are broad-based with no single customer accounting for a significant portion of total sales and no single industry accounting for a majority of its business. BACKLOG On November 23, 1996, there were unshipped orders totalling approximately $10.0 million. Last year's backlog at approximately the same date was $8.7 million. 3 Part I - cont'd. COMPETITION Products similar to those sold by the Company are manufactured and sold by other companies as well, resulting in a very competitive environment. However, the Company feels its ability to manufacture high quality products that serve specialized needs of industry through its highly efficient distribution channels differentiates the Company from its competitors. RESEARCH AND DEVELOPMENT For the years ended September 28, 1996, September 30, 1995, and October 1, 1994, the Company expended approximately $2,513,000, $2,404,000, and $2,148,000, respectively, on the development of new products and the improvement of existing products. These expenditures included the compensation of engineers, designers, and drafters who were engaged in product development. EMPLOYEES The Company has approximately 1,125 full-time employees. FOREIGN AND EXPORT BUSINESS See footnote 8, page 32 of the Annual Report to Stockholders for the year ended September 28, 1996 which is incorporated herein by reference and filed as an exhibit to this report. ITEM 2. DESCRIPTION OF PROPERTY The Company owns facilities in the following locations: Land Owned Plant Floor Area Northbrook, Illinois 4.7 acres 125,000 sq. ft. Kalamazoo, Michigan 39.1 acres 116,000 sq. ft. Franklin, Massachusetts 6.6 acres 60,000 sq. ft. El Paso, Texas 5.0 acres 50,000 sq. ft. Belvidere, Illinois 3.5 acres 36,000 sq. ft. Juarez, Mexico .8 acres 40,000 sq. ft. Netherlands 1.3 acres 30,000 sq. ft. Wales, U.K. 4.5 acres 25,000 sq. ft. All of the above properties are owned in fee except the land in Wales, U.K. which is held under a lease expiring in 2105. The Company also leases approximately 20,000 square feet in Ontario, Canada; 12,500 square feet in Remchingen, Germany; 10,500 square feet in Grand Rapids, Michigan; 7,000 square feet in Buffalo Grove, Illinois; 3,400 square feet in Thorigny-sur-Marne, France; and 6,400 square feet in Singapore. All plants are considered to be well-equipped and well-maintained. They are of masonry or steel construction. In the judgment of management, sufficient capacity is available at the above locations to cover the Company's needs at least through fiscal 1997. 4 Part I - cont'd. ITEM 3. LEGAL PROCEEDINGS The Company is subject to federal and state hazardous substance cleanup laws that impose liability for the costs of cleaning up contamination resulting from past spills, disposal or other releases of hazardous substances. In this regard, the Company has incurred, and expects to incur, assessment, remediation and related costs at one of the Company's facilities. In 1991, the Company reported to state regulators a release at that site from an underground storage tank ("UST"). The UST and certain contaminated soil subsequently were removed and disposed of at an off-site disposal facility. The Company's independent environmental consultant has been conducting an investigation of soil and groundwater at the site with oversight by the state Department of Environmental Quality ("DEQ"). The investigation indicates that additional soil and groundwater at the site have been impaired by chlorinated solvents, including tetrachloroethane and trichloroethylene, and other compounds. Also, the Company learned that a portion of the site had been used as a disposal area by the previous owners of the site. The Company's consultant is investigating and has begun to remediate this area and believes that it is an additional likely source of contamination of soil and groundwater. In addition, the investigation of the site indicates that the groundwater contaminants have migrated off-site. The Company is currently discussing various remediation alternatives for both on-site and off-site contamination with the DEQ. The Company is conducting additional investigations to determine the extent of contamination at and around the site and to determine the extent of other sources of contamination in addition to the removed UST and the above-referenced disposal area, including the possible presence of ongoing dumping activities by others in the vicinity around the Company's facilities. The Company's consultant has estimated that a minimum of $800,000 of investigation and remediation expenses remains to be incurred at the site. The Company has a reserve for such purposes and has notified the previous owners of the site and various insurers of possible claims by the Company relating to the remediation of the site. The consultant's cost estimate was based on a review of currently available data, which is limited, and assumptions concerning the extent of contamination, geological conditions, and the costs and effectiveness of certain treatment technologies. The cost estimate is subject to substantial uncertainty until the extent of contamination and geological conditions are fully understood, feasible remedial alternatives are assessed, and the DEQ approves a remediation plan. The Company is continuing to investigate the environmental conditions at the site and will adjust its reserve if necessary. The Company may incur significant additional assessment, remediation and related costs at the site, and such costs could materially and adversely affect the Company's consolidated net income for the period in which such costs are incurred. At this time, the Company, however, cannot estimate the time or potential magnitude of such costs, if any. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS There were no matters submitted to a vote of the security holders either through solicitation of proxies or otherwise during the fourth quarter of the fiscal year ended September 28, 1996. 5 Part II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCK MATTERS (a) The Company's common stock trades on the NASDAQ stock market under the symbol WDHD. The daily quotations as reported by NASDAQ are published in the Wall Street Journal and other leading financial publications. On April 26, 1995, the board of directors declared a three-for-two stock split effected in the form of a 50% common stock dividend, payable May 22, 1995, to holders of record on May 8, 1995. On January 22, 1993, the board of directors declared a two-for-one stock split effected in the form of a 100% stock dividend, payable March 1, 1993, to holders of record on February 12, 1993. All share and per share amounts in this filing have been adjusted to give retroactive effect to these stock splits. Preferred Stock Purchase Rights have been distributed to stockholders and deemed to be attached to the shares of Common Stock of the Registrant. If and when the rights become exercisable, the holders initially would be entitled to purchase one unit consisting of one one-thousandths of a share ("unit") of Series A Junior Participating Preferred Stock at a purchase price of $65 per unit, subject to adjustment. See footnote 5, page 30 of the Annual Report to Stockholders for the year ended September 28, 1996, for further explanation. This footnote is incorporated herein by reference and filed as an exhibit to this report. The range in the market price per share of the common stock during the past two years was as follows: 1996 1995 ---------------------------- ------------------------------ Fiscal Fiscal Quarter High Low Quarter High Low 1st 16 3/4 13 7/8 1st 10 13/16 9 5/16 2nd 15 13 2nd 13 5/16 10 1/2 3rd 15 1/2 10 3rd 15 12 11/16 4th 13 3/4 11 3/4 4th 14 3/4 12 1/2 (b) The number of holders of record of the Company's securities as of December 11, 1996, was as follows: Title of Class Number of Stockholders Common Stock 591 Preferred Stock Purchase Rights 591 6 Part II - cont'd. (c) The cash dividends declared for the past two years were as follows: 1996 1995 ---------------------------- ---------------------------- Fiscal Quarter Rate Fiscal Quarter Rate 1st $0.065 1st $0.063 2nd $0.070 2nd $0.065 3rd $0.070 3rd $0.065 4th $0.070 4th $0.065 ------ ------ Total $0.275 Total $0.258 ------ ------ ------ ------ ITEM 6. SELECTED FINANCIAL DATA The "Financial Profile" appearing on pages 18 and 19 of the Annual Report to Stockholders for the year ended September 28, 1996, is incorporated herein by reference and filed as an exhibit to this report. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS "Management's Discussion of Operations and Financial Position" appearing on pages 16 and 17 of the Annual Report to Stockholders for the year ended September 28, 1996, is incorporated herein by reference and filed as an exhibit to this report. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The "Report of Independent Public Accountants" included on page 34 and the consolidated financial statements with accompanying footnotes appearing on pages 20 through 33 of the Annual Report to Stockholders for the year ended September 28, 1996, are incorporated herein by reference and filed as an exhibit to this report. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. 7 Part III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Information appearing under the heading "Nominees and Continuing Directors" on pages 1 through 4 of the Registrant's definitive proxy statement dated December 20, 1996, for the annual meeting of stockholders to be held on January 24, 1997, is hereby incorporated herein by reference and made a part hereof. The following information is provided with respect to the executive officers of the Company: Position Held Name of Officer Age Position Since C. Mark DeWinter 54 President and Chief July, 1993 Executive Officer Robert G. Jennings 58 Vice President, Finance and July, 1987 Chief Financial Officer Robert J. Tortorello 47 Vice President, Corporate June, 1995 Development, General Counsel and Secretary Robert A. Moulton 47 Vice President, Human May, 1987 Resources Joseph P. Nogal 41 Treasurer/Controller and July, 1993 Assistant Secretary All officers are elected each year at the Annual Meeting of the Board of Directors which is held immediately following the annual meeting of stockholders. The next Annual Meeting of the Board of Directors will be held on January 24, 1997. The business experience of those executive officers who are not directors or nominees is as follows: Mr. Robert G. Jennings joined the Company in July, 1987. He previously had served as Vice President, Finance and Treasurer for MagneTek, Inc. from 1984 to 1987 and was Vice President, Treasurer and Controller for Louis Allis Division, Litton Industries from 1973 to 1984. Mr. Robert J. Tortorello became the Company's General Counsel and Secretary in June, 1987. He was elected a Vice President of the Company in January, 1991. He assumed responsibility for the Company's corporate development activities in June, 1995. Before joining the Company, he was Assistant Vice President and Assistant to the Chairman at Beatrice Companies, Inc. from 1986 to 1987. Prior to that he had been a Senior Attorney at Beatrice since 1978. Mr. Robert A. Moulton joined the company in October, 1986 as Manager, Human Resources and was elected Vice President in May, 1987. He was formerly a Director, Personnel at G. D. Searle and Company from 1981 to 1986. 