-----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, SkP9vuS4dEagFET22wUw5rfJnE3JQTiPiuC3/WUzW33tkIBXXYChNGESPglLGHUT kAduTu5WlcL/cGn413Efag== 0000891804-99-000239.txt : 19990210 0000891804-99-000239.hdr.sgml : 19990210 ACCESSION NUMBER: 0000891804-99-000239 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19990102 FILED AS OF DATE: 19990209 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WOODHEAD INDUSTRIES INC CENTRAL INDEX KEY: 0000108215 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC LIGHTING & WIRING EQUIPMENT [3640] IRS NUMBER: 361982580 STATE OF INCORPORATION: DE FISCAL YEAR END: 0927 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-05971 FILM NUMBER: 99526496 BUSINESS ADDRESS: STREET 1: THREE PKWY NORTH STREET 2: STE 550 CITY: DEERFIELD STATE: IL ZIP: 60015 BUSINESS PHONE: 8472369300 MAIL ADDRESS: STREET 1: THREE PWKY NORTH STREET 2: STE 550 CITY: DEERFIELD STATE: IL ZIP: 60015 FORMER COMPANY: FORMER CONFORMED NAME: WOODHEAD DANIEL CO DATE OF NAME CHANGE: 19710624 10-Q 1 WOODHEAD INDUSTRIES, INC. 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES ACT OF 1934 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ACT OF 1934 For the Quarter Ended January 2, 1999 Commission File Number 0-5971 WOODHEAD INDUSTRIES, INC. - ------------------------------------------------------------------------------- DELAWARE 36-1982580 - ------------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer Identification incorporation or organization) Number) THREE PARKWAY NORTH, SUITE 550, DEERFIELD, IL. 60015 - ------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number including area code (847) 236-9300 - ------------------------------------------------------------------------------- (Former name, former address or former fiscal year, if changes since last reports) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes X No On January 30, 1999 there were 11,090,901 shares of the Registrant's common stock outstanding.
PART I. FINANCIAL INFORMATION WOODHEAD INDUSTRIES, INC. CONDENSED CONSOLIDATED BALANCE SHEETS January 2, 1999 and October 3, 1998 ASSETS (Amounts in thousands) Unaudited CURRENT ASSETS 1/2/99 10/3/98 --------- --------- Cash and short-term securities $ 4,763 $ 2,923 Accounts receivable 26,916 26,792 Refundable income taxes 767 795 Inventories (Note 3) 19,873 19,431 Prepaid taxes and other expenses 7,920 7,695 --------- --------- Total current assets $ 60,239 $ 57,636 --------- --------- DEFERRED INCOME TAXES AND OTHER ASSETS $ 2,268 $ 2,324 --------- --------- PROPERTY, PLANT & EQUIPMENT, at cost $ 115,948 $ 114,076 Less: Accumulated depreciation (50,901) (48,792) --------- --------- Net property, plant and equipment $ 65,047 $ 65,284 --------- --------- GOODWILL $ 29,929 $ 30,697 --------- --------- TOTAL ASSETS $ 157,483 $ 155,941 ========= ========= LIABILITIES & STOCKHOLDERS' INVESTMENT CURRENT LIABILITIES Accounts payable $ 8,930 $ 7,828 Accrued expenses 15,973 17,656 Income taxes 1,932 837 Portion of long-term debt payable within one year -- -- --------- --------- Total current liabilities $ 26,835 $ 26,321 --------- --------- OTHER LIABILITIES $ 2,040 $ 2,070 --------- --------- LONG-TERM DEBT $ 52,500 $ 53,000 --------- --------- STOCKHOLDERS' INVESTMENT: (Note 5) Preferred stock $ -- $ -- Common stock 11,089 11,032 Additional paid-in capital 9,735 9,276 Cumulative translation adjustment (1,594) (1,276) Retained earnings 56,878 55,518 --------- --------- Total stockholders' investment $ 76,108 $ 74,550 --------- --------- TOTAL LIABILITIES & STOCKHOLDERS' INVESTMENT $ 157,483 $ 155,941 ========= =========
See accompanying notes to condensed consolidated financial statements. -2-
WOODHEAD INDUSTRIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Amounts in thousands except per share data, unaudited) Three Months Ended -------------------------- 1/2/99 12/27/97 -------- --------- NET SALES $ 38,836 $ 34,350 COST OF SALES 22,356 19,380 -------- -------- GROSS PROFIT $ 16,480 $ 14,970 % of Net Sales 42.4% 43.6% OPERATING EXPENSES 12,125 10,063 -------- -------- INCOME FROM OPERATIONS $ 4,355 $ 4,907 OTHER EXPENSES ( INCOME) INTEREST EXPENSE (INCOME) $ 874 $ (56) OTHER (INCOME) EXPENSES, NET (397) 287 -------- -------- NET OTHER EXPENSES $ 477 $ 231 INCOME BEFORE INCOME TAXES $ 3,878 $ 4,676 PROVISION FOR INCOME TAXES $ 1,525 $ 1,868 -------- -------- NET INCOME $ 2,353 $ 2,808 ======== ======== NET INCOME PER SHARE(Note 4) BASIC $ 0.21 $ 0.27 ======== ======== DILUTED $ 0.21 $ 0.25 ======== ======== WEIGHTED AVERAGE COMMON SHARES OUTSTANDING BASIC 11,048 10,561 ======== ======== DILUTED 11,399 11,223 ======== ======== DIVIDENDS PER SHARE $ 0.090 $ 0.090 ======== ========
