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 27,
1997 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 jusistriction 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 22, 1997 was $207,764,872. Shares outstanding as of
November 22, 1997 were 10,569,914.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's definitive proxy statement dated December 19, 1997,
for the annual meeting of stockholders to be held January 23, 1998, and portions
of the Annual Report to Stockholders for the year ended September 27, 1997 are
incorporated by reference in Parts I, II, III, and IV.
<PAGE>
ANNUAL REPORT FORM 10-K
FOR THE YEAR ENDED SEPTEMBER 27, 1997
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
<PAGE>
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 1997.
INDUSTRY SEGMENTS
The Company consists of one business segment which can best be described as
specialty power and signaling devices. That segment accounted for 99% of the
sales and 98% of the earnings in 1997 and during the past five years has
averaged 99% of sales and 96% 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
<PAGE>
Part I - cont'd.
The percent of sales and income for the three product classifications over
the past five years is as follows:
<TABLE>
<CAPTION>
SALES INCOME
--------------------------------------- --------------------------------------
1997 1996 1995 1994 1993 1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Electrical specialties 70 67 66 68 68 80 77 81 78 75
Reels and power systems 29 31 33 31 30 18 18 16 18 20
Molded rubber products 1 2 1 1 2 2 5 3 4 5
</TABLE>
DISTRIBUTION
All of the Company's products are 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 22, 1997, there were unshipped orders totaling approximately
$9.2 million. Last year's backlog at approximately the same date was $10.0
million.
3
<PAGE>
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 believes 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 27, 1997, September 28, 1996, and September
30, 1995, the Company expended approximately $3,025,000, $2,513,000, and
$2,404,000, 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 1,259 full-time employees.
FOREIGN AND EXPORT BUSINESS
See footnote 8, page 29 of the Annual Report to Stockholders for the year
ended September 27, 1997, 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 42,000 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. In 1997, a 10.7 acre parcel of
land was purchased in Juarez, Mexico. In addition, 1.2 acres of land was leased
in Bretten, Germany. Both parcels were acquired for construction of new
facilities which currently is in progress.
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; 6,500 square
feet in Lagny-Sur-Marne, France; 5,900 square feet in Singapore; and 200 square
feet in Japan. 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 1998.
4
<PAGE>
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 has remediated the soils
in this area and believes that it is an additional source of contamination of
groundwater, both on-site and off-site. In addition, the investigation of the
site indicates that the groundwater contaminants have migrated off-site. The
Company has implemented a groundwater remediation system for the on-site
contamination, and continues to monitor and analyze conditions to determine the
continued efficacy of this system. The Company has selected a remediation
alternative for the off-site groundwater contamination and is currently
reviewing this alternative with the DEQ. The Company also is conducting
additional investigations to determine the extent of other sources of
contamination in addition to the removed UST and the above-referenced disposal
area, including possible evidence of past or current releases by others in the
vicinity around the Company's facilities.
The Company's consultant estimates that a minimum of approximately $890,000 of
investigation and remediation expenses remain to be incurred, both on-site and
off-site. The Company has a reserve for such purposes and has notified the
previous owners of the site and various insurers of possible claims by the
Company relating to the remediation of the site. The consultant's cost estimate
was based on a review of currently available data, which is limited, and
assumptions concerning the extent of contamination, geological conditions, and
the costs and effectiveness of certain treatment technologies. The cost estimate
is subject to substantial uncertainty until the extent of contamination and
geological conditions are fully understood, feasible remedial alternatives are
assessed, and the DEQ approves a remediation plan. The Company is continuing to
investigate the environmental conditions at the site and will adjust its reserve
if necessary. The Company may incur significant additional assessment,
remediation and related costs at the site, and such costs could materially and
adversely affect the Company's consolidated net income for the period in which
such costs are incurred. At this time, the Company, however, cannot estimate the
time or potential magnitude of such costs, if any.
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 27, 1997.
5
<PAGE>
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 26 of the Annual Report to
Stockholders for the year ended
September 27, 1997, 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:
1997 1996
----------------------------- ------------------------------
Fiscal Fiscal
Quarter High Low Quarter High Low
1st 14 1/4 12 1/4 1st 16 3/4 13 7/8
2nd 16 3/4 13 1/4 2nd 15 13
3rd 19 1/4 14 3/4 3rd 15 1/2 10
4th 21 1/8 17 3/4 4th 13 3/4 11 3/4
(b) The number of holders of record of the Company's securities as of
December 10, 1997, was as follows:
Title of Class Number of Stockholders
Common Stock 559
Preferred Stock Purchase Rights 559
6
<PAGE>
Part II - cont'd.
(c) The cash dividends declared for the past two years were as follows:
1997 1996
--------------------------- ---------------------------
Fiscal Quarter Rate Fiscal Quarter Rate
1st $0.080 1st $0.065
2nd $0.080 2nd $0.070
3rd $0.090 3rd $0.070
4th $0.090 4th $0.070
------ ------
Total $0.340 Total $0.275
====== ======
ITEM 6. SELECTED FINANCIAL DATA
The "Financial Profile" appearing on pages 14 and 15 of the Annual Report
to Stockholders for the year ended September 27, 1997, 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 12 and 13 of the Annual Report to Stockholders for the year ended
September 27, 1997, 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 11 and the
consolidated financial statements with accompanying footnotes appearing on pages
16 through 30 of the Annual Report to Stockholders for the year ended September
27, 1997, 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
<PAGE>
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 19, 1997, for the annual meeting of stockholders
to be held on January 23, 1998, 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 55 Chairman, President and July, 1993
Chief Executive Officer
Robert G. Jennings 59 Vice President, Finance and July, 1987
Chief Financial Officer
Robert J. Tortorello 48 Vice President, General January, 1991
Counsel and Secretary
Robert A. Moulton 48 Vice President, Human May, 1987
Resources
Gregory E. Baker 34 Vice President, Corporate October, 1997
Development and
Strategic Planning
Joseph P. Nogal 42 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 23, 1998.
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. 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
<PAGE>
Part III - cont'd.
Mr. Gregory E. Baker joined the Company in October, 1997 as Vice
President, Corporate Development and Strategic Planning. He previously
had served as Director, Supply Chain Optimization and also Manager,
Corporate Development for Tenneco Packaging from 1995 to 1997. Prior to
that he held a variety of positions with both AlliedSignal and Texas
Instruments from 1986 to 1995.
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 and 7 of the Registrant's
definitive proxy statement dated December 19, 1997, for the annual meeting
of stockholders to be held on January 23, 1998, 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 19, 1997, for the
annual meeting of stockholders to be held January 23, 1998, 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 and 8 of the
Registrant's definitive proxy statement dated December 19, 1997, for the
annual meeting of stockholders to be held January 23, 1998, 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 19, 1997, for the annual meeting of
stockholders to be held January 23, 1998, 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 27, 1997, September 28,
1996, and September 30, 1995.
9
<PAGE>
Part IV - cont'd.
Consolidated Statements of Income - for the years ended September 27,
1997, September 28, 1996, and September 30, 1995.
Consolidated Statements of Stockholders' Investment - for the years
ended September 27, 1997, September 28, 1996, and September 30, 1995.
Consolidated Statements of Cash Flow - for the years ended September
27, 1997, September 28, 1996, and September 30, 1995.
Notes to Consolidated Financial Statements.
2. Financial Statement Schedules
The following consolidated financial information for the years ended
September 27, 1997, September 28, 1996, and September 30, 1995, 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 27, 1997.
(c) Reference is made to Item 14(a) 3 above.
(d) Reference is made to Item 14(a) 2 above.
10
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
For the three years ended September 27, 1997
(in thousands)
ADDITIONS
------------------------
Balance at Charged to Charged to Balance
Beginning Costs and Other at End
Description Of Period Expenses Accounts Deductions Of Period
- ------------------------- ---------- ---------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Reserve for excess and
obsolete inventory:
Year ended September 27, 1997 $ 1,192 $ 499 - $(423) (1) $ 1,270
2 (2)
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)
- -------------
<FN>
(1) Represents write-offs less recoveries.
(2) Foreign currency translation adjustment.
</FN>
</TABLE>
11
<PAGE>
SUPPLEMENTARY NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
ACCRUED EXPENSES
Accrued expenses at September 27, 1997, September 28, 1996, and September 30,
1995, consisted of the following:
(in thousands)
1997 1996 1995
---- ---- ----
Payroll $3,872 $3,014 $3,386
Pension and profit sharing 2,305 1,828 1,399
Environmental 890 800 1,519
Litigation & related expenses 163 159 936
Commissions 1,261 995 780
Insurance 277 428 474
Other 4,273 4,030 4,015
----- ----- -----
$13,041 $11,254 $12,509
======= ======= =======
12
<PAGE>
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 27, 1997 incorporated by reference in
this Form 10-K, and have issued our report thereon dated November 11, 1997. 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 11, 1997
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. 333-26379 (filed May 2, 1997):
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 12/4/97
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/ C. Mark DeWinter Chairman 12/4/97
C. Mark DeWinter President and C.E.O.
/s/ Charles W. Denny Director 12/9/97
Charles W. Denny
/s/Eugene P. Nesbeda Director 12/5/97
Eugene P. Nesbeda
/s/ Sarilee K. Norton Director 12/15/97
Sarilee K. Norton
/s/ Alan L. Shaffer Director 12/11/97
Alan L. Shaffer
/s/ Robert D. Tuttle Director 12/15/97
Robert D. Tuttle
/s/ Richard A. Virzi Director 12/15/97
Richard A. Virzi
15
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description Page
- ------- ----------- ----
(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) By-laws of the Company, as amended, for the fiscal year ended
September 27, 1997, are filed as an exhibit to this report. 19-29
(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, and amended on October
31, 1997, 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
<PAGE>
EXHIBIT INDEX (cont'd.)
Exhibit
Number Description Page
- ------- ----------- ----
(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
are 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 as set forth in Exhibit A of
Registrant's definitive proxy statement dated December 20,
1996, for the annual meeting of stockholders held January 24,
1997, which is incorporated herein by reference and made a
part hereof.
(g) 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.
(h) The Management Incentive Plan effective for fiscal 1997 as
described on page 17 of the Registrant's definitive proxy
statement dated December 20, 1996, for the annual meeting of
stockholders held January 24, 1997, which page is
incorporated herein by reference and made a part hereof.