8 Part III - cont'd. Mr. Joseph P. Nogal became the Company's Treasurer/Controller in January, 1991. He was elected the Assistant Secretary of the Company in July, 1993. From 1986 to 1990, he had served as Controller of the Company's Canadian Operations. Prior to 1986, he had held various positions within the Company since he joined it in 1978. Information appearing under the heading "Section 16(a) Beneficial Ownership Reporting Compliance" on page 6 of the Registrant's definitive proxy statement dated December 20, 1996, for the annual meeting of stockholders to be held on January 24, 1997, is hereby incorporated herein by reference and made a part hereof. ITEM 11. EXECUTIVE COMPENSATION The information contained under the headings "Directors' Compensation" on page 6 and "Executive Compensation" on pages 9 through 17 of the Registrant's definitive proxy statement dated December 20, 1996, for the annual meeting of stockholders to be held January 24, 1997, is incorporated herein by reference and made a part hereof. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The table and footnotes appearing under the heading "Stock Ownership of Management and Certain Beneficial Owners" appearing on page 7 of the Registrant's definitive proxy statement dated December 20, 1996, for the annual meeting of stockholders to be held January 24, 1997, are hereby incorporated by reference and made a part hereof. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information contained under the heading "Nominees and Continuing Directors" appearing on pages 1 through 4 of the Registrant's definitive proxy statement dated December 20, 1996, for the annual meeting of stockholders to be held January 24, 1997, is incorporated by reference and made a part hereof. Part IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a) Documents filed as part of this Report: 1. Financial Statements (filed herewith as part of Exhibit 13): Consolidated Balance Sheets - at September 28, 1996, September 30, 1995, and October 1, 1994. 9 Part IV - cont'd. Consolidated Statements of Income - for the years ended September 28, 1996, September 30, 1995, and October 1, 1994. Consolidated Statements of Stockholders' Investment - for the years ended September 28, 1996, September 30, 1995, and October 1, 1994. Consolidated Statements of Cash Flow - for the years ended September 28, 1996, September 30, 1995, and October 1, 1994. Notes to Consolidated Financial Statements. 2. Financial Statement Schedules The following consolidated financial information for the years ended September 28, 1996, September 30, 1995, and October 1, 1994, is submitted herewith: PAGE Report of Independent Public Accountants on Schedule and Supplementary Notes 13 Schedule II Valuation and Qualifying Accounts 11 Supplementary Notes to Consolidated Financial Statements 12 All other schedules have been omitted because they are not applicable, not required, or the information is included elsewhere in the financial statements or notes thereto. Separate financial statements of the Registrant have been omitted since the Registrant is primarily a holding company and its subsidiaries, included in the consolidated financial statements, are wholly-owned subsidiaries. 3. The Exhibits are listed in the index of exhibits required by Item 601 of Regulation S-K included at pages 16, 17, and 18, which are incorporated herein by reference and made a part hereof. (b) No reports on Form 8-K were filed during the three months ended September 28, 1996. (c) Reference is made to Item 14(a) 3 above. (d) Reference is made to Item 14(a) 2 above. 10 SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS For the three years ended September 28, 1996 (in thousands)
Additions ------------------------ Charged to Balance at Charged To Other Balance Beginning Costs and Accounts Deductions at End Description of Period Expenses -Describe -Describe of Period - ----------------------- ---------- ---------- ---------- ---------- --------- Reserve for excess and obsolete inventory: Year ended September 28, 1996 $ 1,076 $ 499 - $(376) (1) $ 1,192 (7) (2) Year ended September 30, 1995 $ 1,119 $ 402 - $(425) (1) $ 1,076 (20) (2) Year ended October 1, 1994 $ 1,304 $ 306 - $(602) (1) $ 1,119 24 (2) 87 (3)
- -------------------- (1) Represents write-offs less recoveries. (2) Foreign currency translation adjustment. (3) Business acquired. 11 SUPPLEMENTARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ACCRUED EXPENSES Accrued expenses at September 28, 1996, September 30, 1995, and October 1, 1994 consisted of the following: (in thousands) 1996 1995 1994 ---- ---- ---- Payroll $3,014 $3,386 $3,050 Pension and profit sharing 1,828 1,399 1,580 Environmental 800 1,519 1,310 Litigation & related expenses 159 936 1,022 Commissions 995 780 687 Insurance 428 474 461 Other 4,030 4,015 2,640 ------- ------- ------- $11,254 $12,509 $10,750 ------- ------- ------- ------- ------- ------- 12 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULE AND SUPPLEMENTARY NOTES To Woodhead Industries, Inc.: We have audited in accordance with generally accepted auditing standards, the consolidated financial statements of Woodhead Industries, Inc. and subsidiaries included in the Woodhead Industries, Inc. Annual Report to Stockholders for the year ended September 28, 1996 incorporated by reference in this Form 10-K, and have issued our report thereon dated November 12, 1996. Our audit was made for the purpose of forming an opinion on those statements taken as a whole. The schedule and supplementary notes included on pages 11 through 12 of this Form 10-K are presented for purposes of complying with the Securities and Exchange Commission's rules and are not part of the basic financial statements. This schedule and these notes have been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, fairly state in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole. ARTHUR ANDERSEN LLP Chicago, Illinois November 12, 1996 13 INDEMNIFICATION UNDERTAKING For the purposes of complying with the amendments to the rules governing Form S-8 (effective July 13, 1990) under the Securities Act of 1933 (the "Act"), the undersigned Registrant hereby undertakes as follows, which undertaking shall be incorporated by reference into Registrant's Registration Statement on Form S-8 No. 33-77968 (filed April 22, 1994): Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. 14 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. WOODHEAD INDUSTRIES, INC. BY /s/ Robert G. Jennings BY /s/ Joseph P. Nogal --------------------------------- --------------------------------- Robert G. Jennings Joseph P. Nogal Vice President, Finance Treasurer/Controller (Chief Financial Officer) (Principal Accounting Officer) Date 12/16/96 -------------- Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by all of the following directors on behalf of the Registrant and in the capacities and on the dates indicated: Signature Title Date /s/ ALAN REED Chairman 12/16/96 ----------------------------- Alan Reed /s/ C. MARK DEWINTER President and C.E.O. 12/16/96 ----------------------------- C. Mark DeWinter /s/ CHARLES W. DENNY Director 12/16/96 ----------------------------- Charles W. Denny /s/ SARILEE K. NORTON Director 12/17/96 ----------------------------- Sarilee K. Norton /s/ RICHARD A. VIRZI Director 12/18/96 ----------------------------- Richard A. Virzi 15 EXHIBIT INDEX Exhibit Number Description - --------- -------------------- (3) Articles of incorporation and bylaws (a) Certificate of Incorporation including amendments through January 22, 1993, are hereby incorporated by reference to Exhibit (4)a of Registrant's Form S-8 filed April 22, 1994, as Registration #33-77968. (b) Company by-laws are hereby incorporated herein by reference to Exhibit 4(b) of Registrant's Form S-8 filed April 22, 1994, as Registration #33-77968. (4) Instruments defining the rights of security holders, including indentures (a) Credit Agreement between Registrant and Harris Trust and Savings Bank dated October 29, 1993, providing for a revolving credit line not exceeding $15,000,000. The above document described in this paragraph (4a) is not filed herewith by Registrant, but Registrant undertakes to furnish copies thereof to the Securities and Exchange Commission upon request. (b) The Preferred Stock Purchase Rights Plan adopted April 24, 1996, as set forth in Exhibit 4 of the Quarterly Report on Form 10-Q filed on May 14, 1996, is incorporated herein by reference and made a part hereof. (10) Material contracts (a) The 1981 Incentive Stock Compensation Plan, as amended, as set forth in Exhibit 4(b) of Registrant's Form S-8 filed September 26, 1988, as Registration #33-24737, is incorporated herein by reference and made a part hereof. (b) The 1987 Stock Compensation Plan as set forth in Exhibit A of Registrant's definitive proxy statement dated December 21, 1987, for the annual meeting of stockholders held January 22, 1988, which is incorporated herein by reference and made a part hereof. (c) The 1990 Stock Awards Plan as set forth in Exhibit A of Registrant's definitive proxy statement dated December 19, 1990 for the annual meeting of stockholders held January 25, 1991, which is incorporated herein by reference and made a part hereof. 16 EXHIBIT INDEX (cont'd.) Exhibit Number Description - --------- -------------------- (10) (d) Amendments to: The 1981 Incentive Stock Compensation Plan, the 1987 Stock Compensation Plan, and the 1990 Stock Awards Plan, all as set forth in Exhibit C of Registrant's definitive proxy statement dated December 22, 1993, for the annual meeting of stockholders held January 28, 1994, which is incorporated herein by reference and made a part hereof. (e) The 1993 Stock Awards Plan as set forth in Exhibit A of Registrant's definitive proxy statement dated December 22, 1993, for the annual meeting of stockholders held January 28, 1994, which is incorporated herein by reference and made a part hereof. (f) The 1996 Stock Awards Plan is set forth in Exhibit A of Registrant's definitive proxy statement dated December 20, 1996, for the annual meeting of stockholders to be held January 24, 1997, which is incorporated herein by referfence and made a part hereof. (g) The 1990 Directors Stock Option Plan for non-employee Directors as set forth in Exhibit B of Registrant's definitive proxy statement dated December 19, 1990, for the annual meeting of stockholders held January 25, 1991, which is incorporated herein by reference and made a part hereof. (h) The 1993 Directors Stock Option Plan for non-employee Directors as set forth as Exhibit B of Registrant's definitive proxy statement dated December 22, 1993 for the annual meeting of stockholders held January 28, 1994, which is incorporated herein by reference and made a part hereof. (i) The Management Incentive Plan effective for fiscal 1996 as described on page 16 of the Registrant's definitive proxy statement dated December 21, 1995, for the annual meeting of stockholders held January 26, 1996, which page is incorporated herein by reference and made a part hereof. (j) The Plan of Compensation for Outside Directors, as set forth in Item (10) of the exhibits to the Form 10-K Annual Report for the year ending September 18, 1985, which is incorporated herein by reference and is made a part hereof. (k) The 1990 Supplemental Executive Retirement Plan ("SERP") as set forth on page 15 of Registrant's definitive proxy statement dated December 21, 1995, for the annual meeting of stockholders held January 26, 1996, which page is incorporated herein by reference and made a part hereof. 17 EXHIBIT INDEX (cont'd)