See accompanying notes to condensed consolidated financial statements. -3-
WOODHEAD INDUSTRIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW (Amounts in thousands - unaudited) Three Months Ended -------------------- 1/2/99 12/27/97 ------ -------- Cash Flows from Operating Activities: Net income for the period $ 2,353 $ 2,808 Adjustments to reconcile net income to net cash flows from operating activities: Depreciation and amortization 2,616 1,292 Change in Assets and Liabilities: (Increases) Decreases in: Accounts receivable (124) 469 Inventories (442) 176 Prepaid expenses (225) (339) Deferred income taxes and other assets 78 2 Increases (Decreases) in: Accounts payable 1,102 (1,144) Accrued expenses (1,713) (3,145) Income taxes 1,123 2,110 Deferred income taxes -- 168 ------- ------- Net cash flows provided by operating activities $ 4,768 $ 2,397 ------- ------- Cash Flows from Investing Activities: Purchases of property, plant & equipment $(1,934) $(3,474) Retirements or sales of property, plant and equipment (4) 28 ------- ------- Net cash flows used for investing activities $(1,938) $(3,446) ------- ------- Cash Flows from Financing Activities: Payments on long-term debt $ (500) $ -- Sales of stock 516 221 Dividend payments (993) (950) ------- ------- Net cash flows used for financing activities $ (977) $ (729) ------- ------- Effect of exchange rates $ (13) $ 90 ------- ------- Net Increase (Decrease) in Cash & short-term securities $ 1,840 $(1,688) ======= ======= Supplemental disclosures of cash flow information: Cash paid during the period for: Interest $ 73 $ 10 Income taxes $ 127 $ 360
See accompanying notes to condensed consolidated financial statements. -4- WOODHEAD INDUSTRIES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS January 2, 1999 (Unaudited) (1) The condensed consolidated balance sheets at January 2, 1999, and October 3, 1998, and the condensed consolidated statements of income and cash flow for the three-month periods ended January 2, 1999, and December 27, 1997, reflect, in the opinion of the Company, all adjustments necessary to present fairly the financial position for such periods. All such adjustments were of a normal recurring nature. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to S.E.C. rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. It is suggested that these condensed consolidated financial statements be read in conjunction with the consolidated financial statements and notes thereto included in the Company's latest annual report on Form 10-K. (2) The results of operations for the three-month periods ended January 2, 1999, and December 27, 1997, are not necessarily indicative of the results to be expected for the full year. (3) The estimated breakdown of raw materials and work-in-process and finished goods inventories at January 2, 1999, and October 3, 1998, is as follows: (in thousands) 1/2/99 10/3/98 ------ ------- Raw materials $13,721 $12,881 Work-in-process and finished goods 11,227 11,600 ------ ------- Inventories before LIFO reserve 24,948 24,481 Less: Reserve to reduce to LIFO (5,075) (5,050) ------ ------- Inventories, net $19,873 $19,431 ======= ======= (4) Income per share is based upon the weighted average number of common shares outstanding for the basic calculation (11,048,000 for the quarter ended January 2, 1999 and 10,561,000 for the quarter ended December 27, 1997) and the weighted average number of common shares outstanding plus dilutive common stock options for the diluted calculation (11,399,000 for the quarter ended January 2, 1999 and 11,223,000 for the quarter ended December 27, 1997). (5) Authorized stock is 40,000,000 shares consisting of 10,000,000 shares of preferred stock, par value $.01 per share, and 30,000,000 shares of common stock, par value $l.00 per share. No shares of preferred stock have been issued. Common shares outstanding at January 2, 1999 and October 3, 1998 were 11,089,000 and 11,032,000, respectively. (6) Certain amounts in the prior period financial statements have been reclassified to conform with the current period presentation. -5- (7) The Company, as a result of its global operating activities, is exposed to changes in foreign currency exchange rates which may