SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (date of
earliest event reported): February 27, 1998
WOODHEAD INDUSTRIES, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 0-5971 36-1982580
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(State or other jurisdiction of (Commission File No.) (IRS Employer
incorporation or organization) Identification Number)
THREE PARKWAY NORTH, SUITE 550, DEERFIELD, ILLINOIS 60015
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(Address of principal executive offices)
(Zip Code)
Registrant's telephone number, including area code (847) 236-9300
-----------------------------
N/A
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(Former name or former address, if changed since last report.)
<PAGE>
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
A. Financial Statements of Business Acquired
- Financial Statements
1. Auditor's Report.
2. Balance Sheet - December 31, 1997.
3. Statement of Income and Retained Earnings for the
Year Ended December 31, 1997.
4. Statement of Cash Flow for the Year Ended December
31, 1997.
5. Notes to Financial Statements.
B. Pro Forma Financial Information
- Pro Forma Financial Statements (Unaudited)
1. Pro Forma Balance Sheet - December 27, 1997
2. Pro Forma Income Statement for the Year Ended
September 27, 1997 for Woodhead Industries, Inc. and
December 31, 1997 for The mPm Group.
3. Pro Forma Income Statement for the three months ended
December 31, 1997.
4. Notes to Pro Forma Financial Statements.
<PAGE>
THE MPM GROUP
COMBINED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1997
TOGETHER WITH REPORT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders of
MPM S.p.A. and MPM Group S.p.A.:
We have audited the accompanying combined balance sheet of MPM S.p.A., MPM GROUP
S.p.A. and all majority-owned subsidiaries (collectively "The MPM Group", or the
"Company") as of December 31, 1997, and the related combined statements of
income, changes in shareholders' equity and financial position for the year 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 audit.
We conducted our audit 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 include
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides 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 MPM S.p.A. and MPM Group S.p.A.
as of December 31, 1997, and the results of their operations and their cash
flows for the year then ended in conformity with generally accepted accounting
principles in Italy.
Accounting principles generally accepted in Italy vary in certain respects from
accounting principles generally accepted in the United States of America.
Application of accounting principles generally accepted in the United States of
America would have affected the net income for the year ended December 31, 1997,
and shareholders' equity as of December 31, 1997, to the extent summarized in
Note 10 to the combined financial statements.
Milan, Italy,
May 4, 1998
<PAGE>
THE MPM GROUP
COMBINED BALANCE SHEET AS OF DECEMBER 31, 1997
(Amounts Stated in Millions of Italian Lire)
<TABLE>
<CAPTION>
<S> <C> <C>
CURRENT ASSETS:
Cash and banks-
Cash in banks 774
Petty cash 10 784
-------
Trade receivables, net of reserve for doubtful accounts of Lire 110 million
Third parties 7,776
Related party 1,638 9,414
-------
---------
Inventories, net 2,409
Other receivables-
Taxes receivable 401
Third parties 169
Related parties 650 1,220
---------
Prepaid expenses 97
---------
Total current assets 13,924
INVESTMENTS IN SUBSIDIARIES (Note 3) 1
DEFERRED TAX ASSET (Note 8) 138
LONG-TERM RECEIVABLES 40
PROPERTY, PLANT AND EQUIPMENT:
Land and buildings 4,284
Plants and machinery 4,275
Industrial and commercial equipment 2,416
Office equipment and other 802
Less- Accumulated depreciation (6,520) 5,257
----------
---------
Total assets 19,360
========
</TABLE>
The accompanying notes are an integral part of this combined balance sheet
<PAGE>
THE MPM GROUP
COMBINED BALANCE SHEET AS OF DECEMBER 31, 1997
(Amounts Stated in Millions of Italian Lire)
LIABILITIES AND
SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
<S> <C> <C>
CURRENT LIABILITIES:
Due to banks 2,374
Trade payables 5,051
Related party payables 1,024
Accrued expenses and other liabilities 335
Current portion of long-term debt 78
Social security payable 213
--------
---------
Total current liabilities 9,075
---------
LONG-TERM DEBT, less current portion 117
EMPLOYEE TERMINATION INDEMNITY 725
COMMITMENTS AND CONTINGENCIES (Note 6) 300
DEFERRED TAX LIABILITY (Note 8) 34
MINORITY INTERESTS (22)
SHAREHOLDERS' EQUITY:
Share capital 2,000
Revaluation reserve 86
Legal reserve 200
Retained earnings 6,845
---------
Total shareholders' equity 9,131
---------
Total liabilities and shareholders' equity 19,360
</TABLE>
The accompanying notes are an integral art of this combined balance sheet.