(i) 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.
(j) 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.
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EXHIBIT INDEX (cont'd)
Exhibit
Number Description Page
- ------- ----------- ----
(10) (k) 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 30
(13) The following items incorporated by reference herein from the Annual
Report to Stockholders for the year ended September 27, 1997 (the "1997
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 29 of the 1997 Annual Report;
(b) Information under the footnote entitled "Capital Stock" set
forth on Page 26 of the 1997 Annual Report;
(c) Information under the section entitled "Financial Profile" set
forth on Pages 14-15 of the 1997 Annual Report;
(d) Information under the section entitled "Management's
Discussion of Operations and Financial Position" set forth on
Pages 12-l3 of the 1997 Annual Report;
(e) Report of Independent Public Accountants set forth on Page 11
of the 1997 Annual Report;
(f) Consolidated Financial Statements set forth Pages 16-19 of
the 1997 Annual Report; and
(g) Notes to Consolidated Financial Statements set forth on Pages
20-30 of the 1997 Annual Report.
(21) Subsidiaries of the Registrant 31
(23) Consent of Arthur Andersen LLP 32
(27) Financial Data Schedule for the year ended September 27, 1997, filed
as an exhibit to this report.
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BY-LAWS
WOODHEAD INDUSTRIES, INC.
(Including all amendments through June 10, 1997)
Article I
OFFICES
The corporation shall maintain a principal office in the State of
Delaware as required by law. The corporation may also have offices in such other
places either within or without the State of Delaware as the Board of Directors
may from time to time designate or as the business of the corporation may
require.
Article II
SEAL
The seal of the corporation shall be circular in form and shall have the
name of the corporation on the circumference and the words "Corporate Seal
Delaware" in the center. The seal may be used by causing it or a facsimile
thereof, to be impressed or affixed or in any other manner reproduced.
Article III
MEETINGS OF STOCKHOLDERS
Section 1. PLACE. Meetings of the stockholders of the corporation shall
be held at such place either within or without the State of Delaware as may from
time to time be designated by the Board of Directors and stated in the notice of
meeting.
Section 2. ANNUAL MEETING. Commencing in 1986, an annual meeting of the
stockholders of the corporation shall be held in each year at 10:00 A.M. on the
fourth Friday in January (or if that be a legal holiday, then on the next
business day) or at such other date and time as shall be designated from time to
time by the Board of Directors and stated in the notice of meeting, for the
election of directors and for the transaction of such other business as may
properly be brought before the meeting.
Section 3. STOCKHOLDER ACTION: SPECIAL MEETINGS. Any action required or
permitted to be taken by the stockholders of the corporation must be effected at
a duly called annual or special meeting of such holders and may not be effected
by any consent in writing by such holders. Except as otherwise required by law
and subject to the rights of the holders of any class or series of stock having
a preference over the Common Stock as to dividends or upon liquidation, special
meetings of stockholders of the corporation may be called only by the Board of
Directors pursuant to a resolution approved by a majority of the entire Board of
Directors.
Section 4. NOTICE. Written notice of all meetings of the stockholders
shall be mailed to or delivered to each stockholder entitled to vote at such
meeting not less than ten nor more than sixty days before the date of the
meeting. Notice of any special meeting shall state in general terms the purposes
for which the meeting is to be held.
Section 5. LIST OF STOCKHOLDERS. The officer who has charge of the stock
ledger of the corporation shall prepare and make, at least ten days before every
meeting of stockholders, a complete list of the stockholders entitled to vote at
the meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
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Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present.
Section 6. QUORUM. The holders of a majority of the issued and
outstanding shares of the capital stock of the corporation entitled to vote
thereat, present in person or represented by proxy, shall constitute a quorum
for the transaction of business at all meetings of the stockholders except as
may otherwise be provided by law, by the Certificate of Incorporation or by
these by-laws; but if there be less than a quorum, the holders of a majority of
the stock so present or represented may adjourn the meeting from time to time,
without notice other than announcement at the meeting, until a quorum shall be
present or represented. When a quorum is present at any meeting, the vote of the
holders of a majority of the stock having voting power present in person or
represented by proxy shall decide any question brought before such meeting,
unless the question is one upon which by express provision of the statutes or of
the certificate of incorporation, a different vote is required in which case
such express provision shall govern and control the decision of such question.
Section 7. VOTING. At all meetings of the stockholders, every registered
owner of shares entitled to vote may vote in person or by proxy and shall have
one vote for each such share standing in his name on the books of the
corporation, but no proxy shall be voted or acted upon after three years from
its date, unless the proxy provides for a longer period. The Board of Directors,
or, if the Board shall not have made the appointment, the chairman presiding at
any meeting of stockholders, shall have power to appoint two or more persons to
act as inspectors or tellers, to receive, canvass, and report the votes cast by
the stockholders at such meeting; but no candidate for the office of director
shall be appointed as inspector or teller at any meeting for the election of
directors.
Section 8. CHAIRMAN OF MEETING. The Chairman of the Board of Directors,
or, in his absence, the President, or in the absence of both the Chairman of the
Board of Directors and the President, a Vice President shall preside at all
meetings of the stockholders; and, in the absence of the Chairman of the Board
of Directors, the President and Vice President, the Board of Directors may
appoint any stockholder to act as chairman of the meeting.
Section 9. SECRETARY OF THE MEETING. The Secretary of the corporation
shall act as secretary of all meetings of the stockholders; and, in his absence,
the chairman may appoint any person to act as secretary of the meeting.
Article IV
BOARD OF DIRECTORS
Section l. MANAGEMENT OF CORPORATION. The business and affairs of the
corporation shall be managed by or under the direction of its Board of
Directors.
Section 2. NUMBER AND CLASSIFICATION OF BOARD. The Board of Directors
shall consist of not more than twelve (12) members, and no less than five (5)
members. The Board of Directors shall be divided into three classes: class I,
class II and class III. Such classes shall be as nearly equal in number as
possible. The Directors in each class shall stand for election in successive
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years. At each annual election, the directors chosen to succeed those whose
terms have expired shall be identified as being in the same class as the
directors whom they succeed and shall be elected for a term expiring at the
third succeeding annual meeting of stockholders or thereafter in each case when
their respective successors are elected and qualified. When the number of
directors is changed any increase or decrease in the number of directorships
shall be apportioned among the classes so as to make all classes as nearly equal
in number as possible.
Section 3. REMOVAL. Subject to the rights of any class or series of
stock having a preference over the Common Stock as to dividends or upon
liquidation to elect directors under specified circumstances, any director may
be removed from office, with or without cause, and only by the affirmative vote
of the holders of eighty percent of the combined voting power of the then
outstanding shares of stock entitled to vote generally in the election of
directors, voting together as a single class.
Section 4. NOMINATIONS. Subject to the rights of holders of any class or
series of stock having a preference over the Common Stock as to dividends or
upon liquidation nominations for the election of directors may be made by the
Board of Directors or a proxy committee appointed by the Board of Directors or
by any stockholder entitled to vote in the election of directors generally.
However, any stockholder entitled to vote in the election of directors generally
may nominate one or more persons for election as directors at a meeting only if
written notice of such stockholder`s intent to make such nomination or
nominations has been given, either by personal delivery or by United States
mail, postage prepaid, to the Secretary of the corporation not later than (i)
with respect to an election to be held at an annual meeting of stockholders, 90
days in advance of such meeting, and (ii) with respect to an election to be held
at a special meeting of stockholders for the election of directors, the close of
business on the seventh day following the date on which notice of such meeting
is first given to stockholders. Each such notice shall set forth: (a) the name
and address of the stockholder who intends to make the nomination and of the
person or persons to be nominated: (b) a representation that the stockholder is
a holder of record of stock of the corporation entitled to vote at such meeting
and intends to appear in person or by proxy at the meeting to nominate the
person or persons specified in the notice; (c) a description of all arrangements
or understandings between the stockholder and each nominee and any other person
or persons (naming such person or persons) pursuant to which the nomination or
nominations are to be made by the stockholder; (d) such other information
regarding each nominee proposed by such stockholder as would be required to be
included in a proxy statement filed pursuant to the proxy rules of the
Securities and Exchange Commission, had the nominee been nominated, or intended
to be nominated, by the Board of Directors; and (e) the consent of each nominee
to serve as a director of the corporation if so elected. The chairman of the
meeting may refuse to acknowledge the nomination of any person not made in
compliance with the foregoing procedure.
Section 5. VACANCY. A reduction in the number of directors to a number
less than nine (9) but more than five (5) shall not be deemed to create a
vacancy on the board. Whenever any vacancy or other appointment to the Board of
Directors shall occur, by reason of death, resignation, or increase in the
number of directors or otherwise, it may be filled by a majority of the
remaining directors, though less than a quorum, or by a sole remaining director,
and the director(s) so chosen shall hold office until the next annual election
(or if the directors are divided into classes, until the next election of the
class for which such director has been chosen), and until his successor shall be
elected and qualified. All appointments to the Board of Directors shall be
ratified by the stockholders at their annual meeting next following such
appointment.
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Section 6. PLACE OF MEETINGS. The Board of Directors may hold meetings,
both regular and special, and keep the books of the corporation either within or
without the State of Delaware.
Section 7. ANNUAL MEETING. The annual meeting of the Board of Directors,
of which no notice shall be necessary, shall be held immediately following the
annual meeting of the stockholders or immediately following any adjournment
thereof for the purpose of the organization of the Board and the election or
appointment of officers for the ensuing year and for the transaction of such
other business as may conveniently and properly be brought before such meeting.
Section 8. REGULAR MEETING. Regular meetings of the Board of Directors
may be held without notice at such time and at such place as shall from time to
time be determined by the board.
Section 9. SPECIAL MEETINGS. Special meetings of the Board of Directors
may be called by order of the Chairman of the Board, the President, or by
one-third of the directors for the time being in office. The Secretary shall
give notice of the time and place of each special meeting by mailing the same at
least two days before the meeting or by telephoning or telegraphing the same at
least one day before the meeting to each director.