Exhibit Number Description Page - --------- -------------------- ---- (10) (l) Severance Agreement as set forth in Item (10) of the exhibits to Form l0-K Annual Report for the year ending October 1, 1994, which is incorporated herein by reference and is made a part hereof, with C. Mark DeWinter dated September 7, 1989. Robert G. Jennings, Robert A. Moulton, Joseph P. Nogal, Terry L. Spandet, and Robert J. Tortorello have substantially identical contracts. (11) Statement regarding computation of per share earnings 19 (13) The following items incorporated by reference herein from the Annual Report to Stockholders for the year ended September 28, 1996 (the "1996 Annual Report"), are filed as Exhibits to this report: (a) Information under the footnote entitled "Information about the Company's Operations in Different Geographic Areas" set forth on Page 32 of the 1996 Annual Report; (b) Information under the footnote entitled "Capital Stock" set forth on Page 30 of the 1996 Annual Report; (c) Information under the section entitled "Financial Profile" set forth on Pages 18-19 of the 1996 Annual Report; (d) Information under the section entitled "Management's Discussion of Operations and Financial Position" set forth on Pages 16-l7 of the 1996 Annual Report; (e) Report of Independent Public Accountants set forth on Page 34 of the 1996 Annual Report; (f) Consolidated Financial Statements set forth Pages 20-23 of the 1996 Annual Report; and (g) Notes to Consolidated Financial Statements set forth on Pages 24-33 of the 1996 Annual Report. (21) Subsidiaries of the Registrant 20 (23) Consent of Arthur Andersen LLP 21 (27) Financial Data Schedule for the year ended September 28, 1996.
18 EX-11 2 STATEMENT RE COMPUTATION EARNINGS PER SHARE COMPUTATION OF PER SHARE EARNINGS (in thousands except per share information)
For the Years Ended --------------------------------------------------------- 1996 1995 1994 ----------------- ----------------- ----------------- Fully Fully Fully Primary Diluted Primary Diluted Primary Diluted ------- ------- ------- ------- ------- ------- Net Income $10,671 $10,671 $ 9,228 $ 9,228 $ 7,250 $ 7,250 ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- Weighted average common shares outstanding 10,393 10,393 10,351 10,351 10,284 10,284 Incremental shares issuable for stock options outstanding (Treasury Stock Method) 538 538 465 532 382 382 ------- ------- ------- ------- ------- ------- Common and common equivalent shares 10,931 10,931 10,816 10,883 10,666 10,666 ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- Earnings per share $ .98 $ .98 $ .85 $ .85 $ .68 $ .68 ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
19 EX-13 3 EXHIBIT 13 Exhibit 13 - -------------------------------------------------------------------------------- MANAGEMENT'S DISCUSSION OF OPERATIONS AND FINANCIAL POSITION FISCAL 1996 RESULTS COMPARED WITH 1995 - -------------------------------------------------------------------------------- SALES Sales in fiscal 1996 of $123.7 million were 3.1% ahead of the $120.0 million in 1995. International sales, including the Elitec acquisition, increased by 15.3% and equalled 30.3% of total sales. The strong international sales were offset by a decline in domestic volume resulting from a weak industrial marketplace. During the year the company realized price increases of approximately 1%. The backlog of unfilled orders was $8.6 million at year end. This $.7 million increase over 1995's level resulted from a strengthening of domestic orders during the company's fourth quarter. - -------------------------------------------------------------------------------- GROSS PROFIT Gross Profit increased 5.1% to $55.1 million from $52.5 million in 1995. Reflecting the company's continued investment in manufacturing processes, an improvement in the gross profit rate was driven by increased manufacturing productivity, cost reductions through product redesign, cost efficiencies through vendor partnerships and overhead expense control. - -------------------------------------------------------------------------------- OPERATING EXPENSES Operating expenses of $37.3 million in 1996 were 5.8% higher than the $35.3 million spent in 1995. An increased rate of 30.2% versus 29.4% as a percent of net sales in 1995 reflects continued investment in new product development combined with aggressive sales and marketing programs. - -------------------------------------------------------------------------------- OTHER Other expenses declined in 1996 to $1.0 million from EXPENSE/INCOME $2.8 million in the prior year. A favorable impact on interest income of $.3 million, a reversal of a lawsuit accrual of $.8 million, and reduced provisions for environmental cleanup of $.5 million all benefitted the company in 1996. - -------------------------------------------------------------------------------- NET INCOME Net income of $10.7 million was $1.5 million or 16% greater than in 1995. A portion of the increase resulted from improved sales and a higher gross profit rate which were partially offset by increased expenses in sales and marketing. The improvement in other expense/income contributed significantly to the 1996 increase in net income. The company's effective tax rate increased to 36.6% from 35.7% in 1995. - -------------------------------------------------------------------------------- FINANCIAL POSITION Working capital increased to $28.3 million from $19.7 million in 1995. The current ratio improved to 2.5/1 from 1.9/1 in 1995. The company's $15 million revolving credit line was unused at year end. Cash flows from continuing operations should exceed the operating requirements of the company in the 1997 year. 16 WOODHEAD INDUSTRIES, INC. 1996 ANNUAL REPORT FISCAL 1995 RESULTS COMPARED WITH 1994 - -------------------------------------------------------------------------------- Fiscal 1995 sales of $120.0 million were 13.5% ahead of the $105.7 million reported for 1994. International sales accounted for 54.7% of this year's sales increase and were equal to 27.1% of total sales. The higher unit volumes in Asia, Canada and Europe were augmented by a weak U.S. dollar. Strong domestic sales reflect improvements in core product lines, including connectors and workstation products. Price increases during the year netted less than 1%. The backlog of unfilled orders was $7.9 million at year end compared with $8.0 million at the close of fiscal 1994. - -------------------------------------------------------------------------------- Gross Profit of $52.5 million was $5.9 million or 12.5% greater than in 1994. The reduced rate of 43.7% versus 44.1% in 1994 was due to strong international price pressures which held price increases to a minimum. In fiscal 1995, inflationary increases in the cost of sales were somewhat offset by the benefit of a devaluation in the Mexican peso which occurred during the year. The company continued to invest in its manufacturing processes to reduce costs and improve productivity. - -------------------------------------------------------------------------------- Operating expenses for 1995 totaled $35.3 million, representing an 8.3% increase over the 1994 total of $32.6 million. The increase was driven by the company's continued investment in new product development and marketing programs. Overall, operating expenses declined as a percent of net sales to 29.4% from 30.8% in 1994 primarily due to limited increases in administrative expenses. - -------------------------------------------------------------------------------- Other expenses increased $.3 million to $2.8 million in fiscal 1995. During 1995 the company increased its reserve for litigation, environmental and other contingencies. For additional information regarding the environmental matter, see footnote #6 concerning Contingent Liabilities. - -------------------------------------------------------------------------------- Net income increased $2.0 million to $9.2 million in 1995. The earnings improvement was achieved by leveraging sales increases with controlled overhead spending and administrative expenses. The company's effective tax rate also declined from 37.1% in 1994 to 35.7% in 1995 primarily due to utilization of foreign tax credits. - -------------------------------------------------------------------------------- Working capital increased to $19.7 million at the close of 1995 representing an increase of $5.1 million over the 1994 year end level. The current ratio also increased slightly to 1.9/1 in 1995 from 1.8/1 in 1994. The company's $15 million revolving credit line was unused at year end. COMMON STOCK PRICE RANGE BY QUARTER (AMOUNTS IN DOLLARS) - -------------------------------------------------------------------------------- The company's common stock trades on the NASDAQ Stock Market under the symbol WDHD. The daily quotations as reported by NASDAQ are published in the Wall Street Journal and other leading financial publications. The range in the market price per share of the stock and dividends paid during the past two years were as follows: - -------------------------------------------------------------------------------- Price FY 1996 High Low Dividend - -------------------------------------------------------------------------------- 1st 16 3/4 13 7/8 $.065 2nd 15 13 $.065 3rd 15 1/2 10 $.07 4th 13 3/4 11 3/4 $.07 - -------------------------------------------------------------------------------- Price FY 1995 High Low Dividend - -------------------------------------------------------------------------------- 1st 10 13/16 9 5/16 $.063 2nd 13 5/16 10 1/2 $.063 3rd 15 12 11/16 $.065 4th 14 3/4 12 1/2 $.065 - -------------------------------------------------------------------------------- All periods have been adjusted for a three-for-two stock split effected in the form of a stock dividend in May 1995, and the stock prices have been rounded to the nearest sixteenth. 17 - -------------------------------------------------------------------------------- FINANCIAL PROFILE