<PAGE>
THE MPM GROUP
COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1997
(Amounts Stated in Millions of Italian Lire)
<TABLE>
<CAPTION>
<S> <C>
NET SALES 33,174
COST OF SALES 23,044
--------
Gross Profit 10,130
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES:
Selling expenses 1,242
General and administrative expenses 4,292
--------
Operating profit 4,596
OTHER EXPENSES 1,862
INTEREST EXPENSE, net 300
MINORITY INTERESTS INCOME 72
--------
Income before income taxes 2,506
INCOME TAXES 1,739
--------
Net income for the period 767
=====
</TABLE>
The accompanying notes are an integral part
of this combined statement of income
<PAGE>
THE MPM GROUP
COMBINED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1997
(Amounts stated in Millions of Italian Lire)
<TABLE>
<CAPTION>
REVALUATION RETAINED
SHARE CAPITAL RESERVE LEGAL RESERVE EARNINGS TOTAL
<S> <C> <C> <C> <C> <C>
BALANCES AS OF DECEMBER 31, 1996 2,000 86 200 6,078 8,364
Net income of the period - - - 767 767
------- ------ ------ ------ -------
BALANCES AS OF DECEMBER 31, 1997 2,000 86 200 6,845 9,131
===== ===== ===== ===== =====
</TABLE>
The accompanying notes are an integral part of this combined statement of
changes in shareholders' equity.
<PAGE>
THE MPM GROUP
COMBINED STATEMENT OF CHANGES IN FINANCIAL POSITION
FOR THE YEAR ENDED DECEMBER 31, 1997
(Amounts Stated in Millions of Italian Lire)
<TABLE>
<CAPTION>
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C>
Net income 767
Adjustments to reconcile net income to net cash provided by
operating activities-
Depreciation expense 566
Minority interest (72)
Write-off of related-party receivable 1,831
Write-off of other long-term receivables 81
Write-down of investment in subsidiary 44
Loss on sale and retirement of assets 123
Other changes, net of non-cash items -
(Increase) in trade and related-party receivables (1,659)
Decrease in inventories, net 194
Decrease in taxes and other receivables 1,264
Decrease in prepaid expenses 79
(Increase) in long-term receivables (34)
(Increase) in deferred taxes, net (104)
(Decrease) in due to banks (1,224)
Increase in trade and related-party payables 240
(Decrease) in taxes payable (448)
(Decrease) in accrued expenses and other liabilities (131)
Increase in social security payables 75
Increase in employee termination indemnity 109
-----------
Net cash provided by operating activities 1,701
-----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (484)
Sales of fixed assets 60
Loan to related party (650)
Sale of investment in subsidiary 40
Increase in investment in subsidiary (36)
-----------
Net cash used in investing activities (1,070)
-----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of debt (79)
Payment of dividends (89)
-----------
Net cash used in financing activities (168)
-----------
INCREASE IN CASH 463
-----------
CASH, beginning of year 321
======
CASH, end of year 784
======
SUPPLEMENTAL INFORMATION:
Cash paid during the year for-
Interest 270
Income taxes 1,211
</TABLE>
The accompanying notes are an integral part of
this combined statement of changes in financial position
<PAGE>
THE MPM GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1997
(1) ORGANIZATION AND OPERATIONS
The MPM Group includes the following affiliated entities: MPM S.p.A.
Meccoelettrica Piazzolla Milano (MPM S.p.A.) and its majority-owned
subsidiary MPM Elettronica S.r.l.; and MPM Group S.p.A. and its majority-
owned subsidiary MPM Handels GmbH. Collectively, The MPM Group will be
referred to herein as the "Company".
MPM S.p.A. is based in Cusano Milanino, Italy, and is engaged in the
manufacturing, distribution, and sales of mechanical and
electromechanical equipment for the robotics industry. MPM Group S.p.A.,
also based in Cusano Milanino, Italy, is responsible for certain
administrative aspects and services in support of the business of MPM
S.p.A. MPM S.p.A. and MPM Group S.p.A. are affiliated by common ownership
and control. Together, the Company has operations in Italy, Germany and
the United Kingdom.
(2) SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying financial statements have been presented on a combined
basis as MPM S.p.A. and MPM Group S.p.A. are affiliated by common
ownership (both 100% owned by Ferdinando Piazzolla and his wife, Renata
Dianati Piazzolla (the "Owners") as of December 31, 1997).
The combined financial statements have been prepared from the financial
statements of the entities within The MPM Group in accordance with their
respective country's generally accepted accounting principles. The
accompanying combined financial statements have been prepared in
accordance with the accounting principles established by the Italian
Accounting Profession, with additional notes and disclosures added. Note
10, U.S. GAAP Reconciliation, provides a reconciliation of the net
income and shareholders' equity from the accompanying combined financial
statements, to the respective amounts in accordance with U.S. GAAP.
