<PAGE>
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.
<PAGE>
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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
For the three years ended September 28, 1996
(in thousands)
<TABLE>
<CAPTION>
Additions
------------------------
Charged to
Balance at Charged To Other Balance
Beginning Costs and Accounts Deductions at End
Description of Period Expenses -Describe -Describe of Period
- ----------------------- ---------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C>
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)
</TABLE>
- --------------------
(1) Represents write-offs less recoveries.
(2) Foreign currency translation adjustment.
(3) Business acquired.
11
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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
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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
<PAGE>
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
<PAGE>
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
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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
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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
<PAGE>
EXHIBIT INDEX (cont'd)
<TABLE>
<CAPTION>
Exhibit
Number Description Page
- --------- -------------------- ----
<S> <C> <C>
(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.
</TABLE>
18
<PAGE>
COMPUTATION OF PER SHARE EARNINGS
(in thousands except per share information)
<TABLE>
<CAPTION>
For the Years Ended
---------------------------------------------------------
1996 1995 1994
----------------- ----------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
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
------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- -------
</TABLE>
19
<PAGE>
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
<PAGE>
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
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL PROFILE
<TABLE>
<CAPTION>
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE, EMPLOYEES, AND STOCKHOLDERS) 1996 1995 1994 1993
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
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
----------------------------------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
18
<PAGE>
WOODHEAD INDUSTRIES, INC. 1996 ANNUAL REPORT
<TABLE>
<CAPTION>
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE, EMPLOYEES, AND STOCKHOLDERS) 1992 1991 1990 1989
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
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.
<CAPTION>
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE, EMPLOYEES, AND STOCKHOLDERS) 1988 1987 1986
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
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
-----------------------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
19
<PAGE>
- --------------------------------------------------------------------------------
CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
As of September 28, 1996, September 30, 1995, and October 1, 1994.
(AMOUNTS IN THOUSANDS) 1996 1995 1994
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
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.
</TABLE>
20
<PAGE>
Woodhead Industries, Inc. 1996 Annual Report
<TABLE>
<CAPTION>
For the years ended September 28, 1996, September 30, 1995, and October 1, 1994.
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA) 1996 1995 1994
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
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.
</TABLE>
21
<PAGE>
- --------------------------------------------------------------------------------
CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
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 -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
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.
</TABLE>
22
<PAGE>
Woodhead Industries, Inc. 1996 Annual Report
<TABLE>
<CAPTION>
For the years ended September 28, 1996, September 30, 1995, and October 1, 1994.
(AMOUNTS IN THOUSANDS) 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
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
---------------------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
23
<PAGE>
- --------------------------------------------------------------------------------
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
<PAGE>
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
<PAGE>
- --------------------------------------------------------------------------------
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
<PAGE>
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:
<TABLE>
<CAPTION>
1996 1995 1994
----------------------------------------------------------------------------------------
<S> <C> <C> <C>
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%
----------------------------------------------------------------------------------------
</TABLE>
27
<PAGE>
- --------------------------------------------------------------------------------
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.)
<TABLE>
<CAPTION>
1996 1995 1994
---------------------------------------------------------------------------------------
<S> <C> <C> <C>
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
---------------------------------------------------------------------------------------
</TABLE>
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
<PAGE>
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
<PAGE>
- --------------------------------------------------------------------------------
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
<PAGE>
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
<PAGE>
- --------------------------------------------------------------------------------
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
<PAGE>
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
<PAGE>
- --------------------------------------------------------------------------------
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
<PAGE>
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
<PAGE>
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
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
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.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-28-1996
<PERIOD-END> SEP-28-1996
<CASH> 10,050
<SECURITIES> 0
<RECEIVABLES> 19,472
<ALLOWANCES> 695
<INVENTORY> 12,707
<CURRENT-ASSETS> 47,050
<PP&E> 64,499
<DEPRECIATION> 40,834
<TOTAL-ASSETS> 78,385
<CURRENT-LIABILITIES> 18,729
<BONDS> 0
0
0
<COMMON> 10,419
<OTHER-SE> 47,458
<TOTAL-LIABILITY-AND-EQUITY> 78,385
<SALES> 123,680
<TOTAL-REVENUES> 123,680
<CGS> 68,549
<TOTAL-COSTS> 68,549
<OTHER-EXPENSES> 1,129
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 16,832
<INCOME-TAX> 6,161
<INCOME-CONTINUING> 10,671
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,671
<EPS-PRIMARY> .98
<EPS-DILUTED> .98
</TABLE>