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE, EMPLOYEES, AND STOCKHOLDERS) 1996 1995 1994 1993 - ------------------------------------------------------------------------------------------------------------------------------- OPERATIONS Net sales $ 123,680 $ 120,003 $ 105,689 $ 89,864 ---------------------------------------------------------------------------------------------------------------- Cost of sales 68,549 67,541 59,070 50,238 ---------------------------------------------------------------------------------------------------------------- Gross profit 55,131 52,462 46,619 39,626 % of net sales 44.6% 43.7% 44.1% 44.1% ---------------------------------------------------------------------------------------------------------------- Operating and other expenses 38,299 38,110 35,096 30,125 % of net sales 31.0% 31.8% 33.2% 33.5% Income before income taxes 16,832 14,352 11,523 9,501 % of net sales 13.6% 12.0% 10.9% 10.6% ---------------------------------------------------------------------------------------------------------------- Provision for income taxes 6,161 5,124 4,273 3,698 ---------------------------------------------------------------------------------------------------------------- Net income 10,671 9,228 7,250 5,803 % of net sales 8.6% 7.7% 6.9% 6.5% % of average assets 14.1% 13.6% 12.2% 11.1% Return on stockholders' average investment 19.7% 19.8% 18.2% 16.6% ---------------------------------------------------------------------------------------------------------------- Earnings per common and common equivalent share $ .98 $ .85 $ .68 $ .55 ---------------------------------------------------------------------------------------------------------------- Dividends per share .27 .26 .23 .23 ---------------------------------------------------------------------------------------------------------------- Common and common equivalent shares 10,931 10,816 10,666 10,467 ---------------------------------------------------------------------------------------------------------------- Memo: Interest (income) expense (161) 97 178 39 % of net sales (.1)% .1% .2% .0% Depreciation and amortization 4,813 4,475 4,199 3,777 % of net sales 3.9% 3.7% 4.0% 4.2% Engineering and development 2,513 2,404 2,148 2,105 % of net sales 2.0% 2.0% 2.0% 2.3% - ------------------------------------------------------------------------------------------------------------------------------- YEAR END Total assets $ 78,385 $ 73,411 $ 62,263 $ 56,360 POSITION ---------------------------------------------------------------------------------------------------------------- Total liabilities 20,508 23,007 19,316 19,700 ---------------------------------------------------------------------------------------------------------------- Working capital 28,321 19,654 14,572 10,538 ---------------------------------------------------------------------------------------------------------------- Current ratio 2.5 to 1 1.9 to 1 1.8 to 1 1.7 to 1 ---------------------------------------------------------------------------------------------------------------- Stockholders' investment 57,877 50,404 42,947 36,660 ---------------------------------------------------------------------------------------------------------------- Long-term debt -- -- 63 2,047 ---------------------------------------------------------------------------------------------------------------- Book value per share $ 5.55 $ 4.86 $ 4.15 $ 3.57 ---------------------------------------------------------------------------------------------------------------- Number of employees 1,125 1,126 1,079 947 ---------------------------------------------------------------------------------------------------------------- Number of stockholders 584 571 598 634 ----------------------------------------------------------------------------------------------------------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS. 18 WOODHEAD INDUSTRIES, INC. 1996 ANNUAL REPORT
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE, EMPLOYEES, AND STOCKHOLDERS) 1992 1991 1990 1989 - ------------------------------------------------------------------------------------------------------------------------------- OPERATIONS Net sales $79,518 $73,499 $72,168 $71,443 ---------------------------------------------------------------------------------------------------------------- Cost of sales 43,756 41,753 41,034 42,070 ---------------------------------------------------------------------------------------------------------------- Gross profit 35,762 31,746 31,134 29,373 % of net sales 45.0% 43.2% 43.1% 41.1% ---------------------------------------------------------------------------------------------------------------- Operating and other expenses 28,007 26,552 22,708 22,195 % of net sales 35.2% 36.1% 31.5% 31.1% Income before income taxes 7,755 5,194 8,426 7,178 % of net sales 9.8% 7.1% 11.7% 10.0% ---------------------------------------------------------------------------------------------------------------- Provision for income taxes 3,000 2,374 3,406 2,878 ---------------------------------------------------------------------------------------------------------------- Net income 4,755 2,820 5,020 4,300 % of net sales 6.0% 3.8% 7.0% 6.0% % of average assets 10.3% 6.6% 12.6% 10.3% Return on stockholders' average investment 15.2% 9.7% 18.4% 17.7% ---------------------------------------------------------------------------------------------------------------- Earnings per common and common equivalent share $ .47 $ .29 $ .52 $ .45 ---------------------------------------------------------------------------------------------------------------- Dividends per share .23 .23 .21 .20 ---------------------------------------------------------------------------------------------------------------- Common and common equivalent shares 10,040 9,615 9,672 9,492 ---------------------------------------------------------------------------------------------------------------- Memo: Interest (income) expense (138) 43 (299) 543 % of net sales (.2)% .1% (.4)% .8% Depreciation and amortization 3,229 3,062 2,461 2,362 % of net sales 4.1% 4.2% 3.4% 3.3% Engineering and development 2,041 1,749 1,577 1,377 % of net sales 2.6% 2.4% 2.2% 1.9% ---------------------------------------------------------------------------------------------------------------- YEAR END Total assets $48,564 $43,709 $41,216 $38,534 POSITION ---------------------------------------------------------------------------------------------------------------- Total liabilities 15,460 14,147 12,638 12,530 ---------------------------------------------------------------------------------------------------------------- Working capital 14,129 11,443 15,542 13,245 ---------------------------------------------------------------------------------------------------------------- Current ratio 2.1 to 1 2.0 to 1 2.5 to 1 2.3 to 1 ---------------------------------------------------------------------------------------------------------------- Stockholders' investment 33,104 29,562 28,578 26,004 ---------------------------------------------------------------------------------------------------------------- Long-term debt 500 500 -- 153 ---------------------------------------------------------------------------------------------------------------- Book value per share $ 3.31 $ 3.05 $ 2.98 $ 2.68 ---------------------------------------------------------------------------------------------------------------- Number of employees 764 816 788 732 ---------------------------------------------------------------------------------------------------------------- Number of stockholders 640 710 751 822 ---------------------------------------------------------------------------------------------------------------- THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS. (AMOUNTS IN THOUSANDS EXCEPT PER SHARE, EMPLOYEES, AND STOCKHOLDERS) 1988 1987 1986 - -------------------------------------------------------------------------------------------------------------------- OPERATIONS Net sales $71,178 $69,887 $63,929 ----------------------------------------------------------------------------------------------------- Cost of sales 42,015 42,325 38,908 ----------------------------------------------------------------------------------------------------- Gross profit 29,163 27,562 25,021 % of net sales 41.0% 39.4% 39.1% ----------------------------------------------------------------------------------------------------- Operating and other expenses 22,993 21,805 20,305 % of net sales 32.3% 31.2% 31.8% Income before income taxes 6,170 5,757 4,716 % of net sales 8.7% 8.2% 7.4% ----------------------------------------------------------------------------------------------------- Provision for income taxes 2,490 2,591 2,139 ----------------------------------------------------------------------------------------------------- Net income 3,680 3,166 2,577 % of net sales 5.2% 4.5% 4.0% % of average assets 8.2% 6.8% 5.3% Return on stockholders' average investment 17.1% 12.9% 9.1% ----------------------------------------------------------------------------------------------------- Earnings per common and common equivalent share $ .39 $ .29 $ .23 ----------------------------------------------------------------------------------------------------- Dividends per share .20 .20 .20 ----------------------------------------------------------------------------------------------------- Common and common equivalent shares 9,387 10,740 11,103 ----------------------------------------------------------------------------------------------------- Memo: Interest (income) expense 1,107 824 1,055 % of net sales 1.6% 1.2% 1.7% Depreciation and amortization 2,335 2,328 2,113 % of net sales 3.3% 3.3% 3.3% Engineering and development 1,574 1,524 1,622 % of net sales 2.2% 2.2% 2.5% - -------------------------------------------------------------------------------------------------------------------- YEAR END Total assets $44,720 $44,806 $48,754 POSITION ----------------------------------------------------------------------------------------------------- Total liabilities 22,187 24,327 20,172 ----------------------------------------------------------------------------------------------------- Working capital 17,029 16,614 19,835 ----------------------------------------------------------------------------------------------------- Current ratio 2.6 to 1 2.4 to 1 2.8 to 1 ----------------------------------------------------------------------------------------------------- Stockholders' investment 22,533 20,479 28,582 ----------------------------------------------------------------------------------------------------- Long-term debt 9,394 10,821 7,723 ----------------------------------------------------------------------------------------------------- Book value per share $ 2.40 $ 2.18 $ 2.57 ----------------------------------------------------------------------------------------------------- Number of employees 810 840 830 ----------------------------------------------------------------------------------------------------- Number of stockholders 920 980 1,112 -----------------------------------------------------------------------------------------------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS. 19 - -------------------------------------------------------------------------------- CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS As of September 28, 1996, September 30, 1995, and October 1, 1994. (AMOUNTS IN THOUSANDS) 1996 1995 1994 - ---------------------------------------------------------------------------------------------------------------------------- ASSETS Current Assets Cash and short-term securities $ 10,050 $ 4,202 $ 1,454 Accounts receivable, less allowances of $695 in 1996, $572 in 1995, and $674 in 1994 18,777 18,965 16,589 Inventories (Note 1) 12,707 12,613 10,402 Prepaid expenses 5,516 5,132 3,811 -------------------------------------------------------------------------------------------------------- Total