All significant intercompany accounts and transactions between
affiliated entities have been eliminated in combination.
<PAGE>
MINORITY INTEREST
Minority interest represents the minority shareholders' proportional
share of the equity in the income and net assets of MPM Elettronica
S.r.l. and MPM Handels GmbH. At December 31, 1997, MPM S.p.A. owned 80%
in MPM Elettronica S.r.l., and MPM Group S.p.A. owned 56% in MPM Handels
GmbH.
REVENUE RECOGNITION
Revenues are recognized at the time that title of the goods passes, which
is generally the shipment date. For services, the revenue is recorded at
the time services are provided.
CASH AND BANKS
Cash and banks include cash held in demand deposit accounts as well as
petty cash.
TRADE RECEIVABLES
Trade receivables are stated at their expected realizable value.
INVENTORIES
Inventories are stated at the lower of cost, on a first-in, first-out
basis, or market. Inventories include material, labor and applicable
overhead costs, and were comprised of the following at the balance sheet
date (in millions of Italian Lire):
DECEMBER 31, 1997
--------------------
Raw materials 1,177
Work in process 327
Finished goods 905
-------
2,409
=====
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at purchase price, or production
cost, which has been adjusted in some cases due to applicable monetary
valuation laws in Italy, net of the related depreciation accrued.
Ordinary maintenance costs are charged to expense, while costs for
improvements are attributed to the related asset, capitalized, and
depreciated in relation to the useful life of that asset.
<PAGE>
Fixed assets are depreciated on a straight-line basis at rates determined
on the basis of economic/technical life. In prior years, the Company
provided accelerated depreciation in order to take full advantage of the
fiscal deduction allowed by Italian fiscal law, which allows a doubling
of the ordinary rates in the first three years after acquisition. The
Company did not use such accelerated depreciation in the current year.
The ordinary depreciable lives are as follows:
CATEGORY ORDINARY DEPRECIABLE LIVES
---------- ----------------------------
Land and Buildings 33 years
Plant and Machinery 4 - 6.5 years
Industrial and Commercial Equipment 5 - 10 years
Other Assets 1 - 4 years
Depreciation expense on property, plant and equipment was Lire 566
million for the year ended December 31, 1997.
ACCOUNTING FOR LEASES
All lease payments are expensed based on the accrual basis of accounting.
There are no material differences between the accounting for leases which
qualify as capital leases in the combined financial statements, and the
treatment required for capital leases defined by SFAS No. 13, "Accounting
for Leases."
RESERVE FOR EMPLOYEE TERMINATION LIABILITIES
Italian law provides for an indemnity to be paid to all employees upon
termination of employment for whatever reason. As of December 31, 1997,
the related reserve reflects the amounts to be accrued according to the
terms of the law and labor contracts. The law requires that the annual
provision reflect both the indemnity accrued based upon compensation for
that year and the revaluation of prior provisions on the basis of an
index which represents a significant percentage of the annual increase in
the Official Italian Cost of Living Index.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments consist of cash and banks, trade
receivables, other receivables, trade payables and accrued expenses and
other liabilities. The amounts of these financial instruments reflected
in the accompanying combined balance sheet as of December 31, 1997
approximate fair market value due to their short-term nature and market
rates of interest.
<PAGE>
FOREIGN CURRENCY TRANSLATION
The Company's functional currencies include the Italian Lira and the
Deutsche Mark. Assets and liabilities in Deutsche Marks are translated
into Italian Lire using the exchange rate in effect at the balance sheet
date. Income and expense items are translated using the average exchange
rate for the period.
INCOME TAXES
Income taxes provided reflect the current and deferred tax consequences
of events that have been recognized in the Company's financial statements
or its tax returns by applying prevailing tax rates.
CONCENTRATION OF CREDIT RISK
The financial instrument that potentially subjects the Company to
concentration of credit risk consists principally of trade receivables.
The Company sells its products primarily in Europe. The Company performs
credit evaluations of its customers' financial condition and generally
does not require collateral. The Company maintains reserves for potential
credit losses, and such losses have been within management's
expectations.
Management believes that the Company has no significant concentrations of
credit risk.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles, requires management to make estimates and
assumptions that affect the amounts reported in the combined financial
statements and accompanying notes. Actual results could differ from those
estimates.
(3) INVESTMENTS IN SUBSIDIARIES
As of December 31, 1997, the Company owned the following investments in
subsidiaries:
MPM Group S.p.A. owned 20% of MPM Systems Limited, whose activity
relateS to the distribution of MPM product primarily in the United
Kingdom. This investment has been carried at cost of approximately
Lire 453,000.