Section 10. CONDUCT OF MEETINGS. At meetings of the Board of Directors,
the Chairman of the Board, the President, or a designated Vice President shall
preside. A majority of the members of the Board of Directors shall constitute a
quorum for the transaction of business, but less than a quorum may adjourn any
meeting from time to time, without notice other than announcement at the
meeting, until a quorum shall be present, whereupon the meeting may be held, as
adjourned, without further notice. At any meeting at which every director shall
be present, even though without any notice, any business may be transacted. An
act of a majority of the directors present at which there is a quorum shall be
the act of the Board of Directors, except as may be otherwise specifically
provided by statute, or by the certificate of incorporation or the by-laws.
Section 11. COMPENSATION. The directors shall receive such compensation
for their services as directors and as members of any committee appointed by the
Board as may be prescribed by the Board of Directors and shall be reimbursed by
the corporation for ordinary and reasonable expenses incurred in the performance
of their duties. No such payment shall preclude any director from serving the
corporation in any other capacity and receiving compensation therefor.
Section 12. INDEMNIFICATION AND INSURANCE.
(a) Right To Indemnification. Each person who was or is made a party or
is threatened to be made a party to or is otherwise involved (including
involvement as a witness) in any action, suit or proceeding, whether civil,
criminal, administrative or investigative (hereinafter a "proceeding"), by
reason of the fact that he or she is or was a director or officer of the
corporation or, while a director or officer of the corporation, is or was
serving at the request of the corporation as a director, officer, employee or
agent of another corporation or of a partnership, joint venture, trust or other
enterprise, including service with respect to an employee benefit plan
(hereinafter an "indemnitee"), whether the basis of such proceeding is alleged
action in an official capacity as a director or officer or in any other capacity
while serving as a director or officer, shall, be indemnified and held harmless
by the corporation to the fullest extent authorized by the Delaware General
Corporation Law, as the same exists or may hereafter be amended (but, in the
case of any such amendment, only to the extent that such amendment permits the
corporation to provide broader indemnification rights than permitted prior
thereto), against all expense, liability and loss (including attorneys` fees,
judgments, fines, ERISA excise taxes or penalties and amounts paid in
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settlement) reasonably incurred or suffered by such indemnitee in connection
therewith and such indemnification shall continue as to an indemnitee who has
ceased to be a director, officer, employee or agent and shall inure to the
benefit of the indemnitee`s heirs, executors and administrators; provided,
however, that, except as provided in paragraph (b) hereof with respect to
proceedings to enforce rights to indemnification, the corporation shall
indemnify any such indemnitee in connection with a proceeding (or part thereof)
initiated by such indemnitee only if such proceeding (or part thereof) was
authorized by the board of directors of the corporation. The right to
indemnification conferred in this Section shall be a contract right and shall
include the right to be paid by the corporation the expenses incurred in
connection with any such proceeding in advance of its final disposition
(hereinafter an "advancement of expenses"); provided, however, that, if and to
the extent that the Delaware General Corporation Law requires, an advancement of
expenses incurred by an indemnitee in his or her capacity as a director or
officer (and not in any other capacity in which service was or is rendered by
such indemnitee, including, without limitation, service to an employee benefit
plan) shall be made only upon delivery to the corporation of an undertaking
(hereinafter an "undertaking"), by or on behalf of such indemnitee, to repay all
amounts so advanced if it shall ultimately be determined by final judicial
decision from which there is no further right to appeal (hereinafter a "final
adjudication") that such indemnitee is not entitled to be indemnified for such
expenses under this Section or otherwise.
(b) Right Of Indemnitee To Bring Suit. If a claim for indemnification
(including the advancement of expenses) under paragraph (a) of this Section is
not paid in full by the corporation within forty-five days after a written claim
has been received by the corporation, except in the case of a claim for an
advancement of expenses, in which case the applicable period shall be twenty
days, the indemnitee may at any time thereafter bring suit against the
corporation to recover the unpaid amount of the claim. If successful in whole or
in part in any such suit, or in a suit brought by the corporation to recover an
advancement of expenses pursuant to the terms of an undertaking, the indemnitee
shall be entitled to be paid also the expense of prosecuting or defending such
suit. In any suit brought by the indemnitee to enforce a right to
indemnification hereunder (but not in a suit brought by the indemnitee to
enforce a right to an advancement of expenses) it shall be a defense that the
indemnitee has not met the applicable standard of conduct set forth in the
Delaware General Corporation Law. In any suit by the corporation to recover an
advancement of expenses pursuant to the terms of an undertaking the corporation
shall be entitled to recover such expenses upon a final adjudication that the
indemnitee has not met the applicable standard of conduct set forth in the
Delaware General Corporation Law. Neither the failure of the corporation
(including its board of directors, independent legal counsel, or its
stockholders) to have made a determination that indemnification of the
indemnitee is proper in the circumstances because the indemnitee has met the
applicable standard of conduct set forth in the Delaware General Corporation
Law, nor an actual determination by the corporation (including its board of
directors, independent legal counsel, or its stockholders) that the indemnitee
has not met such applicable standard of conduct, shall create a presumption that
the indemnitee has not met the applicable standard of conduct or, in the case of
such a suit brought by the indemnitee, be a defense to such suit. In any suit
brought by the indemnitee to enforce a right to indemnification or to an
advancement of expenses hereunder, or by the corporation to recover an
advancement of expenses pursuant to the terms of an undertaking, the burden of
proving that the indemnitee is not entitled to be indemnified, or to such
advancement of expenses, under this Section or otherwise shall be on the
corporation.
(c) Service For Subsidiaries. Any person serving as a director, officer,
employee or agent of another corporation, partnership, joint venture or other
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enterprise, at least 50% of whose equity interests are owned by the corporation
(hereinafter a "subsidiary"), shall be conclusively presumed to be serving in
such capacity at the request of the corporation.
(d) Reliance. Persons who after the date of the adoption of this
provision become or remain directors or officers of the corporation or who,
while a director or officer of the corporation, become or remain a director,
officer, employee or agent of a subsidiary, shall be conclusively presumed to
have relied on the rights to indemnity and advancement of expenses contained in
this Section 12 in entering into or continuing such service. The rights to
indemnification and to the advancement of expenses conferred in this Section
shall apply to claims made against an indemnitee arising out of acts or
omissions which occurred or occur both prior and subsequent to the adoption
hereof.
(e) Non-exclusivity Of Rights. The rights to indemnifcation and to the
advancement of expenses conferred in this Section shall not be exclusive of any
other right which any person may have or hereafter acquire under this
certificate of incorporation or under any statute, by-law, agreement, vote of
stockholders or disinterested directors or otherwise.
(f) Insurance. The corporation may maintain insurance, at its expense,
to protect itself and any director, officer, employee or agent of the
corporation or another corporation, partnership, joint venture, trust or other
enterprise against any expense, liability or loss, whether or not the
corporation would have the power to indemnify such person against such expense,
liability or loss under the Delaware General Corporation Law.
(g) Indemnification Of Employees And Agents Of The Corporation. The
corporation may, to the extent authorized from time to time by the board of
directors, grant rights to indemnification and to the advancement of expenses,
to any employee or agent of the corporation to the fullest extent of the
provisions of this Section with respect to the indemnification and advancement
of expenses of directors and officers of the corporation.
Section 13. MANIFESTATION OF DISSENT. A director of the corporation who
is present at a meeting of the Board of Directors at which action on any
corporate matter is taken shall be presumed to have assented to the action taken
unless his dissent shall be entered in the minutes of the meeting or unless he
shall file his written dissent to such action with the person acting as the
secretary of the meeting before the adjournment thereof or shall forward such
dissent by registered mail to the Secretary of the corporation immediately after
the adjournment of the meeting. Such right to dissent shall not apply to a
director who voted in favor of such action.
Article V
COMMITTEES OF DIRECTORS
Section 1. DESIGNATION OF COMMITTEES. The Board of Directors may, by
resolution passed by a majority of the whole board, designate one or more
committees, each committee to consist of one or more of the directors of the
corporation. The board may designate one or more directors as alternate members
of any committee, who may replace any absent or disqualified member at any
meeting of the committee. In the absence or disqualification of a member of a
Committee, the member or members thereof present at any meeting and not
disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any such absent or disqualified member. Any such
committee, to the extent provided in the resolution of the Board of Directors,
shall have and may exercise all the powers and authority of the Board of
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Directors in the management of the business and affairs of the corporation, and
may authorize the seal of the corporation to be affixed to all papers which may
require it; but no such committee shall have the power or authority in reference
to amending the certificate of incorporation, adopting an agreement of merger or
consolidation, recommending to the stockholders the sale, lease or exchange of
all or substantially all of the corporation`s property and assets, recommending
to the stockholders a dissolution of the corporation or a revocation of a
dissolution, or amending the by-laws of the corporation; and, unless the
resolution or the certificate of incorporation expressly so provide, no such
committee shall have the power or authority to declare a dividend or to
authorize the issuance of stock. Such committee or committees shall have such
name or names as may be determined from time to time by resolution adopted by
the Board of Directors.
Section 2. MINUTES OF MEETINGS. Each committee shall keep regular
minutes of its meetings and report the same to the Board of Directors when
required.
Section 3. RULES OF PROCEDURE. A majority of the members of any
committee may fix its rules of procedure. All action taken by any committee
shall be reported to the Board of Directors at a meeting succeeding such action
and shall be subject to revision, alteration, and approval by the Board of
Directors; provided that no rights or acts of third parties shall be affected by
any such revision or alteration.
Article VI
OPERATING DIVISIONS OF THE CORPORATION
Section 1. TITLES. The Board of Directors of the corporation may from
time to time confer on the employees of the corporation assigned to any
operating division of the corporation, or discontinue, the title of President,
Vice President, and any other title or titles deemed appropriate of such
operating division. The designation of any such official titles for employees
assigned to operating divisions of the corporation shall not be permitted to
conflict in any way with any executive or administrative authority established
from time to time by the corporation. Any employee so designated as an officer
of an operating division shall have authority, responsibilities and duties with
respect to his operating division corresponding to those normally vested in the
comparable officer of the corporation by these by-laws, subject to such
limitations as may be imposed by the Board of Directors of the corporation.