current assets $ 47,050 $ 40,912 $ 32,256 -------------------------------------------------------------------------------------------------------- Other Assets $ 557 $ 1,039 $ 1,570 -------------------------------------------------------------------------------------------------------- Property, Plant and Equipment (Note 1) $ 64,499 $ 61,464 $ 55,035 Less: Accumulated depreciation 40,834 37,429 33,904 -------------------------------------------------------------------------------------------------------- Net property, plant and equipment $ 23,665 $ 24,035 $ 21,131 -------------------------------------------------------------------------------------------------------- Goodwill (Note 1) $ 7,113 $ 7,425 $ 7,306 -------------------------------------------------------------------------------------------------------- Total Assets $ 78,385 $ 73,411 $ 62,263 - ---------------------------------------------------------------------------------------------------------------------------- LIABILITIES AND Current Liabilities: STOCKHOLDERS' Accounts payable $ 6,162 $ 7,033 $ 5,948 INVESTMENT Accrued expenses 11,254 12,509 10,750 Income taxes payable 1,313 1,647 880 Portion of long-term debt payable within one year (Note 2) -- 69 106 -------------------------------------------------------------------------------------------------------- Total current liabilities $ 18,729 $ 21,258 $ 17,684 -------------------------------------------------------------------------------------------------------- Deferred Income Taxes (Note 3) $ 1,779 $ 1,749 $ 1,569 -------------------------------------------------------------------------------------------------------- Long-term Debt, less portion payable within one year shown above (Note 2) $ -- $ -- $ 63 -------------------------------------------------------------------------------------------------------- Stockholders' Investment (Notes 1,2,5 and 7): Preferred stock $ -- $ -- $ -- Common stock at par, (Shares issued - 10,419) 10,419 10,374 7,470 Additional paid-in capital 1,571 1,248 4,987 Cumulative translation adjustment (616) 140 (347) Retained earnings 46,503 38,642 35,521 Less: Treasury stock at cost, (Shares held 1994 - 575) -- -- (4,684) -------------------------------------------------------------------------------------------------------- Total stockholders' investment $ 57,877 $ 50,404 $ 42,947 -------------------------------------------------------------------------------------------------------- Total Liabilities and Stockholders' Investment $ 78,385 $ 73,411 $ 62,263 -------------------------------------------------------------------------------------------------------- THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
20 Woodhead Industries, Inc. 1996 Annual Report
For the years ended September 28, 1996, September 30, 1995, and October 1, 1994. (AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA) 1996 1995 1994 - -------------------------------------------------------------------------------------------------------------- CONSOLIDATED Net Sales $ 123,680 $ 120,003 $ 105,689 STATEMENTS OF ------------------------------------------------------------------------------------------ INCOME Cost of Sales 68,549 67,541 59,070 ------------------------------------------------------------------------------------------ Gross Profit $ 55,131 $ 52,462 $ 46,619 Percent of net sales 44.6% 43.7% 44.1% ------------------------------------------------------------------------------------------ Operating Expenses: Engineering and product development $ 2,513 $ 2,404 $ 2,148 Marketing and sales 21,384 19,764 17,504 General and administrative 13,434 13,121 12,930 ------------------------------------------------------------------------------------------ Total operating expenses $ 37,331 $ 35,289 $ 32,582 Percent of net sales 30.2% 29.4% 30.8% ------------------------------------------------------------------------------------------ Income from Operations $ 17,800 $ 17,173 $ 14,037 Percent of net sales 14.4% 14.3% 13.3% ------------------------------------------------------------------------------------------ Other Expense (Income): Interest (income) expense $ (161) $ 97 $ 178 Other, net 1,129 2,724 2,336 ------------------------------------------------------------------------------------------ Net other expense $968 $ 2,821 $ 2,514 ------------------------------------------------------------------------------------------ Income Before Income Taxes $ 16,832 $ 14,352 $ 11,523 Percent of net sales 13.6% 12.0% 10.9% Provision for Income Taxes (Note 3) 6,161 5,124 4,273 ------------------------------------------------------------------------------------------ Net Income $ 10,671 $ 9,228 $ 7,250 Percent of net sales 8.6% 7.7% 6.9% ------------------------------------------------------------------------------------------ Earnings per common and common equivalent share (Note 1) $ .98 $ .85 $ .68 ------------------------------------------------------------------------------------------ THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
21 - -------------------------------------------------------------------------------- CONSOLIDATED FINANCIAL STATEMENTS
For the years ended September 28, 1996, September 30, 1995, and October 1, 1994. (AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA) - ---------------------------------------------------------------------------------------------------------------------------------- CONSOLIDATED ADDITIONAL CUMULATIVE TOTAL STATEMENTS OF COMMON PAID-IN TRANSLATION RETAINED TREASURY STOCKHOLDERS' STOCKHOLDERS' STOCK CAPITAL ADJUSTMENT EARNINGS STOCK INVESTMENT INVESTMENT ------------------------------------------------------------------------------------------------------------------- Balance October 2, 1993 $ 7,470 $ 4,667 $ (914) $ 30,601 $(5,164) $36,660 Net income for the year -- -- -- 7,250 -- 7,250 Translation adjustment -- -- 567 -- -- 567 Cash dividends, $.34 per share -- -- -- (2,330) -- (2,330) Stock option plans -- 320 -- -- 480 800 ------------------------------------------------------------------------------------------------------------------- Balance October 1, 1994 $ 7,470 $ 4,987 $ (347) $ 35,521 $(4,684) $42,947 Net income for the year -- -- -- 9,228 -- 9,228 Translation adjustment -- -- 487 -- -- 487 Cash dividends, $.257 per share -- -- -- (2,657) -- (2,657) Stock option plans 23 326 -- -- 50 399 Retirement of treasury stock (569) (4,065) -- -- 4,634 -- Three-for-two stock split (Note 5) 3,450 -- -- (3,450) -- -- ------------------------------------------------------------------------------------------------------------------- Balance September 30, 1995 $10,374 $ 1,248 $ 140 $38,642 $ -- $50,404 Net income for the year -- -- -- 10,671 -- 10,671 Translation adjustment -- -- (756) -- -- (756) Cash dividends, $.27 per share -- -- -- (2,810) -- (2,810) Stock option plans 45 323 -- -- -- 368 ------------------------------------------------------------------------------------------------------------------- Balance September 28, 1996 $10,419 $ 1,571 $ (616) $46,503 $ -- $57,877 ------------------------------------------------------------------------------------------------------------------- THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
22 Woodhead Industries, Inc. 1996 Annual Report
For the years ended September 28, 1996, September 30, 1995, and October 1, 1994. (AMOUNTS IN THOUSANDS) 1996 1995 1994 - ------------------------------------------------------------------------------------------------------------------ CONSOLIDATED Cash Flows From Operating Activities: STATEMENTS OF Net income for the year $ 10,671 $ 9,228 $ 7,250 CASH FLOWS --------------------------------------------------------------------------------------------------- Adjustments to reconcile net income to net cash flows from operating activities: --------------------------------------------------------------------------------------------------- Depreciation and amortization 4,813 4,475 4,199 (Increase) decrease in: Accounts receivable 188 (1,361) (3,752) Inventories (94) (1,938) (1,731) Prepaid expenses (384) (1,224) (158) Other assets -- (147) (66) (Decrease) increase in: Accounts payable (871) 511 700 Accrued expenses (1,255) 1,576 1,670 Income taxes payable (334) 486 34 Deferred income taxes 30 180 (330) --------------------------------------------------------------------------------------------------- Net cash flows from operating activities $ 12,764 $11,786 $7,816 ---------------------------------------------------------------------------------------------------- Cash Flows From Investing Activities: Purchases of property, plant & equipment $ (5,132) $ (6,620) $ (3,928) Payments for businesses acquired -- (599) -- Retirements or sales of property, plant & equipment 887 260 24 --------------------------------------------------------------------------------------------------- Net cash (used for) provided by investing activities $ (4,245) $ (6,959) $ (3,904) --------------------------------------------------------------------------------------------------- Cash Flows From Financing Activities: (Decrease) increase in short-term debt $ (69) $ (37) $ (498) (Decrease) increase in long-term debt -- (63) (1,984) Sales of stock 368 399 800 Dividend payments (2,810) (2,657) (2,330) --------------------------------------------------------------------------------------------------- Net cash (used for) provided by financing activities $ (2,511) $ (2,358) $ (4,012) --------------------------------------------------------------------------------------------------- Effect of Exchange Rates $ (160) $ 279 $ 399 --------------------------------------------------------------------------------------------------- Net Increase (Decrease) in Cash and Short-Term Securities $ 5,848 $ 2,748 $ 299 Cash and short-term securities at beginning of year 4,202 1,454 1,155 --------------------------------------------------------------------------------------------------- Cash and short-term securities at end of year $ 10,050 $ 4,202 $ 1,454 --------------------------------------------------------------------------------------------------- Supplemental Cash Flow Data Cash paid during the year for: Interest $ 43 $ 97 $ 167 Income taxes 5,877 5,179 3,787 ---------------------------------------------------------------------------------------------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS. 23 - -------------------------------------------------------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (AMOUNTS IN THOUSANDS, EXCEPT SHARES AND PER SHARE, IN ALL TABLES) - -------------------------------------------------------------------------------- 1. CONSOLIDATION SUMMARY OF The consolidated financial statements include the accounts of all ACCOUNTING subsidiaries, each of which is wholly owned. Revenue is POLICIES recognized when products are shipped. All significant intercompany transactions have been eliminated in consolidation. The Company follows the practice of ending its fiscal year on the Saturday closest to September 30. INVENTORIES The Company values its inventory at the lower of cost or market, cost being determined using first-in first-out (FIFO) or last-in first-out (LIFO) method. The total inventories at the balance sheet dates