MPM Group S.p.A. owned 35% of El. S. Ind. S.r.l., which operates as a
distributor of MPM product in Northern Italy. This investment has
been accounted for under the equity method, and due to recurring
losses for this entity, the investment for this entity has been
written off during 1997.
<PAGE>
(4) DUE TO BANKS
As of December 31, 1997, the Company has credit lines of approximately
Lire 4,900 million. These credit lines are guaranteed mainly by the
Company's receivables. Average interest rates paid in 1997 have been
between 7.35% and 10.5%. No guarantees have been released to third
parties.
(5) DEBT
In June 1995, MPM S.p.A. obtained financing from Mediocredito Lombardo
according to Italian Law 28/11/65 no. 1329 - "Sabatini", which provided
special reduced interest. This loan bears interest at an effective rate
of 9.04%, to be repaid in installments every 3 months of approximately
Lire 19.6 million through May 2000. The loan is secured by equipment of
MPM S.p.A. The loan may be repaid prior to May 2000, with an early
prepayment penalty.
(6) COMMITMENTS AND CONTINGENCIES
Future minimum lease payments under non-cancelable leases are as follows
as of December 31, 1997 (in millions of Italian Lire):
1998 89
1999 70
Rental expense under non-cancelable leases amounted to approximately Lire
115 million for the year ended December 31, 1997.
The Company has also established, in prior years, a fund for potential
claims from third parties in the amount of Lire 267 million.
<PAGE>
(7) RELATED-PARTY TRANSACTIONS
In the ordinary course of business, the Company has entered into certain
transactions with entities affiliated through common ownership. Sales to
these related parties totaled approximately Lire 2,964 million in 1997,
and purchases totaled approximately Lire 69 million.
Included in Land and buildings in the accompanying combined financial
statements, is an apartment used by the Owners' son valued at Lire 975
million. No depreciation has been taken on this property as it is not
used for business purposes. The apartment was sold as part of the
transaction described in note 9, Subsequent Events. In addition, during
the year, the Owners' son repurchased furniture from the Company at a
price of Lire 60 million, which had been previously valued in the
financial statements at Lire 137 million. The loss on this sale has been
reflected in the accompanying combined financial statements.
During December 1997, MPM S.p.A. sold its investment in Min-TEC
Industriale S.r.l., (Min-TEC) in which it had previously owned 80%, to
the minority shareholders. During 1997, the Company had sales of
approximately Lire 52 million, and purchased approximately Lire 3,868
million of goods and services from Min-TEC. In addition, as of December
31, 1997, a receivable (financing) in the amount of Lire 650 million was
outstanding from Min-TEC. This amount was paid in its entirety in
February 1998. The Company also wrote off approximately Lire 1,831
million in receivables from Min-TEC during 1997, which has been reflected
in Other expenses in the accompanying combined income statement.
The accompanying financial statements also include property in Arosio,
Italy, used by Min-TEC for its operations, at a net book value of
approximately Lire 2,870 million. During 1997, the Company received
rental income from Min-TEC for the use of this property in the amount of
Lire 150 million. The property was sold to Min-TEC as part of the
transaction described in note 9, Subsequent Events.
(8) INCOME TAXES
Prior to 1998, Italian corporations were subject to the following income
taxes:
IRPEG (Corporate Income Tax) at 37%, and
ILOR (Local Income Tax) at 16.2%.
Effective January 1, 1998, the Italian Ministry of Finance approved a new
law which provides the replacement of; ILOR, certain social security
contributions paid by companies, net equity tax and other minor taxes,
with a new tax (IRAP). IRAP will be computed by applying a rate of 4.25%
on "value added." Value added is defined as the difference between sales
and operating costs, excluding labor, bad debt provision, board of
director compensation and other expenses.
<PAGE>
The provision for income taxes for 1997, consisted of the following (in millions
of Italian Lire):
IRPEG 1,188
ILOR 467
Other taxes 84
-------
1,739
=====
Current provision 1,782
Deferred provision (43)
-------
1,739
=====
A reconciliation of the Italian fiscal rates to the effective tax rates
is as follows:
IRPEG 37.0%
ILOR 16.2%
Net operating losses of subsidiaries, for which
no benefit has been recognized 9.3%
Other taxes 3.5%
Other, net 3.4%
------
69.4%
====
The components of the deferred tax provision consist of the following (in
millions of Italian Lire):
Inventory reserves (22)
Excess of book over tax amortization of assets (11)
Write-off of assets not taken for tax purposes (8)
Other (2)
-------
(43)
====
<PAGE>
The significant deferred tax assets and liabilities at December 31, 1997,
were as follows (in millions of Italian Lire):
Deferred tax liabilities:
Tax interest deducted in excess of book 34
------
Total deferred liabilities 34
===
Deferred tax assets:
Net operating losses of subsidiaries 233
Excess of book over tax amortization
of assets 62
Inventory reserves 55
Reserve for agent termination 14
Other 7
Less: Valuation allowance (233)
------
Total deferred assets 138
===
NET DEFERRED TAX ASSETS 104
The Company has recorded a valuation allowance to reflect uncertainties
associated with the ultimate realization of certain deferred tax assets.