adversely affect its results of operations and financial condition. In seeking to minimize the risks and/or costs associated with such activities, the Company manages exposure to changes in foreign currency exchange rates through its regular operating activities and, when deemed appropriate, through the use of derivative financial instruments. The Company uses financial instruments to selectively hedge and thereby attempts to reduce its overall exposure to the effects of foreign currency fluctuations. The company does not use derivative financial instruments for speculative purposes. The Company uses foreign currency forward and swap contracts to hedge a portion of the currency risks of transactions denominated in foreign currencies. Gains and losses on these foreign currency hedges are generally offset by corresponding losses and gains on the underlying transactions. In 1998 the Company entered into a foreign currency swap agreement with a AA- rated counterparty to hedge a portion of its investment in its Italian subsidiary. Under the terms of the agreement, the Company will swap 35.52 billion Lire for $20.0 million amortized over the next 8 years. In addition, the contract provides for the Company to make annual interest payments of 6.50% on the outstanding Lire balance, while receiving 7.43% on the outstanding Dollar balance. Due to the fact that this contract is an effective hedge of an investment in a foreign entity, any gain or loss on the contract is recorded directly to cumulative translation adjustment in shareholders' equity. (8) Effective October 4, 1998, the Company adopted Financial Accounting Standards Board Statement No. 130 - Comprehensive Income. Comprehensive income includes all changes in equity during a period except those resulting from investments by, and distributions to, Share Owners. Comprehensive income, shown net of tax if applicable, for the three month periods ending January 2, 1999 and December 27, 1997, is as follows: (in thousands) Three Months Ended -------------------------- 1/2/99 12/27/97 -------- -------- Net Income $ 2,353 $ 2,808 Foreign Currency Translation Adjustment (207) 71 ------ ------- Comprehensive Income $ 2,146 $ 2,879 ======= ======= -6- WOODHEAD INDUSTRIES, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FINANCIAL CONDITION Working capital increased by $2.1 million during the quarter ended January 2, 1999. The current ratio of 2.2 to 1 for the quarter was the same as at the end of the prior fiscal year. Long-term debt decreased to $52.5 million from the prior year end, resulting in a debt to total capitalization (debt plus equity) ratio of 40.8%. Return on assets declined to 2.8% from 14.7% and return on equity declined to 4.8% from 19.2% for the comparable 12-month periods ending January 2, 1999 and December 27, 1997, respectively. The decline in Return on Assets and Return on Equity was primarily due to certain charges in the fourth quarter of the 1998 fiscal year. The Company's financial position remains strong and significant borrowing capacity is available should the need arise. The Company is party to an environmental matter which obligates it to investigate, remediate or mitigate the effects on the environment of the release of certain substances at one of the Company's facilities. For additional information concerning the environmental matter, see "Item 1. Legal Proceedings". OPERATING RESULTS First quarter Net Sales rose 13.1% to $38.8 million from $34.4 million reported for the same period last year, primarily due to the recent acquisitions of SST and mPm S.r.l. Domestic sales decreased by 5.3% compared with the same period last year, primarily due to the weakness in demand for the Company's Brad Harrison products as related to the continued delay of major project business. International sales rose by 62.4% during the first quarter of fiscal 1998 and constituted 39.0% of total sales of the quarter just ended. This increase reflects sales by mPm, which was acquired on February 27, 1998 as well as continued market strength in Europe, which supported substantial sales increases at our European subsidiaries. The backlog of unfilled orders was $13.2 million compared with $11.5 million at fiscal year-end 1998 and $9.5 million reported a year ago. Gross profit of $16.5 million was $1.5 million or 10.1% greater than in the same quarter last year. Gross profit margins declined to 42.4% from 43.6% due to the impact of SST and mPm. Operating