were as follows: 1996 1995 1994 ------------------------------------------------------------------- Inventories valued using FIFO $ 6,402 $ 5,727 $ 4,637 ------------------------------------------------------------------- Inventories valued using LIFO: At FIFO cost $11,082 $11,530 $10,321 Less: Reserve to reduce to LIFO 4,777 4,644 4,556 ------------------------------------------------------------------- LIFO inventories $ 6,305 6,886 $ 5,765 -------------------------------------------------------------------- Total Inventories $12,707 $12,613 $10,402 ------------------------------------------------------------------- Inventory composition at FIFO: Raw materials $ 8,917 $ 8,528 $ 7,012 Work-in-process and finished goods 8,567 8,729 7,946 ------------------------------------------------------------------- Total $17,484 $17,257 $14,958 ------------------------------------------------------------------- PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are recorded at cost. Depreciation is computed using the straight-line method for financial accounting purposes. The estimated useful lives are as follows: Asset Description Asset Life ------------------------------------------------------------------- Buildings and improvements 20 to 40 years Machinery and equipment 3 to 12 years Dies and molds 4 to 5 years Furniture and office equipment 3 to 10 years ------------------------------------------------------------------- The cost of property retired or otherwise disposed of is removed from the property accounts, the accumulated depreciation is removed from the related reserves, and the net gain or loss is reflected in income. Maintenance and repairs are charged to expense as incurred. Major renewals and betterments are capitalized. The details of property, plant and equipment at the balance sheet dates were as follows: 1996 1995 1994 ------------------------------------------------------------------- Land $ 1,297 $ 1,358 $ 876 Buildings and improvements 14,368 14,816 12,757 Machinery and equipment 18,390 16,180 14,364 Dies and molds 16,690 15,654 14,548 Furniture and office equipment 13,754 13,456 12,490 ------------------------------------------------------------------- $ 64,499 $ 61,464 $ 55,035 ------------------------------------------------------------------- 24 WOODHEAD INDUSTRIES, INC. 1996 ANNUAL REPORT - -------------------------------------------------------------------------------- 1. GOODWILL SUMMARY OF Goodwill is the cost of acquired businesses in excess of the fair ACCOUNTING value of their identifiable net assets and is amortized over a POLICIES period not exceeding 40 years. The Company regularly reviews the (CONT.) individual components of goodwill and recognizes, on a current basis, any diminution in value. INCOME PER COMMON AND COMMON SHARE EQUIVALENT Income per share is computed on the basis of the weighted average number of shares outstanding plus the effect of common stock equivalents. The weighted average shares used in the computations were 10,931,000 in 1996, 10,816,000 in 1995, and 10,666,000 in 1994. CASH FLOWS For purposes of reporting cash flows, cash on hand and short-term securities are combined. Short-term securities may include certificates of deposit, Euro-dollars and commercial paper which must be held for three months or less in order to be considered short-term for cash flows. RESTATEMENTS All share and per share amounts have been adjusted for a three-for-two stock split effected in the form of a stock dividend in May 1995 and a two-for-one stock split effected in the form of a stock dividend in March 1993. - -------------------------------------------------------------------------------- 2. Long-term debt consisted of the following: LONG-TERM DEBT AND 1996 1995 1994 SHORT-TERM -------------------------------------------------------------------- BORROWING Bank Revolving Credit Agreement $ -- $ -- $ -- Other -- 69 169 -------------------------------------------------------------------- Total $ -- $ 69 $ 169 Less: Portion of long-term debt payable within one year -- 69 106 -------------------------------------------------------------------- Net long-term debt $ -- $ -- $ 63 -------------------------------------------------------------------- The Company has a Revolving Credit Agreement (the "Agreement") with a bank that provides for borrowings of up to $15,000,000 at the bank's prime rate or offered rate. This Agreement expires on October 31, 1997. The average amount owing to the bank was $0 in 1996, $811,000 in 1995, and $1,964,000 in 1994, at weighted average interest rates of 0.0%, 6.9%, and 4.2%, respectively. Under the Agreement, the Company is required, among other things, to maintain consolidated tangible net worth, as defined, of not less than $24,571,000 and a minimum current ratio of 1.5 to 1. In addition, there are some restrictions on the creation or assumption of any lien or security interest upon any of its assets. Short-term borrowing averaged $49,000 in 1996, $6,000 in 1995, and $3,000 in 1994, at weighted average interest rates of 8.6%, 9.3%, and 6.2%, respectively. 25 - -------------------------------------------------------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 3. Effective October 3, 1993, the Company adopted Statement of INCOME TAXES Financial Accounting Standards No. 109 (SFAS 109), "Accounting for Income Taxes". SFAS 109 requires, among other things, the application of current statutory income tax rates to deferred income tax balances. In the first quarter of fiscal 1994, the company recognized the cumulative effect, through October 3, 1993, of the accounting change, reflecting the difference between current statutory tax rates and the generally higher rates that were used to establish the deferred income tax balances, resulting in no material effect to the Company's financial condition. The provision for income taxes for 1996, 1995, and 1994 consisted of the following: 1996 1995 1994 ----------------------------------------------------------------- U. S. federal income tax $4,015 $3,529 $3,217 State income taxes 781 608 593 Foreign income taxes 1,365 987 463 ----------------------------------------------------------------- $ 6,161 $ 5,124 $4,273 ----------------------------------------------------------------- Current provision $5,723 $5,467 $5,010 Deferred provision 438 (343) (737) ----------------------------------------------------------------- $6,161 $ 5,124 $4,273 ----------------------------------------------------------------- A reconciliation of the federal statutory rate to the effective tax rate is as follows: 1996 1995 1994 ----------------------------------------------------------------- Federal statutory rate 34.0% 34.0% 34.0% State income taxes, net of federal benefit 3.1 2.8 3.4 Difference between U.S. and foreign rates 1.4 1.3 2.1 Other, net (1.9) (2.4) (2.4) ----------------------------------------------------------------- 36.6% 35.7% 37.1% ----------------------------------------------------------------- The components of income before income taxes consisted of the following: 1996 1995 1994 ----------------------------------------------------------------- Domestic $13,508 $11,980 $10,866 Foreign 3,324 2,372 657 ----------------------------------------------------------------- $16,832 $14,352 $11,523 ----------------------------------------------------------------- The components of the deferred tax provisions consisted of the following: 1996 1995 1994 ----------------------------------------------------------------- Excess of tax over book depreciation and amortization $ 6 $ (16) $ 134 Excess of tax loss on disposal of property 127 2 (13) Accounts receivable reserves 6 61 (8) Inventory reserves (29) (10) 10 Litigation reserves 311 431 (301) Environmental reserves 152 (827) -- Employee benefit reserves (165) 30 (253) Other reserves 30 (14) (306) ----------------------------------------------------------------- $ 438 $ (343) $ (737) ----------------------------------------------------------------- 26 WOODHEAD INDUSTRIES, INC. 1996 ANNUAL REPORT - -------------------------------------------------------------------------------- 3. The significant deferred tax assets and liabilities at September INCOME TAXES 28, 1996, September 30, 1995 and October 1, 1994 were as (CONT.) follows: 1996 1995 1994 ----------------------------------------------------------------- Deferred tax liabilities: ----------------------------------------------------------------- Accelerated depreciation & amortization $ 1,779 $ 1,749 $ 1,569 ----------------------------------------------------------------- Total Deferred Liabilities $ 1,779 $ 1,749 $ 1,569 ----------------------------------------------------------------- Less deferred tax assets: Accounts receivable reserves $ 203 $ 160 $ 221 Inventory reserves 348 378 432 Litigation reserves 64 356 787 Environmental reserves 554 827 -- Employee benefit reserves 1,023 816 865 Other reserves 677 109 (369) ----------------------------------------------------------------- Total Deferred Assets $ 2,869 $ 2,646 $ 1,936 ----------------------------------------------------------------- Net Deferred Tax Assets $ 1,090 $ 897 $ 367 ----------------------------------------------------------------- - -------------------------------------------------------------------------------- 4. The Company has defined benefit, defined contribution and PENSION government mandated plans covering eligible, non-bargaining AND OTHER unit employees. Pension benefits are fully vested after EMPLOYEE BENEFITS five years and are based upon years of service and highest five-year average compensation. It is the Company's policy to fund its pension costs by making annual contributions based upon the minimum funding provisions of the "Employee Retirement Income Security Act of 1974". The total pension expense of Company sponsored plans was $407,000 in 1996 and was $297,000 and $290,000 in 1995 and 1994, respectively. Net periodic pension cost for the non-union plans for 1996, 1995 and 1994 included the following components: 1996 1995 1994 ------------------------------------------------------------ Service cost-benefits earned during the year $ 281 $ 244 $ 278 Interest cost on projected benefit obligation 412 443 452 Actual (gain) loss on plan assets (808) (835) 21 Net amortization and deferral 573 635 (189) ------------------------------------------------------------ $ 458 $ 487 $ 562 ------------------------------------------------------------ Assumptions used in accounting for the pension plans are as follows:
1996 1995 1994 ---------------------------------------------------------------------------------------- Discount rate 8.0% 8.0% 8.0% Rate of increase in compensation levels 6.0% 6.0% varied by age Expected long-term rate of return on assets 7.5% 7.5% 7.5% ----------------------------------------------------------------------------------------
27 - -------------------------------------------------------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 4. The following table reconciles the plans' funded status and PENSION the amount recognized in the Company's balance sheets at September AND OTHER 28, 1996, September 30, 1995, and October 1, 1994, for its non-union EMPLOYEE plans: BENEFITS (CONT.)