A valuation allowance is required when management determines that it is
more likely than not that deferred tax assets will not be realized.
Certain deferred income taxes resulting from the recognition, in
different periods, of certain components of income and expenses for
financial statements and income tax reporting purposes have not been
recorded as they are not material to the combined financial statements.
(9) SUBSEQUENT EVENTS
On February 27, 1998, pursuant to a Share Purchase Agreement (the "Share
Purchase Agreement") dated as of February 6, 1998, by and among Mr.
Ferdinando Piazzolla, Mrs. Renata Dianati Piazzolla (collectively the
"Sellers") and Woodhead Italia, S.r.l., a wholly-owned subsidiary of
Woodhead Industries, Inc. ("Woodhead") incorporated in Italy; Woodhead
acquired all of the issued and outstanding capital stock of MPM S.p.A.
and MPM Group S.p.A., and certain assets of The MPM Group's subsidiaries
in exchange for Lire 52,637,000,000 (approximately $29.9 million USD).
The transaction was accounted for under the purchase method of
accounting.
<PAGE>
As part of the transaction, the following events occurred:
The Company acquired the remaining 44% of MPM Handels GmbH in
February 1998, at a price of 454,000 Deutsche Marks.
In February 1998, certain assets of MPM Systems Limited, an entity
owned 20% by MPM Group S.p.A., were sold to Aero-Motive (U.K.)
Limited, a subsidiary of Woodhead. The Company then sold its
ownership in MPM Systems Limited to the remaining majority
shareholders who have since discontinued the operations of this
entity.
The Company sold its 80% share in Min-TEC in December 1997 to the
minority shareholders at a price of Lire 40 million. Min-TEC repaid
its Lire 650 million receivable to MPM S.p.A. in February 1998. The
property in Arosio, Italy, was sold to Min-TEC at a price of Lire
2,878 million.
The Owners' son, purchased the apartment at a price of Lire 975
million.
Also as part of the transaction, Lire 5 billion of the purchase price was
placed in escrow with an escrow agent to provide payment of, and to
secure certain rights of Woodhead relating to the purchase. Such rights
have been outlined in an Escrow Agreement as part of the Share Purchase
Agreement, and include indemnification by the Sellers to Woodhead for
matters such as unused inventory (as defined), uncollected accounts
receivable (as defined) and tax liabilities (as defined) related to
business of The MPM Group prior to the closing of the transaction.
Prior to the transaction, there were no material relationships between
the Sellers and Woodhead, or any of Woodhead's affiliates, directors or
officers or any associates of such directors and officers.
(10) U.S. GAAP RECONCILIATION
These combined financial statements have been prepared in accordance with
generally accepted accounting principles (GAAP) in Italy, which differ in
certain respects from U.S. GAAP. The significant differences for the
Company relate principally to the following items and the adjustments
necessary to restate net income and shareholders' equity in accordance
with U.S. GAAP are shown below.
<PAGE>
DEFERRED TAXES
Under Italian GAAP, there is no mandatory and comprehensive rule to
record deferred taxes. Under U.S. GAAP, deferred taxes are to be
accounted for in accordance with Statement of Financial Accounting
Standards No. 109,"Accounting for Income Taxes" (SFAS No. 109). Under
SFAS No. 109, deferred tax assets or liabilities are recognized for
differences arising from Italian financial reporting and tax reporting
methodologies as well as for temporary differences arising from the other
U.S. GAAP adjustments.
Certain reserves within shareholders' equity are subject to taxation upon
distribution. Under SFAS No. 109, deferred taxes should be provided on
these undistributed earnings. Deferred taxes also arise in relation to
the tax effect of other U.S. GAAP adjustments.
No deferred taxes have been recognized on losses of majority-owned
subsidiaries as their realizability is not determinable in the opinion of
management.
FIXED ASSETS
Certain fixed assets have been revalued at various times in the Company's
history (for example in 1983) in accordance with various Italian Laws
(Italian Tax Code No. 72/83). Such asset valuations and restatements are
not allowed under U.S. GAAP. The effect of such revaluations has been
taken directly to equity.