Article VII
OFFICERS
Section 1. ELECTION. The Board of Directors shall elect the officers of
the corporation who shall be a president, a vice-president, a secretary and a
treasurer. The Board of Directors may also elect a Chairman of the Board and may
elect or appoint additional vice-presidents, one or more assistant secretaries
and assistant treasurers and such other or additional officers as in its opinion
are desirable for the conduct of the business of the corporation. No officer
other than the Chairman of the Board need be a director.
Section 2. REMOVAL. In its discretion the Board of Directors, by the
vote of a majority of the whole Board, may leave unfilled for any such period as
it may fix by resolution any office except those of President, Treasurer, and
Secretary. Any officer or agent elected or appointed by the Board of Directors
shall be subject to removal at any time by the affirmative vote of a majority of
the whole Board of Directors. Any officer, agent, or employee, other than
officers and agents elected or appointed by the Board of Directors, shall hold
office at the discretion of the officer appointing them.
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Section 3. DUTIES OF CHAIRMAN. The Chairman of the Board of Directors if
elected, or failing his election, the President, shall preside at all meetings
of the stockholders and of the Board of Directors and shall perform such other
duties as may be prescribed from time to time by the Board of Directors or by
the by-laws.
Section 4. DUTIES OF PRESIDENT. The President shall be the chief
executive and administrative officer of the corporation. In the absence of the
Chairman of the Board, he shall preside at all meetings of the stockholders and
of the Board of Directors. He shall exercise such duties as customarily pertain
to the office of President and shall have general and active supervision over
the property, business and affairs of the corporation and over its several
officers. He may appoint officers, agents, or employees other than those
appointed by the Board of Directors. He may sign, execute, and deliver in the
name of the corporation powers of attorney, contracts, bonds, and other
obligations and shall perform such other duties as may be prescribed from time
to time by the Board of Directors or by the by-laws.
Section 5. DUTIES OF VICE PRESIDENTS. The Vice Presidents shall have
such powers and perform such duties as may be assigned to them by the Board of
Directors or the President. In the absence or disability of the President, the
Vice President designated by the Board or the President shall perform the duties
and exercise the powers of the President. A Vice President may sign and execute
contracts and other obligations pertaining to the regular course of his duties.
Section 6. DUTIES OF TREASURER. The Treasurer shall, subject to the
direction of a designated Vice President, have general custody of all the funds
and securities of the corporation and have general supervision of the collection
and disbursement of funds of the corporation. He shall endorse on behalf of the
corporation for collection checks, notes, and other obligations, and shall
deposit the same to the credit of the corporation in such bank or banks or
depositories as the Board of Directors may designate. He may sign, with the
President, or such other person or persons as may be designated for the purpose
by the Board of Directors, all bills of exchange or promissory notes of the
corporation. He shall enter or cause to be entered regularly in the books of the
corporation full and accurate account of all moneys received and paid by him on
account of the corporation; shall at all reasonable time exhibit his books and
accounts to any director of the corporation upon application at the office of
the corporation during business hours; and, whenever required by the Board of
Directors or the President, shall render a statement of his accounts. He shall
perform such other duties as may be prescribed from time to time by the Board of
Directors or by the by-laws. If required by the Board of Directors he shall give
bond for the faithful performance of his duties in such sum and with such surety
as shall be approved by the Board of Directors.
Section 7. SECRETARY AND ASSISTANT SECRETARY. The Secretary shall,
subject to the direction of a designated Vice President, keep the minutes of all
meetings of the stockholders and of the Board of Directors, and to the extent
ordered by the Board of Directors or the President, the minutes of meetings of
all committees. He shall cause notice to be given of meetings of stockholders,
of the Board of Directors, and of any committee appointed by the Board. He shall
have custody of the corporate seal and general charge of the records,
documents, and papers of the corporation not pertaining to the performance of
the duties vested in other officers, which shall at all reasonable times be open
to the examination of any director. He may sign or execute contracts with the
President or a Vice President thereunto authorized in the name of the
corporation. He, or an Assistant Secretary, shall have authority to affix the
corporate seal to any instrument requiring it and when so affixed, it may be
attested by his signature or by the signature of such Assistant Secretary. He
shall perform such other duties as may be prescribed from time to time by the
Board of Directors or by the by-laws. The Assistant Secretary, or if there be
26
<PAGE>
more than one, the Assistant Secretaries in the order determined by the Board of
Directors shall, in the absence of the Secretary or in the event of his
inability or refusal to act, perform the duties and exercise the power of the
Secretary.
Section 8. BANK ACCOUNTS. In addition to such bank accounts as may be
authorized in the usual manner by resolution of the Board of Directors, the
Treasurer of the corporation with the approval of the President may authorize
such bank accounts to be opened or maintained in the name and on behalf of the
corporation as he may deem necessary or appropriate, payments from such bank
accounts to be made upon and according to the check of the corporation which may
be signed jointly or singly by either the manual or facsimile signature or
signatures of such officer or bonded employee or such officers or bonded
employees of the corporation as shall be specified in the written instructions
of the Treasurer of the corporation with the approval of the President of the
corporation.
Section 9. VACANCIES. In case any office shall become vacant, the Board
of Directors shall have power to fill such vacancies. In case of the absence or
disability of any officer, the Board of Directors may delegate the powers or
duties of any officer to another officer or a director for the time being.
Section 10. EXERCISE OF RIGHTS AS STOCKHOLDERS. Unless otherwise ordered
by the Board of Directors, the President or a Vice President thereunto duly
authorized by the President shall have full power and authority on behalf of the
corporation to attend and to vote at any meeting of stockholders of any
corporation in which this corporation may hold stock, and may exercise on behalf
of this corporation any and all of the rights and powers incident to the
ownership of such stock at any such meeting, and shall have power and authority
to execute and deliver proxies and consents on behalf of this corporation in
connection with the exercise by this corporation of the rights and powers
incident to the ownership of such stock. The Board of Directors, from time to
time, may confer like powers upon any other person or persons.
Article VIII
CAPITAL STOCK
Section 1. STOCK CERTIFICATES. Every holder of stock in the corporation
shall be entitled to have a certificate, signed by, or in the name of the
corporation by, the chairman of the Board of Directors, or the president or a
vice-president and the Treasurer or an assistant treasurer, or the secretary or
an assistant secretary of the corporation, certifying the number of shares owned
by him in the corporation.
Section 2. FACSIMILE SIGNATURES. Any of or all the signatures on the
certificate may be facsimile. In case any officer, transfer agent or registrar
who has signed or whose facsimile signature has been placed upon a certificate
shall have ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the corporation with the same effect
as if he were such officer, transfer agent or registrar at the date of issue.
Section 3. TRANSFER AGENT. The Board of Directors shall have power to
appoint one or more Transfer Agents and also to appoint one or more Registrars
for the transfer and registration of certificates of stock of any class, and may
require that stock certificates shall be countersigned and registered by one or
more of such Transfer Agents and, if one or more Registrars has also been
appointed by the Board of Directors, by one or more of such Registrars.
Section 4. TRANSFER OF STOCK. Shares of capital stock of the corporation
27
<PAGE>
shall be transferable on the books of the corporation only by the holder of
record thereof in person or by a duly authorized attorney, upon surrender and
cancellation of certificates for a like number of shares.
Section 5. LOST CERTIFICATES. In case any certificate for the capital
stock of the corporation is alleged to be lost, stolen, or destroyed, the Board
of Directors may, before directing a new certificate to be issued in place
thereof, require of the owner thereof such proof of the fact and a bond in such
sum as it may direct as indemnity to the corporation and to its Transfer Agent
and Registrar, if any, against any claim that may be made against them or any of
them with respect to the certificate alleged to have been lost, stolen or
destroyed.
Section 6. HOLDER OF RECORD. The corporation shall be entitled to treat
the holder of record of any share or shares of stock as the holder thereof in
fact and shall not be bound to recognize any equitable or other claim to or
interest in such shares on the part of any other person, whether or not it shall
have express or other notice thereof, except as otherwise expressly provided by
law.
Section 7. FIXING RECORD DATE. In order that the corporation may
determine the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, or to express consent to corporate
action in writing without a meeting, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock or
for the purpose of any other lawful action, the Board of Directors may fix, in
advance, a record date, which shall not be more than sixty nor less than ten
days before the date of such meeting, nor more than sixty days prior to any
other action. A determination of stockholders of record entitled to notice of or
to vote at a meeting of stockholders shall apply to any adjournment of the
meeting.
Article IX
MISCELLANEOUS
Section 1. FISCAL YEAR. The Board of Directors shall have power to fix,
and from time to time change, the fiscal year of the corporation. Unless
otherwise fixed by the Board, the fiscal year of the corporation shall begin on
the Sunday next following the Saturday closest to September 30 in each year and
shall end on the Saturday closest to September 30 in the next ensuing calendar
year.
Section 2. GIVING OF NOTICES. Whenever, under the provisions of the
statutes or of the certificate of incorporation or of these by-laws, notice is
required to be given to any director or stockholder, it shall not be construed
to mean personal notice, but such notice may be given in writing, by mail,
addressed to such director or stockholder, at his address as it appears on the
records of the corporation, with postage thereon prepaid, and such notice shall
be deemed to be given at the time when the same shall be deposited in the United
States mail. Notice to directors may also be given by telephone or telegram.
Section 3. WAIVER OF NOTICE. Whenever any notice is required to be given
under the provisions of the statutes or of the certificate of incorporation or
of these by-laws, a written waiver thereof, signed by the person or persons
entitled to said notice, whether before or after the time stated therein, shall
be deemed equivalent to notice.
Section 4. ACTION OF DIRECTORS BY WRITTEN CONSENT. Unless otherwise
restricted by the certificate of incorporation or these by-laws, any action
28
<PAGE>
required or permitted to be taken at any meeting of the Board of Directors or of
any committee thereof may be taken without a meeting, if all members of the
board or committee, as the case may be, consent thereto in writing, and the
writing or writings are filed with the minutes of proceedings of the board or
committee.
Article X
AMENDMENT
Subject to the provisions of the Certificate of Incorporation, these
by-laws may be altered, amended or repealed at any regular meeting of the
stockholders (or at any special meeting thereof duly called for that purpose) by
a majority vote of the shares represented and entitled to vote at such meeting;
provided that in the notice of such special meeting notice of such purpose shall
be given. Subject to the laws of the State of Delaware, the Certificate of
Incorporation and these by-laws, the Board of Directors may by majority vote of
those present at any meeting at which a quorum is present amend these by-laws,
or enact such other by-laws as in their judgment may be advisable for the
regulation of the conduct of the affairs of the corporation.