expenses increased 20.5% to $12.1 million from $10.0 million in the first quarter of fiscal 1999. As a percent of net sales, operating expenses increased to 31.2% from 29.3%. Interest expense increased due to the debt related to the 1998 acquisitions of SST and mPm. Other expenses decreased due to gains in foreign exchange and absence of expenses incurred last year for the startup of the Company's new plant in Juarez, Mexico, and unrelated employee severance costs. Net income decreased by 16.2% to $2.4 million from $2.8 million. Basic earnings per share were $0.21 compared with $0.27 in the first quarter of last year. Earnings per share on a diluted basis were $0.21 compared with $0.25 in the first quarter of last year. -7- OTHER The Company has been assessing and addressing the impact of the Year 2000 issue on its business over the past two years. As a result of the ongoing assessment, the Company has been modifying or replacing various hardware and software platforms throughout the Company. Since the Company is operated in a decentralized manner, each of its operating locations is addressing whether its systems, vendors, equipment and products are or will be Year 2000 compliant. The compliance status at each subsidiary is being monitored by Corporate personnel on a quarterly basis to ensure that required courses of action are being executed in a timely fashion. Management believes the modification of its computer information systems will be completed in adequate time to enable proper processing of transactions relating to the Year 2000 and beyond. However, if such systems are not timely modified, such a delay could have a material adverse effect on the Company. Expenses associated with the Year 2000 issue are currently reflected in the Company's financial statements. Consultants' fees incurred at its various subsidiaries are being expensed when incurred while new systems are being capitalized. Although the Company has not accumulated the normal costs of updating business systems which occur on an ongoing basis that also address the Year 2000 issue, it is believed that these costs do not have a material financial effect on the Company as a whole. At present, the Company is evaluating contingency plan alternatives. The Company believes the key risk factors associated with Year 2000 are those it cannot directly control, primarily the readiness of its key suppliers, distributors, customers, public infrastructure suppliers and other vendors. The Company's subsidiaries have each initiated discussions with those third parties to determine their Year 2000 compliance status, and is keeping the communication channels open with respect to their readiness. While the Company is working diligently to ensure its mission critical third parties will be compliant, there can be no assurance that the systems of any third party on which the Company's systems and operations rely will be timely converted and will not have a material adverse effect on the Company. Certain statements in this Form 10-Q may constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve numerous assumptions, known and unknown risks, uncertainties and other factors which may cause actual and future performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, but are not limited to: achieving sales levels to fulfill revenue expectations; the absence of presently unexpected costs or charges, certain of which may be outside the control of the Company; general economic and business conditions; the ability to integrate acquisitions; shifts in market demand for the Company's products and competition. -8- PART II. OTHER INFORMATION WOODHEAD INDUSTRIES, INC. Item 1. Legal Proceedings The Company is subject to federal and state hazardous substance cleanup laws that impose liability for the costs of cleaning up contamination resulting from past spills, disposal or other releases of hazardous substances. In this regard, the Company has incurred, and expects to incur, assessment, remediation and related costs at one of the Company's facilities. In 1991, the Company reported to state regulators a release at that site from an underground storage tank ("UST"). The UST and certain contaminated soil subsequently were removed and disposed of at an off-site disposal facility. The Company's independent environmental consultant has been conducting an investigation of soil and groundwater at the site with oversight by the state Department of Environmental