The Company is allowed, under Italian fiscal law, to provide accelerated
depreciation (at twice the normal rate) on its fixed assets during the
first three years the asset is in service to obtain fiscal benefit that
would otherwise be unavailable. Accelerated depreciation has been
recognized by the Company for both book and tax purposes. Accelerated
depreciation is allowed for U.S. tax purposes, however U.S. GAAP requires
that depreciation recorded in the financial statements should be
reflective of the estimated useful life of the asset in service. No
current year impact on net income has been taken for this adjustment as
the Company has not taken such accelerated depreciation in the current
year.
<PAGE>
The following is a summary of the significant adjustments to net income
for the year ended December 31, 1997, and to shareholders' equity as of
December 31, 1997, which would have been required if the combined
financial statements had been reported in accordance with U.S. GAAP
instead of Italian GAAP (in millions of Italian Lire).
<TABLE>
<CAPTION>
SHAREHOLDERS' EQUITY NET INCOME
AS OF FOR THE YEAR ENDED
DECEMBER 31, 1997 DECEMBER 31, 1997
----------------- -----------------
<S> <C> <C>
Balances according to the 9,131 767
combined financial statements
prepared under Italian GAAP
Deferred taxes on previously (154) -
untaxed equity reserves
(including asset revaluation)
Accelerated Depreciation 512 -
Deferred taxes on above adjustment (211) -
-------- --------
Balances in accordance with U.S. 9,278 767
GAAP ==== ====
</TABLE>
<PAGE>
WOODHEAD INDUSTRIES, INC.
UNAUDITED PRO FORMA
COMBINED CONDENSED FINANCIAL STATEMENTS
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION
The following tables set forth selected unaudited pro forma combined condensed
financial data for Woodhead Industries, Inc. (Woodhead) for the fiscal year
ended September 27, 1997, and for the three-month period ended December 27,
1997, after giving effect to the acquisition, as if it had been consummated,
with respect to the statement of operations data, at the beginning of the
periods presented, or, with respect to the balance sheet data, as of the date
presented. The unaudited pro forma combined condensed financial statements of
Woodhead Industries, Inc. were prepared utilizing the accounting policies
outlined in its historical financial statements, except as described in the
accompanying notes. The combined financial statements of The MPM Group filed
under part (a) of this item should be read in conjunction with the unaudited pro
forma combined condensed financial statements presented below.
The acquisition of The MPM Group was accounted for under the purchase method of
accounting. Accordingly, the unaudited pro forma combined condensed financial
statements reflect Woodhead's preliminary allocation of purchase price of The
MPM Group which will be subject to further adjustments as Woodhead finalizes the
allocation of the purchase price in accordance with generally accepted
accounting principles. The unaudited pro forma combined condensed financial
statements do not reflect any cost savings or synergies anticipated by
Woodhead's management as a result of the acquisition. In addition, the unaudited
pro forma combined condensed results of operations do not necessarily reflect
actual results which would have occurred if the acquisition had taken place at
the beginning of the earliest period presented or as of the date indicated, nor
are they necessarily indicative of the results of future combined operations.
<PAGE>
<TABLE>
<CAPTION>
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
REFLECTING WOODHEAD INDUSTRIES, INC.
AFTER GIVING EFFECT TO THE ACQUISITION
(In Thousands of U.S. Dollars, Except For Per Share Data)
ASSETS
The MPM Group
Woodhead 12/31/97 Pro forma Pro forma
12/27/97 ADJUSTMENTS TOTAL
------------ ---------------- ------------ -----------
<S> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and equivalents 6,596 445 (4,336) (A) 5,011
(253) (E)
2,190 (F)
369 (G)
Accounts receivable, net 19,582 5,350 - 24,932
Inventories, net 17,891 1,369 210 (A) 19,470
Prepaid expenses and other assets 5,393 749 (369) (G) 5,773
--------- --------- --------- ---------
Total current assets 49,462 7,913 (2,189) 55,186
OTHER ASSETS 229 102 708 (A) 1,039
PROPERTY, PLANT AND EQUIPMENT, net 32,769 3,278 2,214 (A) 36,071
(2,190) (F)
GOODWILL, net 6,717 - 21,482 (A) 28,443
244 (E)
--------- --------- --------- -----------
Total assets 89,177 11,293 20,269 120,739
========= ========= ========= ===========
</TABLE>
See accompanying notes to unaudited pro forma combined condensed
financial statements.
<PAGE>
<TABLE>
<CAPTION>
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
REFLECTING WOODHEAD INDUSTRIES, INC.