1996 1995 1994 --------------------------------------------------------------------------------------- Actuarial present value of benefit obligations Vested benefits $ 4,308 $ 4,059 $ 4,723 Non-vested benefits 385 355 198 --------------------------------------------------------------------------------------- Accumulated benefit obligation $ 4,693 4,414 4,921 Effect of projected future compensation levels 928 979 873 --------------------------------------------------------------------------------------- Projected benefit obligation $ 5,621 $ 5,393 $ 5,794 Plan assets at fair value 6,289 5,240 5,195 --------------------------------------------------------------------------------------- (Over) under funded status $ (668) $ 153 $ 599 Unrecognized prior service cost (112) (128) (203) Unrecognized net gain (loss) 270 (379) (269) Unrecognized net asset at date of application 8 16 33 --------------------------------------------------------------------------------------- (Prepaid) accrued pension cost included in balance sheet $ (502) $ (338) $ 160 ---------------------------------------------------------------------------------------
In fiscal 1990, a supplemental retirement benefit plan was approved for certain key executive officers which will provide supplemental payments upon retirement, disability, or death. The obligations are not funded apart from the Company's general assets. The Company charged to expense $121,000 in 1996, $205,000 in 1995, and $299,000 in 1994 under the plan. Most of the Company's union employees are covered by union-sponsored, collectively-bargained multi-employer pension plans. The Company contributed and charged to expense $160,000 in 1996, $154,000 in 1995, and $130,000 in 1994, for such plans. These contributions are determined in accordance with the provisions of negotiated labor contracts and generally are based on the number of man-hours worked. Information from the plan's administrators is not available to permit the Company to determine its share of unfunded vested benefits. The annual profit sharing contributions which are the lesser of (a) a percentage of income as defined in the plans or (b) 15% of the aggregate compensation paid to participants during the year, were $798,000 in 1996, $698,000 in 1995, and $634,000 in 1994. The Company makes matching contributions of 50% of employees' contributions up to 4% of compensation. Matching contributions were $225,000 in 1996, and were $214,000 and $206,000 in 1995 and 1994, respectively. Plan assets of Company-sponsored plans are invested primarily in common stocks, corporate bonds, and government securities. Although the Company has a right to improve, change or terminate the plans, they are intended to be permanent. OTHER POSTRETIREMENT BENEFITS The Company provides an optional retiree medical program to a majority of its U.S. salaried and non-union retirees. All retirees are required to contribute to the cost of their coverage. These postretirement benefits are unfunded. During the quarter ended January 1, 1994, the Company adopted Statement of Financial Accounting Standards No. 106 (SFAS No. 106), "Employer's Accounting for Postretirement Benefits other than Pensions," on a prospective basis. Adopting this new standard resulted in a cumulative catch-up adjustment of approximately $1,098,000(pre-tax) which will be amortized over 20 years. On an on-going basis, the annual incremental expense, including $55,000 amortization of the $1,098,000, will be approximately $181,000(pre-tax). 28 Woodhead Industries, Inc. 1996 Annual Report - -------------------------------------------------------------------------------- 4. In fiscal years 1996, 1995 and 1994, the components of cost of these PENSION postretirement benefits, principally healthcare, were as follows: AND OTHER EMPLOYEE 1996 1995 1994 BENEFITS -------------------------------------------------------------------- (CONT.) Service cost $ 52 $ 44 $ 45 Interest cost 104 87 81 Amortization of transition obligation 55 54 55 -------------------------------------------------------------------- $ 211 $ 185 $ 181 -------------------------------------------------------------------- The funded status of these benefits for the fiscal years ended September 28, 1996, September 30, 1995 and October 1, 1994 were as follows: 1996 1995 1994 -------------------------------------------------------------------- Actuarial present value of benefit obligations Retirees $ 574 $ 424 $ 428 Eligible active employees 277 298 282 Other active employees 545 471 396 -------------------------------------------------------------------- Accumulated postretirement benefit obligation $ 1,396 $1,193 $1,106 Plan assets at fair value $ -- -- -- -------------------------------------------------------------------- Under funded status $ 1,396 $1,193 $1,106 Unrecognized transition obligation (934) (989) (1,044) Unrecognized net gain 24 118 119 -------------------------------------------------------------------- Accrued postretirement benefit cost included in balance sheet $ 486 $ 322 $ 181 -------------------------------------------------------------------- Assumptions used in the accounting were: 1996 1995 1994 -------------------------------------------------------------------- Discount rate 8.0% 8.0% 7.5% Health care trend rate in first year 10.0% 11.0% 12.0% Gradually declining to a trend rate of 6.0% 6.0% 6.0% in the year 2000 2000 2000 -------------------------------------------------------------------- The effect of a one percentage point increase in the assumed health care trend rate on: 1996 1995 1994 -------------------------------------------------------------------- Aggregate of service and interest cost $ 30 $ 25 $ 24 Accumulated postretirement benefit obligation 240 202 177 -------------------------------------------------------------------- POSTEMPLOYMENT BENEFITS The Company provides certain postemployment benefits to former or inactive employees after employment but before retirement. If the Company had adopted Statement of Financial Accounting Standards No. 112, "Employers' Accounting for Postemployment Benefits", the effect of the change would have been immaterial. The Company will, on an annual basis, reevaluate its liability under SFAS No. 112 to verify that it remains immaterial. 29 - -------------------------------------------------------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 5. The total authorized stock is 40,000,000 shares, consisting of CAPITAL STOCK 10,000,000 shares of preferred stock, par value $.01 per share, and 30,000,000 shares of common stock, par value $1.00 per share. No shares of preferred stock have been issued to date. In May, 1996, the Company adopted a new shareholder rights plan effective upon termination of the previous rights plan and declared a dividend distribution of one preferred stock purchase right ("Right") for each share of common stock outstanding. Each Right represents the right to purchase, if and when the Rights are exercisable, a unit consisting of one one-thousandths of a share ("unit") of Series A Junior Participating Preferred Stock at a purchase price of $65 per unit, subject to adjustment. The exercise price and the number of shares issuable upon the exercise of the Rights are subject to adjustment in certain cases to prevent dilution. The Rights are evidenced by the common stock certificates and are not exercisable, or transferable apart from the common stock, until ten days after a person (i) acquires 15% or more of the common stock or (ii) commences a tender offer which would result in the ownership of 15% or more of the common stock or the Board of Directors determines that any person has become an Adverse Person as that term is defined in the plan. In the event any person becomes the beneficial owner of 15% or more of the common stock or the Board of Directors declares a person to be an Adverse Person, each of the Rights (other than Rights held by the party triggering the Rights and certain transferees which are voided) becomes a discount right entitling the holder to acquire common stock having a value equal to twice the Right's exercise price. In the event the Company is acquired in a merger or other business combination transaction (including one in which the Company is the surviving corporation), each Right will entitle its holder to purchase, at the then current exercise price of the Right, that number of shares of common stock of the surviving company which at the time of such transaction would have a market value of two times the exercise price of the Right. The Rights do not have any voting rights and are redeemable, at the option of the Company, at a price of $0.01 per Right at any time until ten days after a person acquires beneficial ownership of at least 15% of the common stock. The Rights expire on May 29, 2006. So long as the Rights are not separately transferable, the Company will issue one Right with each new share of common stock issued. On April 26, 1995, the board of directors declared a three-for-two stock split effected in the form of a 50% common stock dividend, payable May 22, 1995, to holders of record on May 8, 1995. On January 22, 1993, the board of directors declared a two-for-one stock split effected in the form of a 100% common stock dividend, payable March 1, 1993, to holders of record on February 12, 1993. All share and per share amounts have been adjusted to give retroactive effect to these stock splits. 