29
<PAGE>
<TABLE>
<CAPTION>
COMPUTATION OF PER SHARE EARNINGS
(in thousands except per share information)
FOR THE YEARS ENDED
-------------------------------------------------------------------
1997 1996 1995
------------------ ------------------- -------------------
FULLY FULLY FULLY
PRIMARY DILUTED PRIMARY DILUTED PRIMARY DILUTED
<S> <C> <C> <C> <C> <C> <C>
Net Income $12,280 $12,280 $10,671 $10,671 $ 9,228 $ 9,228
======= ======= ======= ======= ======= =======
Weighted average
common shares
outstanding 10,466 10,466 10,393 10,393 10,351 10,351
Incremental shares
issuable for stock
options outstanding
(Treasury Stock Method) 536 657 538 538 465 532
------- ------- ------- ------ ------ -------
Common and common
equivalent shares 11,002 11,123 10,931 10,931 10,816 10,883
======= ======= ======= ====== ====== -------
Earnings per share $ 1.12 $ 1.10 $ .98 $ .98 $ .85 $ .85
====== ====== ======= ======= ====== =======
</TABLE>
30
<PAGE>
REPORT OF MANAGEMENT
The management of Woodhead Industries, Inc. is responsible for 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
Chairman, President and Vice President, Finance and
Chief Executive Officer Chief Financial Officer
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Woodhead Industries, Inc.:
We have audited the accompanying consolidated balance sheets of WOODHEAD
INDUSTRIES, INC. (a Delaware corporation) AND SUBSIDIARIES as of September 27,
1997, September 28, 1996, and September 30, 1995, 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 27, 1997, September 28, 1996, and September 30,
1995, 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 11, 1997
11
<PAGE>
MANAGEMENT'S DISCUSSION OF OPERATIONS AND FINANCIAL POSITION
FISCAL 1997 RESULTS COMPARED WITH 1996
SALES
The Company's sales of $136.9 million exceeded fiscal 1996 results by $13.2
million or 10.7 percent. Domestic sales drove the majority of the revenue gain
increasing by 14.9 percent and equal to 72.3 percent of total sales. This is in
sharp contrast to last year's slight decline in domestic revenue. Sales in
Europe and Asia increased marginally reflecting market weakness in Europe and
the start of the currency crisis in Asia. While international revenues in native
currencies increased 3.4 percent, these were somewhat offset by the strong U.S.
dollar. During the year, competitive pressures remained high, resulting in
minimal price increases of less than one percent. The backlog of unfilled orders
was $8.8 million at year end compared with $8.6 million at the close of fiscal
1996.
GROSS PROFIT
The substantial gain in gross profit of $6.8 million or 12.4 percent to $62.0
million in 1997 reflects improvement in both sales volume and the gross profit
rate. The increase in the gross profit rate to 45.3 percent in 1997 from 44.6
percent in 1996 resulted from improved product mix derived from higher sales of
the Company's Brad Harrison(R) product line. Other factors also contributing to
the higher gross profit rate were new higher-margin products, $.4 million
reduction in LIFO expense, increased production efficiencies and higher plant
utilization.
OPERATING EXPENSES
Operating expenses were $40.5 million in 1997 -- an increase of $3.2 million or
8.5 percent over 1996. Investment in engineering and product development was
increased by 20.4 percent over 1996 levels reflecting the Company's continued
focus on new products. However, operating expenses as a percent of net sales
decreased from 30.2 percent to 29.6 percent primarily due to limited increases
in marketing and selling expenses.
OTHER EXPENSE/INCOME
Other expenses increased slightly from $1.0 million in 1996 to $1.1 million in
1997. Lower expenses in both amortization, $.2 million, and provision for
environmental cleanup, $.2 million, benefitted the Company. These two items
helped offset the absence of $.8 million in other income in 1996 due to the
favorable resolution of a 1991 lawsuit.
NET INCOME
Record sales coupled with a higher gross profit rate increased net income $1.6
million or 15.1 percent to $12.3 million in 1997. During the year, the Company's
effective tax rate increased from 36.6 percent to 39.6 percent. Higher state
taxes combined with the absence of foreign tax credits utilized in 1996 were the
causes for the higher rate.
FINANCIAL POSITION
There was a $3.4 million increase in working capital during 1997 which brought
the total to $31.7 million. Strong cash flow allowed the Company to begin
construction at two new manufacturing facilities and expand another location in
the U.K. The Company's $15 million revolving credit line was unused during the
year. Looking forward, internal cash flow is expected to be more than adequate
to fund the operating requirements of the company in 1998.
12
<PAGE>
FISCAL 1996 RESULTS COMPARED WITH 1995
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 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 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 expenses declined in 1996 to $1.0 million from $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 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.
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.
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 1997 High Low Dividend
1ST 14 1/4 12 1/4 $.07
2ND 16 3/4 13 1/4 $.08
3RD 19 1/4 14 3/4 $.08
4TH 21 1/8 17 3/4 $.09
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
13
<PAGE>
<TABLE>
FINANCIAL PROFILE
(Amounts in thousands except per share, employees, and stockholders)
OPERATIONS
<CAPTION>
1997 1996 1995 1994
<S> <C> <C> <C> <C>
Net sales $ 136,886 $ 123,680 $ 120,003 $ 105,689
--------- --------- --------- ---------
Cost of sales 74,914 68,549 67,541 59,070
--------- --------- --------- ---------
Gross profit 61,972 55,131 52,462 46,619
% of net sales 45.3% 44.6% 43.7% 44.1%
--------- --------- --------- ---------
Operating and other expenses 41,647 38,299 38,110 35,096
% of net sales 30.4% 31.0% 31.8% 33.2%
Income before income taxes 20,325 16,832 14,352 11,523
% of net sales 14.8% 13.6% 12.0% 10.9%
--------- --------- --------- ---------
Provision for income taxes 8,045 6,161 5,124 4,273
--------- --------- --------- ---------
Net income 12,280 10,671 9,228 7,250
% of net sales 9.0% 8.6% 7.7% 6.9%
% of average assets 14.7% 14.1% 13.6% 12.2%
Return on stockholders' average investment 19.6% 19.7% 19.8% 18.2%
--------- --------- --------- ---------
Earnings per common and common
equivalent share $ 1.12 $ .98 $ .85 $ .68
--------- --------- --------- ---------
Dividends per share .32 .27 .26 .23
--------- --------- --------- ---------
Common and common equivalent shares 11,002 10,931 10,816 10,666
--------- --------- --------- ---------
Memo: Interest (income) expense (290) (161) 97 178
% of net sales (.2)% (.1)% .1% .2%
Depreciation and amortization 4,809 4,813 4,475 4,199
% of net sales 3.5% 3.9% 3.7% 4.0%
Engineering and development 3,025 2,513 2,404 2,148
% of net sales 2.2% 2.0% 2.0% 2.0%
YEAR-END
POSITION
Total assets $ 88,999 $ 78,385 $ 73,411 $ 62,263
--------- --------- --------- ---------
Total liabilities 21,744 20,508 23,007 19,316
--------- --------- --------- ---------
Working capital 31,727 28,321 19,654 14,572
--------- --------- --------- ---------
Current ratio 2.6 TO 1 2.5 to 1 1.9 to 1 1.8 to 1
--------- --------- --------- ---------
Stockholders' investment 67,255 57,877 50,404 42,947
--------- --------- --------- ---------
Long-term debt -- -- -- 63
--------- --------- --------- ---------
Book value per share $ 6.38 $ 5.55 $ 4.86 $ 4.15
--------- --------- --------- ---------
Number of employees 1,259 1,125 1,126 1,079
--------- --------- --------- ---------
Number of stockholders 548 584 571 598
--------- --------- --------- ---------
The accompanying notes are an integral part of these statements.