AFTER GIVING EFFECT TO THE ACQUISITION
(In Thousands of U.S. Dollars, Except For Per Share Data)
LIABILITIES AND
SHAREHOLDERS' EQUITY
The MPM Group
Woodhead 12/31/97 Pro forma Pro forma
12/27/97 ADJUSTMENTS
TOTAL
---------- ---------------- -------------- ------------
<S> <C> <C> <C> <C>
CURRENT LIABILITIES:
Due to banks - 1,349 - 1,349
Accounts payable 5,321 3,452 - 8,773
Accrued expenses and liabilities 9,896 313 - 10,209
Income taxes 2,333 - - 2,333
Current portion of long-term debt - 44 - 44
--------- --------- --------- ---------
Total current liabilities 17,550 5,158 - 22,708
DEFERRED INCOME TAXES 2,183 227 - 2,410
LONG-TERM DEBT, less current portion - 66 25,550 (A) 25,616
OTHER LONG-TERM LIABILITIES - 583 - 583
MINORITY INTERESTS - (13) (9) (E) (22)
SHAREHOLDERS' EQUITY:
Common stock 10,571 - - 10,571
Additional paid-in-capital 2,956 - - 2,956
Share capital - 1,137 (1,137) (A) -
Equity reserves - 163 (163) (A) -
Cumulative translation adjustment (1,377) (12) 12 (A) (1,377)
Retained earnings 57,294 3,984 (3,984) (A) 57,294
--------- --------- --------- -----------
Total liabilities and 89,177 11,293 20,269 120,739
shareholders' equity
========= ========= ========== ===========
</TABLE>
See accompanying notes to unaudited pro forma combined condensed
financial statements.
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED
STATEMENT OF OPERATIONS REFLECTING
WOODHEAD INDUSTRIES, INC.
AFTER GIVING EFFECT TO THE ACQUISITION
(In Thousands of U.S. Dollars, Except For Per Share Data)
<TABLE>
<CAPTION>
The MPM
Woodhead Group
Three months Three months
ended ended
12/27/97 12/31/97 Pro forma Pro forma
ADJUSTMENTS TOTAL
--------------- -------------- ------------- ------------
<S> <C> <C> <C> <C>
NET SALES 34,350 4,614 - 38,964
COST OF SALES 19,380 3,205 35 (D) 22,620
----------- ---------- ---------- ---------
GROSS PROFIT 14,970 1,409 (35) 16,344
OPERATING EXPENSES 9,934 770 269 (B) 10,973
----------- ---------- ---------- ---------
INCOME FROM OPERATIONS 5,036 639 (304) 5,371
OTHER (INCOME) EXPENSES, net 360 1,177 377 (C) 1,936
22 (G)
----------- ---------- ---------- ---------
INCOME BEFORE INCOME TAXES 4,676 (538) (703) 3,435
PROVISION FOR INCOME TAXES 1,868 (41) (223) (H) 1,604
----------- ---------- ---------- ---------
NET INCOME (LOSS) 2,808 (497) (480) 1,831
===== ===== ===== =====
NET INCOME PER COMMON SHARE AND COMMON
SHARE EQUIVALENT
Basic $ 0.27 $ (0.05) $ (0.05) $ 0.17
Diluted $ 0.25 $ (0.05) $ (0.04) $ 0.16
COMMON AND COMMON EQUIVALENT SHARES
OUTSTANDING
Basic 10,561 - - 10,561
Diluted 11,223 - - 11,223
</TABLE>
See accompanying notes to unaudited pro forma
combined condensed financial statements.
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED
STATEMENT OF OPERATIONS REFLECTING
WOODHEAD INDUSTRIES, INC.
AFTER GIVING EFFECT TO THE ACQUISITION
(In Thousands of U.S. Dollars, Except For Per Share Data)
<TABLE>
<CAPTION>
The MPM
Woodhead Group
Year ended Year ended Pro forma Pro forma
9/27/97 12/31/97 ADJUSTMENTS TOTAL
------------- ------------ ------------ -----------
<S> <C> <C> <C> <C>
NET SALES 136,886 19,379 - 156,265
COST OF SALES 74,914 13,461 138 (D) 88,513
------------ ------------ ----------- -----------
GROSS PROFIT 61,972 5,918 (138) 67,752
OPERATING EXPENSES 40,513 3,233 1,074 (B) 44,820
------------ ------------ ----------- -----------
INCOME FROM OPERATIONS 21,459 2,685 (1,212) 22,932
OTHER (INCOME) EXPENSES, net 1,134 1,221 1,508 (C) 3,951
88 (G)
------------ ------------ ----------- -----------
INCOME BEFORE INCOME TAXES 20,325 1,464 (2,808) 18,981
PROVISION FOR INCOME TAXES 8,045 1,016 (890) (H) 8,171
------------ ------------ ----------- -----------
NET INCOME 12,280 448 (1,918) 10,810
NET INCOME PER COMMON SHARE AND COMMON
SHARE EQUIVALENT
Basic $ 1.12 $ 0.04 $ (0.18) $ 0.98
Diluted $ 1.10 $ 0.04 $ (0.17) $ 0.97
COMMON AND COMMON EQUIVALENT SHARES
OUTSTANDING
Basic 11,002 - - 11,002
Diluted 11,123 - - 11,123
</TABLE>
See accompanying notes to unaudited pro forma combined condensed
financial statements.