30 Woodhead Industries, Inc. 1996 Annual Report - -------------------------------------------------------------------------------- 6. The Company is subject to federal and state hazardous substance CONTINGENT cleanup laws that impose liability for the costs of cleaning up LIABILITIES 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 is investigating and has begun to remediate this area and believes that it is an additional likely source of contamination of soil and groundwater. In addition, the investigation of the site indicates that the groundwater contaminants have migrated off-site. The Company is currently discussing various remediation alternatives for both on-site and off-site contamination with the DEQ. The Company is conducting additional investigations to determine the extent of contamination at and around the site and to determine the extent of other sources of contamination in addition to the removed UST and the above-referenced disposal area, including the possible presence of ongoing dumping activities by others in the vicinity around the Company's facilities. The Company's consultant estimates that a minimum of $800,000 of investigation and remediation expenses remains to be incurred at the 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. 31 - -------------------------------------------------------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 7. Under the Company's stock option plans, options to purchase STOCK OPTION common shares may be granted to directors, officers and key PLANS employees at a price not less than the market value at date of grant. As of September 28, 1996, 1,316,950 unissued common shares are reserved under all stock option plans which includes 145,800 shares available for future grants. The following grants are outstanding and exercisable: Fiscal Year Number of Option Price Expiration of Grant Shares Per Share Date ----------------------------------------------------------------- 1987 3,000 $ 5.21 1997 1988 9,500 3.17 1998 1989 41,000 3.58-4.58 1999 1990 156,100 4.75 2000 1991 169,100 4.25 2001 1992 117,900 5.17 2002 1993 243,150 6.98-8.42 2003 1994 148,950 10.33 2004 1995 146,850 9.33 2005 1996 135,600 14.00-14.31 2006 ----------------------------------------------------------------- 1,171,150 ----------------------------------------------------------------- The following summarizes the options granted, exercised and expired during the last three fiscal years: Option Price Number of Shares* Per Share* 1996 1995 1994 ----------------------------------------------------------------- Granted $14.00-15.50 135,600 106,700 115,900 Exercised 3.17-14.31 45,500 29,300 85,400 Expired -- -- -- -- ----------------------------------------------------------------- Subsequent to September 28, 1996, stock options were granted for 133,900 shares at an average price of $13.30 per share. *Option prices and shares from periods prior to the May 1995 3-for-2 stock split have been presented at their respective historical amounts to reflect actual activity. - -------------------------------------------------------------------------------- 8. United States Foreign Consolidated INFORMATION ------------------------------------------------------------------- ABOUT THE 1996 COMPANY'S Sales to unaffiliated customers $ 87,218 $ 36,462 $ 123,680 OPERATIONS Net income 8,835 1,836 10,671 IN Identifiable assets at DIFFERENT September 28, 1996 56,529 21,856 78,385 GEOGRAPHIC ------------------------------------------------------------------- AREAS 1995 Sales to unaffiliated customers $ 90,324 $ 29,679 $ 120,003 Net income 7,867 1,361 9,228 Identifiable assets at September 30, 1995 53,152 20,259 73,411 ------------------------------------------------------------------- 1994 Sales to unaffiliated customers $ 83,652 $ 22,037 $ 105,689 Net income 7,056 194 7,250 Identifiable assets at October 1, 1994 47,322 14,941 62,263 ------------------------------------------------------------------- 32 Woodhead Industries, Inc. 1996 Annual Report - -------------------------------------------------------------------------------- 9. The following is a summary of quarterly data for 1996, 1995, and SUMMARY OF 1994. QUARTERLY DATA Net Gross Net Net Income (UNAUDITED) Sales Profit Income Per Share ----------------------------------------------------------------- 1996 First Quarter $ 29,968 $ 13,177 $ 2,203 $ .20 Second Quarter 31,675 14,045 2,615 .24 Third Quarter 30,557 13,728 2,897 .26 Fourth Quarter 31,480 14,181 2,956 .27 ----------------------------------------------------------------- Total $123,680 $ 55,131 $ 10,671 $ .98 ----------------------------------------------------------------- 1995 First Quarter $ 27,667 $ 11,747 $ 1,830 $ .17 Second Quarter 31,413 13,799 2,203 .20 Third Quarter 30,329 13,101 2,305 .21 Fourth Quarter 30,594 13,815 2,890 .27 ----------------------------------------------------------------- Total $120,003 $ 52,462 $ 9,228 $ .85 ----------------------------------------------------------------- 1994 First Quarter $ 23,536 $ 10,014 $ 1,426 $ .13 Second Quarter 26,938 11,873 1,634 .15 Third Quarter 27,446 12,088 1,927 .18 Fourth Quarter 27,769 12,644 2,263 .21 ----------------------------------------------------------------- Total $105,689 $ 46,619 $ 7,250 $.68 ----------------------------------------------------------------- - -------------------------------------------------------------------------------- 10. On September 29, 1995, the Company acquired all of the assets of ACQUISITIONS Elitec S.A. for $599,000 excluding cash. Located outside of Paris, France, Elitec is a distributor of industrial connectors and sensors that serve the automation and computer-control needs of many industries. The acquisition was accounted for under the purchase method, and the net assets and results of operations are included in the Company's Consolidated Financial Statements from the date of acquisition. 33 - -------------------------------------------------------------------------------- REPORT OF The management of Woodhead Industries, Inc. is responsible for MANAGEMENT the integrity of the information presented in this Annual Report, including the Company's financial statements. These statements have been prepared in conformity with generally accepted accounting principles and include, where necessary, informed estimates and judgments by management. The Company maintains systems of accounting and internal controls designed to provide assurance that assets are properly accounted for as well as to insure that the financial records are reliable for preparing financial statements. The systems are augmented by qualified personnel and are reviewed on a periodic basis. Our independent auditors, Arthur Andersen LLP, conduct annual audits of our financial statements in accordance with generally accepted auditing standards, which include the review of internal controls for the purpose of establishing audit scope, and issue an opinion on the fairness of such financial statements. The Audit Committee of the Board of Directors, which is composed solely of outside Directors, meets periodically with management and the independent auditors to review the manner in which they are performing their responsibilities and to discuss auditing, internal accounting controls, and financial reporting matters. The independent auditors periodically meet alone with the Audit Committee and have free access to the Audit Committee at any time. /s/ C. Mark DeWinter /s/ Robert G. Jennings C. Mark DeWinter Robert G. Jennings President and Vice President, Finance and Chief Executive Officer Chief Financial Officer - -------------------------------------------------------------------------------- REPORT OF To Woodhead Industries, Inc.: INDEPENDENT PUBLIC We have audited the accompanying consolidated balance sheets of ACCOUNTANTS WOODHEAD INDUSTRIES, INC. (a Delaware corporation) AND SUBSIDIARIES as of September 28, 1996, September 30, 1995, and October 1, 1994, and the related consolidated statements of income, stockholders' investment, and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of WOODHEAD INDUSTRIES, INC. AND SUBSIDIARIES as of September 28, 1996, September 30, 1995, and October 1, 1994, and the results of their operations and their cash flows for the years then ended in conformity with generally accepted accounting principles. /s/ Arthur Andersen LLP Chicago, Illinois November 12, 1996 34 EX-21 4 EXHIBIT 21 SUBSIDIARIES OF THE REGISTRANT The subsidiaries of the Company at September 28, 1996 were: Name of Subsidiary State or Other Jurisdiction in Which Organized AI/FOCS, Inc. State of Delaware FOCS Midwest, Inc. State of Delaware Aero-Motive Company State of Michigan Aero-Motive (U.K.) Limited United Kingdom Woodhead France S.A.R.L. France Elitec S.A. France Central Rubber Company State of Illinois Daniel Woodhead Company State of Delaware H. F. Vogel GmbH Electrotechnische Fabrik Germany Woodhead Asia Pte. Ltd. Singapore Woodhead Canada Ltd. Province of Ontario Woodhead de Mexico S.A. de C.V. Mexico Woodhead Industries (The Netherlands) B.V. The Netherlands Akapp Electro Industrie B.V. The Netherlands W.I.S. Corp. U.S. Virgin Islands 20 EX-23 5 EXHIBIT 23 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation by reference of our report dated November 12, 1996 incorporated by reference in this Form 10-K, into the previously filed Woodhead Industries, Inc. Registration Statement on Form S-8 (Registration #33-77968). ARTHUR ANDERSEN LLP Chicago, Illinois December 23, 1996 21 EX-27 6 FDS EXH.27
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF INCOME SECTIONS FOUND IN EXHIBIT 13 OF THE COMPANY'S 10K FOR THE YEAR-TO-DATE, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 12-MOS SEP-28-1996 SEP-28-1996 10,050 0 19,472 695 12,707 47,050 64,499 40,834 78,385 18,729 0 0 0 10,419 47,458 78,385 123,680 123,680 68,549 68,549 1,129 0 0 16,832 6,161 10,671 0 0 0 10,671 .98 .98
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