Quality ("DEQ"). The investigation indicates that additional soil and groundwater at the site have been impaired by chlorinated solvents, including tetrachloroethane and trichloroethylene, and other compounds. Also, the Company learned that a portion of the site had been used as a disposal area by the previous owners of the site. The Company's consultant has remediated the soils in this area but believes that it is the primary source of contamination of groundwater, both on-site and off-site. In addition, the investigation of the site indicates that the groundwater contaminants have migrated off-site. The Company has implemented a groundwater remediation system for the on-site contamination. During the past year, the Company was required to modify this system in order to address treatment problems created by changed conditions, and these modifications increased the estimated long term cost of the on-site remediation. The Company continues to monitor and analyze conditions to determine the continued efficacy of this system. The Company has also modified the design of its proposed remediation alternative for the off-site groundwater contamination because of changed off-site conditions, and is currently reviewing this alternative with the DEQ. The Company continues to investigate the extent of other sources of contamination in addition to the removed UST and the above-referenced disposal area, including possible evidence of past or current releases by others in the vicinity around the Company's facilities. The Company's consultant has estimated that a minimum of approximately $2,045,000 of investigation and remediation expenses remain to be incurred, both on-site and off-site. The Company has initiated discussions with the previous owners of the site and various insurers concerning possible claims by the Company for contribution to the cost of the investigation and remediation of the site. The consultant's cost estimate was based on a review of currently available data and assumptions concerning the extent of contamination, geological conditions, and the costs and effectiveness of certain treatment technologies. The cost estimate continues to be subject to substantial uncertainty because of the extent of the contamination area, the variety and nature of geological conditions throughout the contamination area, changes in remediation technology, and ongoing DEQ feedback. The Company is continuing to monitor the 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. -9- PART II. OTHER INFORMATION WOODHEAD INDUSTRIES, INC. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits (11) Computation of earnings per share (27) Financial data schedule (Electronic filings only) (b) Reports on Form 8-K filed during the quarter ended January 2, 1999 1. Form 8-K/A on October 14, 1998 Item 7. Financial statements, pro forma financial information and exhibits. -10- SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. WOODHEAD INDUSTRIES, INC. /s/ Robert G. Jennings 2/9/99 ------------------------ ---------- Robert G. Jennings Date Vice President - Finance (Chief Financial Officer) /s/ Joseph P. Nogal 2/9/99 ----------------------- ---------- Joseph P. Nogal Date Vice President, Treasurer/Controller (Chief Accounting Officer) -11- EX-11 2 COMPUTATION OF EARNINGS
EXHIBIT 11 WOODHEAD INDUSTRIES, INC. COMPUTATION OF EARNINGS PER SHARE (Amounts in thousands, except per share data - unaudited) Three Months Ended Three Months Ended 1 /2/99 12/27/97 ------------------ ------------------ Basic Diluted Basic Diluted ------- ------- ------- ------- Net Income $ 2,353 $ 2,353 $ 2,808 $ 2,808 ======= ======= ======= ======= Weighted average common shares 11,048 11,048 10,561 10,561 Dilutive common stock options - 351 - 662 ------- ------- ------- ------- Weighted average common shares plus dilutive common stock options 11,048 11,399 10,561 11,223 ======= ======= ======= ======= Earnings per share $0.21 $0.21 $0.27 $0.25 ======= ======= ======= =======
-12- EX-27 3 WOODHEAD INDUSTRIES FDS
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF INCOME FOUND ON PAGES 2 AND 3 OF THE COMPANY'S FORM 10Q FOR THE YEAR TO DATE AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 U.S. DOLLARS 3-MOS OCT-02-1999 JAN-02-1999 1 4,763 0 26,916 0 19,873 60,239 115,948 50,901 157,483 26,835 0 0 0 11,089 65,019 157,483 38,836 38,836 22,356 22,356 0 0 874 3,878 1,525 2,353 0 0 0 2,353 .21 .21
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