14
<PAGE>
<CAPTION>
1993 1992 1991 1990
<S> <C> <C> <C> <C>
Net sales $ 89,864 $ 79,518 $ 73,499 $ 72,168
-------- -------- -------- --------
Cost of sales 50,238 43,756 41,753 41,034
-------- -------- -------- --------
Gross profit 39,626 35,762 31,746 31,134
% of net sales 44.1% 45.0% 43.2% 43.1%
-------- -------- -------- --------
Operating and other expenses 30,125 28,007 26,552 22,708
% of net sales 33.5% 35.2% 36.1% 31.5%
Income before income taxes 9,501 7,755 5,194 8,426
% of net sales 10.6% 9.8% 7.1% 11.7%
-------- -------- -------- --------
Provision for income taxes 3,698 3,000 2,374 3,406
Net income 5,803 4,755 2,820 5,020
% of net sales 6.5% 6.0% 3.8% 7.0%
% of average assets 11.1% 10.3% 6.6% 12.6%
Return on stockholders' average investment 16.6% 15.2% 9.7% 18.4%
-------- -------- -------- --------
Earnings per common and common
equivalent share $ .55 $ .47 $ .29 $ .52
-------- -------- -------- --------
Dividends per share .23 .23 .23 .21
-------- -------- -------- --------
Common and common equivalent shares 10,467 10,040 9,615 9,672
-------- -------- -------- --------
Memo: Interest (income) expense 39 (138) 43 (299)
% of net sales .0% (.2)% .1% (.4)%
Depreciation and amortization 3,777 3,229 3,062 2,461
% of net sales 4.2% 4.1% 4.2% 3.4%
Engineering and development 2,105 2,041 1,749 1,577
% of net sales 2.3% 2.6% 2.4% 2.2%
YEAR-END
POSITION
Total assets $ 56,360 $ 48,564 $ 43,709 $ 41,216
-------- -------- -------- --------
Total liabilities 19,700 15,460 14,147 12,638
-------- -------- -------- --------
Working capital 10,538 14,129 11,443 15,542
-------- -------- -------- --------
Current ratio 1.7 to 1 2.1 to 1 2.0 to 1 2.5 to 1
-------- -------- -------- --------
Stockholders' investment 36,660 33,104 29,562 28,578
-------- -------- -------- --------
Long-term debt 2,047 500 500 --
-------- -------- -------- --------
Book value per share $ 3.57 $ 3.31 $ 3.05 $ 2.98
-------- -------- -------- --------
Number of employees 947 764 816 788
-------- -------- -------- --------
Number of stockholders 634 640 710 751
-------- -------- -------- --------
<PAGE>
<CAPTION>
1989 1988 1987
<S> <C> <C> <C>
Net sales $71,443 $71,178 $69,887
-------- ------- -------
Cost of sales 42,070 42,015 42,325
-------- ------- -------
Gross profit 29,373 29,163 27,562
% of net sales 41.1% 41.0% 39.4%
-------- ------- -------
Operating and other expenses 22,195 22,993 21,805
% of net sales 31.1% 32.3% 31.2%
Income before income taxes 7,178 6,170 5,757
% of net sales 10.0% 8.7% 8.2%
-------- ------- -------
Provision for income taxes 2,878 2,490 2,591
-------- ------- -------
Net income 4,300 3,680 3,166
% of net sales 6.0% 5.2% 4.5%
% of average assets 10.3% 8.2% 6.8%
Return on stockholders'
average investment 17.7% 17.1% 12.9%
-------- ------- -------
Earnings per common and common
equivalent share $ .45 $ .39 $ .29
-------- ------- -------
Dividends per share .20 .20 .20
Common and common equivalent shares 9,492 9,387 10,740
-------- ------- -------
Memo: Interest (income) expense 543 1,107 824
% of net sales .8% 1.6% 1.2%
Depreciation and amortization 2,362 2,335 2,328
% of net sales 3.3% 3.3% 3.3%
Engineering and development 1,377 1,574 1,524
% of net sales 1.9% 2.2% 2.2%
YEAR-END
POSITION
Total assets $38,534 $44,720 $44,806
-------- ------- -------
Total liabilities 12,530 22,187 24,327
-------- ------- -------
Working capital 13,245 17,029 16,614
-------- ------- -------
Current ratio 2.3 to 1 2.6 to 1 2.4 to 1
-------- ------- -------
Stockholders' investment 26,004 22,533 20,479
-------- ------- -------
Long-term debt 153 9,394 10,821
-------- ------- -------
Book value per share $ 2.68 $ 2.40 $ 2.18
-------- ------- -------
Number of employees 732 810 840
-------- ------- -------
Number of stockholders 822 920 980
-------- ------- -------
</TABLE>
15
<PAGE>
<TABLE>
CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
As of September 27, 1997, September 28, 1996, and September 30, 1995.
(Amounts in thousands)
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and short-term securities $ 8,284 $ 10,050 $ 4,202
Accounts receivable, less allowances
of $911 in 1997, $695 in 1996,
and $572 in 1995 20,051 18,777 18,965
Inventories (Note 1) 18,067 12,707 12,613
Prepaid expenses 5,054 5,516 5,132
-------- -------- --------
Total current assets $ 51,456 $ 47,050 $ 40,912
-------- -------- --------
Other assets $ 271 $ 557 $ 1,039
-------- -------- --------
Property, plant and equipment (Note 1) $ 74,514 $ 64,499 $ 61,464
Less: Accumulated depreciation 44,016 40,834 37,429
-------- -------- --------
Net property, plant and equipment $ 30,498 $ 23,665 $ 24,035
-------- -------- --------
Goodwill (Note 1) $ 6,774 $ 7,113 $ 7,425
-------- -------- --------
TOTAL ASSETS $ 88,999 $ 78,385 $ 73,411
LIABILITIES AND STOCKHOLDERS' INVESTMENT
Current liabilities:
Accounts payable $ 6,465 $ 6,162 $ 7,033
Accrued expenses 13,041 11,254 12,509
Income taxes payable 223 1,313 1,647
Portion of long-term debt
payable within one year (Note 2) -- -- 69
-------- -------- --------
Total current liabilities $ 19,729 $ 18,729 $ 21,258
-------- -------- --------
Deferred income taxes (Note 3) $ 2,015 $ 1,779 $ 1,749
-------- -------- --------
Long-term debt, less portion payable
within one year shown above (Note 2) $ -- $ -- $ --
-------- -------- --------
Stockholders' investment (Notes 1,2,5 and 7):
Preferred stock $ -- $ -- $ --
Common stock at par,
(Shares issued - 10,541) 10,541 10,419 10,374
Additional paid-in capital 2,765 1,571 1,248
Cumulative translation adjustment (1,487) (616) 140
Retained earnings 55,436 46,503 38,642
-------- -------- --------
Total stockholders' investment $ 67,255 $ 57,877 $ 50,404
-------- -------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' INVESTMENT $ 88,999 $ 78,385 $ 73,411
-------- -------- --------
The accompanying notes are an integral part of these statements.
</TABLE>
16
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF INCOME
For the years ended September 27, 1997, September 28, 1996, and
September 30, 1995.
(Amounts in thousands except per share data)
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
Net sales $ 136,886 $ 123,680 $ 120,003
--------- --------- ---------
Cost of sales 74,914 68,549 67,541
--------- --------- ---------
Gross profit $ 61,972 $ 55,131 $ 52,462
Percent of net sales 45.3% 44.6% 43.7%
--------- --------- ---------
Operating expenses:
Engineering and product development $ 3,025 $ 2,513 $ 2,404
Marketing and sales 22,811 21,384 19,764
General and administrative 14,677 13,434 13,121
--------- --------- ---------
Total operating expenses $ 40,513 $ 37,331 $ 35,289
Percent of net sales 29.6% 30.2% 29.4%
--------- --------- ---------
Income from operations $ 21,459 $ 17,800 $ 17,173
Percent of net sales 15.7% 14.4% 14.3%
--------- --------- ---------
Other expenses (income):
Interest (income) expense $ (290) $ (161) $ 97
Other, net 1,424 1,129 2,724
--------- --------- ---------
Net other expense $ 1,134 $ 968 $ 2,821
--------- --------- ---------
Income before income taxes $ 20,325 $ 16,832 $ 14,352
Percent of net sales 14.8% 13.6% 12.0%
Provision for income taxes (Note 3) 8,045 6,161 5,124
--------- --------- ---------
Net income $ 12,280 $ 10,671 $ 9,228
Percent of net sales 9.0% 8.6% 7.7%
--------- --------- ---------
EARNINGS PER COMMON AND COMMON
EQUIVALENT SHARE (NOTE 1) $ 1.12 $ .98 $ .85
========= ========= =========
The accompanying notes are an integral part of these statements.
</TABLE>
17
<PAGE>
<TABLE>
CONSOLIDATED FINANCIAL STATEMENTS
For the years ended September 27, 1997, September 28, 1996, and
September 30, 1995.
(Amounts in thousands)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' INVESTMENT
<CAPTION>
ADDITIONAL CUMULATIVE TOTAL
COMMON PAID-IN TRANSLATION RETAINED TREASURY STOCKHOLDERS'
STOCK CAPITAL ADJUSTMENT EARNINGS STOCK INVESTMENT
<S> <C> <C> <C> <C> <C> <C>
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 0
Three-for-two stock split (Note 5) 3,450 -- -- (3,450) -- 0
-------- -------- -------- -------- -------- --------
Balance September 30, 1995 $ 10,374 $ 1,248 $ 140 $ 38,642 $ 0 $ 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 $ 0 $ 57,877
Net income for the year -- -- -- 12,280 -- 12,280
Translation adjustment -- -- (871) -- -- (871)
Cash dividends, $.32 per share -- -- -- (3,347) -- (3,347)
Stock option plans 122 1,194 -- -- -- 1,316
-------- -------- -------- -------- -------- --------
BALANCE SEPTEMBER 27, 1997 $ 10,541 $ 2,765 ($ 1,487) $ 55,436 $ 0 $ 67,255
======== ======== ======== ======== ======== ========
The accompanying notes are an integral part of these statements
</TABLE>
18
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
For the years ended September 27, 1997, September 28, 1996, and
September 30, 1995.
(Amounts in thousands)
1997 1996 1995
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income for the year $ 12,280 $ 10,671 $ 9,228
-------- -------- --------
Adjustments to reconcile net income to
net cash flows from operating
activities:
Depreciation and amortization 4,809 4,813 4,475
(Increase) decrease in:
Accounts receivable (1,274) 188 (1,361)
Inventories (5,360) (94) (1,938)
Prepaid expenses 462 (384) (1,224)
Other assets (62) -- (147)
Increase (decrease) in:
Accounts payable 303 (871) 511
Accrued expenses 1,787 (1,255) 1,576
Income taxes payable (1,090) (334) 486
Deferred income taxes 236 30 180
-------- -------- --------
Net cash flows from operating activities $ 12,091 $ 12,764 $ 11,786
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant & equipment $(11,610) $ (5,132) $ (6,620)
Payments for businesses acquired -- -- (599)
Retirements or sales of property,
plant & equipment 58 887 260
-------- -------- --------
Net cash (used for) provided by
investing activities $(11,552) $ (4,245) $ (6,959)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
(Decrease) increase in short-term debt $ -- $ (69) $ (37)
(Decrease) increase in long-term debt -- -- (63)
Sales of stock 1,316 368 399
Dividend payments (3,347) (2,810) (2,657)
-------- -------- --------
Net cash (used for) provided by
financing activities $ (2,031) $ (2,511) $ (2,358)
-------- -------- --------
EFFECT OF EXCHANGE RATES $ (274) $ (160) $ 279
-------- -------- --------
NET (DECREASE) INCREASE IN CASH AND
SHORT-TERM SECURITIES $ (1,766) $ 5,848 $ 2,748
Cash and short-term securities at
beginning of year 10,050 4,202 1,454
-------- -------- --------
Cash and short-term securities
at end of year $ 8,284 $ 10,050 $ 4,202
SUPPLEMENTAL CASH FLOW DATA
Cash paid during the year for:
Interest $ 45 $ 43 $ 97
Income taxes 7,906 5,877 5,179
-------- -------- --------
The accompanying notes are an integral part of these statements.
</TABLE>
19
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except shares and per share, in all tables)
1. SUMMARY OF ACCOUNTING POLICIES
CONSOLIDATION
The consolidated financial statements include the accounts of all subsidiaries,
each of which is wholly owned. Revenue is 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:
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
Inventories valued using FIFO $ 7,588 $ 6,402 $ 5,727
-------- -------- --------
Inventories valued using LIFO:
At FIFO cost $ 14,941 $ 11,082 $ 11,530
Less: Reserve to reduce to LIFO 4,462 4,777 4,644
-------- -------- --------
LIFO inventories $ 10,479 $ 6,305 6,886
-------- -------- --------
TOTAL INVENTORIES $ 18,067 $ 12,707 $ 12,613
-------- -------- --------
Inventory composition at FIFO:
Raw materials $ 12,391 $ 8,917 $ 8,528
Work-in-process and finished goods 10,138 8,567 8,729
-------- -------- --------
TOTAL $ 22,529 $ 17,484 $ 17,257
======== ======== ========
</TABLE>
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:
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
Land $ 5,430 $ 1,297 $ 1,358
Buildings and improvements 15,665 14,368 14,816
Machinery and equipment 20,322 18,390 16,180
Dies and molds 17,951 16,690 15,654
Furniture and office equipment 15,146 13,754 13,456
-------- -------- --------
$ 74,514 $ 64,499 $ 61,464
</TABLE>
20
<PAGE>
GOODWILL
Goodwill is the cost of acquired businesses in excess of the fair value of their
identifiable net assets and is amortized over a period not exceeding 40 years.
The Company regularly reviews the 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 11,002,000 in 1997, 10,931,000 in
1996, and 10,816,000 in 1995.
In February 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 128, "Earnings Per Share" (SFAS
128), which will be effective for the Company in the first quarter of fiscal
1998. When adopted, SFAS 128 will replace the presentation of primary earnings
per share (EPS) with basic EPS. Basic EPS excludes dilution and is computed by
dividing net income available for common stockholders by the weighted average
number of common shares outstanding for the period. Diluted EPS, which reflects
the potential dilution that could occur if securities or other contracts to
issue common stock were exercised or converted, will also need to be disclosed.
The Company's basic earnings per share are not expected to be materially
different from primary earnings per share.
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.
USE OF ESTIMATES IN THE FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect reported amounts and related disclosures. Actual results could differ
from those estimates.
2. LONG-TERM DEBT AND SHORT-TERM BORROWING
Long-term debt consisted of the following:
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
Bank revolving credit agreement $ -- $ -- $ --
Other -- -- 69
-------- -------- --------
Total $ -- $ -- $ 69
Less: Portion of long-term debt payable
within one year -- -- 69
-------- -------- --------
NET LONG-TERM DEBT $ -- $ -- $ --
======== ======== ========
</TABLE>
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, 2000. The average amount owing to
the bank was $0 in 1997, $0 in 1996, and $811,000 in 1995, at weighted average
interest rates of 0.0%, 0.0%, and 6.9%, respectively. Under the Agreement, the
Company is required, among other things, to maintain consolidated tangible net
worth, as defined, of not less than $30,000,000, a debt to EBITDA ratio of not
more than 2.5 to 1.0 and an EBIT to interest coverage ratio of 3 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 $19,000 in 1997, $49,000 in 1996, and $6,000 in
1995, at weighted average interest rates of 7.7%, 8.6%, and 9.3%, respectively.
21
<PAGE>
3. INCOME TAXES
The provision for income taxes for 1997, 1996, and 1995 consisted of the
following:
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
U. S. federal income tax $ 5,257 $ 4,015 $ 3,529
State income taxes 1,191 781 608
Foreign income taxes 1,597 1,365 987
--------- --------- -------
$ 8,045 $ 6,161 $ 5,124
--------- --------- -------
Current provision $ 8,505 $ 5,723 $ 5,467
Deferred provision (460) 438 (343)
--------- --------- -------
$ 8,045 $ 6,161 $ 5,124
--------- --------- -------
</TABLE>
A reconciliation of the federal statutory rate to the effective tax rate is as
follows:
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
Federal statutory rate 34.0% 34.0% 34.0%
State income taxes, net of federal benefit 3.9 3.1 2.8
Difference between U.S. and foreign rates 1.4 1.4 1.3
Other, net .3 (1.9) (2.4)
---- ---- ----
39.6% 36.6% 35.7%
==== ==== ====
</TABLE>
The components of income before income taxes consisted of the following:
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
Domestic $ 16,445 $ 13,508 $ 11,980
Foreign 3,880 3,324 2,372
-------- -------- --------
$ 20,325 $ 16,832 $ 14,352
======== ======== ========
</TABLE>
The components of the deferred tax provisions consisted of the following:
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
Excess of book over tax depreciation
and amortization $ (19) $ 6 $ (16)
Excess of book loss on disposal of property (4) 127 2
Accounts receivable reserves (83) 6 61
Inventory reserves (89) (29) (10)
Litigation reserves 58 311 431
Environmental reserves 77 152 (827)
Employee benefit reserves (330) (165) 30
Other reserves (70) 30 (14)
------ ------ ------
$ (460) $ 438 $ (343)
====== ====== ======
</TABLE>
22
<PAGE>
The significant deferred tax assets and liabilities at September 27, 1997,
September 28, 1996 and September 30, 1995 were as follows:
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
Deferred tax liabilities:
Accelerated depreciation & amortization $ 2,015 $ 1,779 $ 1,749
-------- -------- --------
Total deferred liabilities $ 2,015 $ 1,779 $ 1,749
-------- -------- --------
Less deferred tax assets:
Accounts receivable reserves $ 287 $ 203 $ 160
Inventory reserves 449 348 378
Litigation reserves 65 64 356
Environmental reserves 538 554 827
Employee benefit reserves 1,330 1,023 816
Other reserves -- 677 109
-------- -------- --------
Total deferred assets $ 2,669 $ 2,869 $ 2,646
-------- -------- --------
NET DEFERRED TAX ASSETS $ 654 $ 1,090 $ 897
======== ======== ========
</TABLE>
4. PENSION AND OTHER EMPLOYEE BENEFITS
The Company has defined benefit, defined contribution and government mandated
plans covering eligible,non-bargaining unit employees. Pension benefits are
fully vested after 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 $245,000 in 1997, and was $407,000 and
$297,000 in 1996 and 1995 respectively.
Net periodic pension cost for the non-union plans for 1997, 1996 and 1995
included the following components:
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
Service cost-benefits earned during the year $ 372 281 $ 244
Interest cost on projected benefit obligation 433 412 443
Actual (gain) loss on plan assets (1,129) (808) (835)
Net amortization and deferral 668 573 635
------- --- -------
$ 344 458 $ 487
======= === =======
</TABLE>
Assumptions used in accounting for the pension plans are as follows:
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
Discount rate 7.5% 8.0% 8.0%
Rate of increase in compensation levels 5.6% 6.0% 6.0%
Expected long-term rate of return on assets 7.5% 7.5% 7.5%
==== ==== ====
</TABLE>
23
<PAGE>
The following table reconciles the plans' funded status and the amount
recognized in the Company's balance sheets at September 27, 1997, September 28,
1996, and September 30, 1995, for its non-union plans:
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
Actuarial present value of benefit obligations
Vested benefits $ 4,733 $ 4,308 $ 4,059
Non-vested benefits 414 385 355
------- ------- -------
Accumulated benefit obligation $ 5,147 4,693 4,414
Effect of projected future
compensation levels 1,255 928 979
------- ------- -------
Projected benefit obligation $ 6,402 $ 5,621 $ 5,393
Plan assets at fair value 7,478 6,289 5,240
------- ------- -------
Under (over) funded status $(1,076) $ (668) $ 153
Unrecognized prior service cost (96) (112) (128)
Unrecognized net gain (loss) 675 270 (379)
Unrecognized net asset at date
of application (6) 8 16
------- ------- -------
(Prepaid) accrued pension cost included
in balance sheet $ (503) $ (502) $ (338)
======= ======= =======
</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 $135,000 in 1997, $121,000 in
1996, and $205,000 in 1995 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 $181,000 in 1997, $160,000 in 1996, and $154,000 in 1995, 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 $1,009,000 in 1997, $798,000 in 1996, and
$698,000 in 1995.
The Company makes matching contributions of 50% of employees' contributions up
to 4% of compensation. Matching contributions were $232,000 in 1997, and were
$225,000 and $214,000 in 1996 and 1995, 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.
24
<PAGE>
In fiscal years
1997, 1996 and 1995, the components of cost of these postretirement benefits,
principally healthcare, were as follows:
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
Service cost $ 64 $ 52 $ 44
Interest cost 111 104 87
Amortization of transition obligation 55 55 54
------- -------- --------
$ 230 $ 211 $ 185
======= ======== ========
</TABLE>
The funded status of these benefits for the fiscal years ended September 27,
1997, September 29, 1996 and September 30, 1995 were as follows:
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
Actuarial present value of benefit
obligations
Retirees $ 595 $ 574 $ 424
Eligible active employees 319 277 298
Other active employees 715 545 471
------- ------- -------
Accumulated postretirement
benefit obligation $ 1,629 $ 1,396 $ 1,193
Plan assets at fair value -- -- --
------- ------- -------
Under funded status $ 1,629 $ 1,396 $ 1,193
Unrecognized transition obligation (879) (934) (989)
Unrecognized net gain (loss) (85) 24 118
------- ------- -------
Accrued postretirement benefit cost
included in balance sheet $ 665 $ 486 $ 322
======= ======= =======
</TABLE>
Assumptions used in the accounting were:
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
Discount rate 7.5% 8.0% 8.0%
Health care trend rate in first year 10.0% 10.0% 11.0%
Gradually declining to a trend rate of 6.0% 6.0% 6.0%
in the year 2000 2000 2000
===== ===== ====
</TABLE>
The effect of a one percentage point increase in the assumed health care trend
rate on:
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
Aggregate of service and interest cost $ 36 $ 30 $ 25
Accumulated postretirement benefit obligation 297 240 202
======== ======= ========
</TABLE>
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.
25
<PAGE>
5. CAPITAL STOCK
The total authorized stock is 40,000,000 shares, consisting of 10,000,000 shares
of preferred stock, par value $.01 per share, and 30,000,000 shares of common
stock, par value $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.
26
<PAGE>
6. CONTINGENT LIABILITIES
The Company is subject to federal and state hazardous substance cleanup laws
that impose liability for the costs of cleaning up contamination resulting from
past spills, disposal or other releases of hazardous substances. In this regard,
the Company has incurred, and expects to incur, assessment, remediation and
related costs at one of the Company's facilities. In 1991, the Company reported
to state regulators a release at that site from an underground storage tank
("UST"). The UST and certain contaminated soil subsequently were removed and
disposed of at an off-site disposal facility. The Company's independent
environmental consultant has been conducting an investigation of soil and
groundwater at the site with oversight by the state Department of Environmental
Quality ("DEQ"). The investigation indicates that additional soil and
groundwater at the site have been impaired by chlorinated solvents, including
tetrachloroethane and trichloroethylene, and other compounds. Also, the Company
learned that a portion of the site had been used as a disposal area by the
previous owners of the site. The Company's consultant has remediated the soils
in this area and believes that it is an additional source of contamination of
groundwater, both on-site and off-site. In addition, the investigation of the
site indicates that the groundwater contaminants have migrated off-site. The
Company has implemented a groundwater remediation system for the on-site
contamination, and continues to monitor and analyze conditions to determine the
continued efficacy of this system. The Company has selected a remediation
alternative for the off-site groundwater contamination and is currently
reviewing this alternative with the DEQ. The Company also is conducting
additional investigations to determine the extent of other sources of
contamination in addition to the removed UST and the above-referenced disposal
area, including possible evidence of past or current releases by others in the
vicinity around the Company's facilities.
The Company's consultant estimates that a minimum of approximately $890,000 of
investigation and remediation expenses remain to be incurred, both on-site and
off-site. The Company has a reserve for such purposes and has notified the
previous owners of the site and various insurers of possible claims by the
Company relating to the remediation of the site. The consultant's cost estimate
was based on a review of currently available data, which is limited, and
assumptions concerning the extent of contamination, geological conditions, and
the costs and effectiveness of certain treatment technologies. The cost estimate
is subject to substantial uncertainty until the extent of contamination and
geological conditions are fully understood, feasible remedial alternatives are
assessed, and the DEQ approves a remediation plan. The Company is continuing to
investigate the environmental conditions at the site and will adjust its reserve
if necessary. The Company may incur significant additional assessment,
remediation and related costs at the site, and such costs could materially and
adversely affect the Company's consolidated net income for the period in which
such costs are incurred. At this time, the Company, however, cannot estimate the
time or potential magnitude of such costs, if any.
27
<PAGE>
7. STOCK OPTION PLANS
Under the Company's stock option plans, options to purchase common shares may be
granted to directors, officers and key employees at a price not less than the
market value at date of grant. The maximum term of options granted is ten years.
As of September 27, 1997, 1,694,717 unissued common shares are reserved under
all stock option plans which includes 503,300 shares available for future
grants. The following grants are outstanding and exercisable:
<TABLE>
<CAPTION>
Fiscal Year Number of Option Price Expiration
of Grant Shares Per Share Date
<S> <C> <C> <C>
1988 7,500 3.17 1998
1989 34,917 3.58 1999
1990 109,600 4.75 2000
1991 134,900 4.25 2001
1992 108,900 5.17 2002
1993 240,450 6.98-8.42 2003
1994 141,750 10.33 2004
1995 139,350 9.33 2005
1996 131,550 14.31 2006
1997 142,500 13.19-15.81 2007
---------- ----------- ----
1,191,417
==========
</TABLE>
The following summarizes the options granted, exercised and expired during the
last three fiscal years:
<TABLE>
<CAPTION>
Option Price Number of Shares*
Per Share* 1997 1996 1995
<S> <C> <C> <C> <C>
Granted $13.19-15.81 147,900 135,600 106,700
Exercised 3.17-14.31 122,233 45,500 29,300
Expired -- -- -- --
</TABLE>
Subsequent to September 27, 1997, stock options were granted for 148,150 shares
at an average price of $20.38 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.
The Company applies Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees," and related interpretations in accounting for the
plans. Accordingly, no compensation expense has been recognized for the stock
option plans.
The Company has adopted the disclosure-only provisions of SFAS No. 123,
"Accounting for Stock-Based Compensation." If the Company had elected to
recognize compensation costs based on the fair value at the date of grant for
awards in Fiscal 1997 and 1996, consistent with the provisions of SFAS No. 123,
the Company's pro forma net income and earnings per common and common equivalent
share would have been $11,802,000 and $1.07 in Fiscal 1997 and $10,284,000 and
$.94 in Fiscal 1996.
The pro forma effect on net income for Fiscal 1997 and 1996 may not be
representative of the pro forma effect on net income of future years.
28
<PAGE>
The Company has ten-year and five-year options. For disclosure purposes, the
fair value of each stock option grant is estimated on the date of grant using
the Black-Scholes option-pricing model. The following weighted-average
assumptions were used for the ten-year stock options granted to officers in
October of Fiscal 1997 and 1996, respectively: expected volatility of 28.06% and
30.88%; risk-free interest rate of 6.56% and 6.02%; expected average life of 8.6
years; and dividend yield of 2.10% and 1.80%. The weighted-average fair value of
the ten-year stock options granted to officers in October of Fiscal 1997 and
1996 was $5.05 and $5.76, respectively. The following weighted-average
assumptions were used for the ten-year stock options granted to employees in
October of Fiscal 1997 and 1996, respectively: expected volatility of 27.62% and
27.35%; risk-free interest rate of 6.45% and 5.95%; expected average life of 6.4
years; and dividend yield of 2.10% and 1.80%. The weighted-average fair value of
the ten-year stock options granted to employees in October of Fiscal 1997 and
1996 was $4.43 and $4.76, respectively. The following weighted-average
assumptions were used for the ten-year stock options granted to employees in
January of Fiscal 1997 and 1996, respectively: expected volatility of 29.42% and
27.89%; risk-free interest rate of 6.06% and 5.08%; expected average life of 6.4
years; and dividend yield of 1.80% and 1.90%. The weighted-average fair value of
the ten-year stock options granted to employees in January of Fiscal 1997 and
1996 was $5.52 and $2.18, respectively. The following weighted-average
assumptions were used for the five-year stock options granted in October of
Fiscal 1997 and 1996, respectively: expected volatility of 26.29% and 27.08%;
risk-free interest rate of 6.31% and 5.85%; expected average life of 4.6 years;
and dividend yield of 2.10% and 1.80%. The weighted-average fair value of the
five-year stock options granted in October of Fiscal 1997 and 1996 was $3.63 and
$4.02, respectively.
Under the above models, the total value of the ten-year stock options granted in
October of Fiscal 1997 and 1996 was $570,305 and $653,756, respectively. The
total value of the ten-year stock options granted in January of Fiscal 1997 and
1996 was $60,720 and $4,360, respectively. The total value of the five-year
stock options granted in October of fiscal 1997 and 1996 was $43,560 and
$42,210, respectively.
8. INFORMATION ABOUT THE COMPANY'S OPERATIONS IN DIFFERENT GEOGRAPHIC AREAS
<TABLE>
<CAPTION>
United States Foreign Consolidated
<S> <C> <C> <C>
1997
SALES TO UNAFFILIATED CUSTOMERS $99,658 $ 37,228 $136,886
NET INCOME 10,824 1,456 12,280
IDENTIFIABLE ASSETS AT SEPTEMBER 27, 1997 65,464 23,535 88,999
======= ======== ========
1996
Sales to unaffiliated customers $87,218 $ 36,462 $123,680
Net Income 8,835 1,836 10,671
Identifiable assets at September 28, 1996 56,529 21,856 78,385
======= ======== ========
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
======= ======== ========
</TABLE>
29
<PAGE>
9. SUMMARY OF QUARTERLY DATA (UNAUDITED)
The following is a summary of quarterly data for 1997, 1996, and 1995.
<TABLE>
<CAPTION>
Net Gross Net Net Income
Sales Profit Income Per Share
<S> <C> <C> <C> <C>
1997
FIRST QUARTER $ 32,163 $ 14,356 $ 2,604 $ .24
SECOND QUARTER 35,503 16,009 3,087 .28
THIRD QUARTER 35,495 15,914 3,181 .29
FOURTH QUARTER 33,725 15,693 3,408 .31
------------ ---------- --------- -------
TOTAL $ 136,886 $ 61,972 $ 12,280 $ 1.12
============ ========== ========= =======
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
============ ========== ========= =======
</TABLE>
10. ACQUISITIONS
On September 29, 1995, the Company acquired all of the assets of 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.
30
<PAGE>
SUBSIDIARIES OF THE REGISTRANT
The subsidiaries of the Company at September 27, 1997 were:
Name of Subsidiary State or Other Jurisdiction
in Which Organized
AI/FOCS, 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
Woodhead Japan Corporation Japan
W.I.S. Corp. U.S. Virgin Islands
31
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference of our report dated November 11, 1997 incorporated by reference in
this Form 10-K, into the previously filed Woodhead Industries, Inc. Registration
Statement on Form S-8 (Registration #333-26379).
ARTHUR ANDERSEN LLP
Chicago, Illinois
December 24, 1997
32
<PAGE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<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>
<CIK> 0000108215
<NAME> WOODHEAD INDUSTRIES, INC.
<MULTIPLIER> 1000
<CURRENCY> U.S DOLLARS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-27-1997
<PERIOD-END> SEP-27-1997
<CASH> 8,284
<SECURITIES> 0
<RECEIVABLES> 20,962
<ALLOWANCES> 911
<INVENTORY> 18,067
<CURRENT-ASSETS> 51,456
<PP&E> 74,514
<DEPRECIATION> 44,016
<TOTAL-ASSETS> 88,999
<CURRENT-LIABILITIES> 19,729
<BONDS> 0
0
0
<COMMON> 10,541
<OTHER-SE> 56,714
<TOTAL-LIABILITY-AND-EQUITY> 88,999
<SALES> 136,886
<TOTAL-REVENUES> 136,886
<CGS> 74,914
<TOTAL-COSTS> 74,914
<OTHER-EXPENSES> 1,424
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 20,325
<INCOME-TAX> 8,045
<INCOME-CONTINUING> 12,280
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 12,280
<EPS-PRIMARY> 1.12
<EPS-DILUTED> 1.10
</TABLE>