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED
CONDENSED FINANCIAL STATEMENTS
(1) BASIS OF PRESENTATION
The financial data of The MPM Group has been presented in the unaudited
pro forma combined condensed financial statements in accordance with U.S.
generally accepted accounting principles (GAAP), and has been reconciled
to Italian GAAP in Note 10 to the combined financial statements of The
MPM Group. Such financial statements are denominated in Italian Lire. The
combined balance sheet has been translated at the year-end rate and the
combined statement of income has been translated at the average exchange
rate for the unaudited pro forma combined condensed financial statements.
The allocation of the purchase price is based on an estimate of the fair
market value of the net assets acquired in February 1998, and is subject
to adjustment. To date, no information has been gathered that would cause
the Company to believe that the final allocation of the purchase price
will be materially different than the preliminary estimate.
(2) PRO FORMA ADJUSTMENTS TO THE
UNAUDITED PRO FORMA COMBINED
CONDENSED FINANCIAL STATEMENTS
The pro forma adjustments with respect to The MPM Group acquisition have
been applied to the unaudited pro forma combined condensed balance sheet
as if the acquisition had taken place on December 27, 1997, or as of the
beginning of the periods presented in the case of the unaudited pro forma
combined condensed statements of operations for the three months ended
December 27, 1997 and the fiscal year ended September 27, 1997. The
adjustments are based upon currently available information and certain
estimates and assumptions are discussed below.
The following adjustments have been made in the unaudited pro forma
combined condensed financial statements to give effect to the acquisition
of The MPM Group.
<TABLE>
<CAPTION>
(A) PURCHASE PRICE
On February 27, 1998, Woodhead purchased 100% of the capital stock
of The MPM Group and certain assets of The MPM Group's
subsidiaries, in exchange for $29.9 million USD (or Lire 52,637
million). The purchase price was allocated in the following
manner:
<PAGE>
<S> <C>
AMOUNTS IN THOUSANDS OF USD
Purchase Price 29,886
Fair Value of Estimated Net Assets Acquired
Current Assets 8,123
Net Property, Plant and Equipment 5,492
Other Assets 810
-------
Tangible Assets Acquired 14,425
Current Liabilities (5,158)
Other Liabilities (863)
-------
Net Tangible Assets Acquired 8,404
Estimated Goodwill 21,482
=======
</TABLE>
The purchase price was partially paid in cash in the amount of
$4.3 million USD. The remaining $25.6 million USD was obtained
from Woodhead under its existing credit facility at Harris Bank.
This debt bears interest at approximately 5.9%, and has been
reflected as Long-term debt in the accompanying unaudited pro
forma combined condensed financial statements.
The property, plant and equipment acquired were recorded at fair
market value, based on the results of an independent appraisal.
The excess of the purchase price versus the net assets acquired,
after giving effect to the fair market value of property, plant
and equipment, was recorded as goodwill to be amortized over 20
years. No deferred taxes have been recorded on this revaluation,
as the new amounts represent the tax basis for depreciation under
Italian tax law.
The purchase price is subject to adjustment, based upon a Closing
Statement (as defined in the Share Purchase Agreement) of the
assets and liabilities of The MPM Group as of the closing date, to
be prepared by Woodhead and delivered to the Sellers within 90
days following the closing date. The estimated amounts recorded
for assets and liabilities may differ from the final assigned
values as determined by the Closing Statement.
(B) GOODWILL
This pro forma entry reflects the amortization of goodwill based
on a 20-year life in connection with The MPM Group acquisition.
The tax impact on this pro forma adjustment has been recognized
only on the portion of goodwill amortization that is deductible
under the appropriate fiscal laws.
(C) INTEREST EXPENSE
This pro forma entry reflects the interest expense on the debt
incurred on behalf of Woodhead Industries, Inc. to finance The MPM
Group acquisition.
(D) Depreciation on revaluation of
property, plant and equipment
TO FAIR MARKET VALUE
This pro forma entry reflects the impact on depreciation as a
result of the revaluation of the property, plant and equipment
acquired to fair market value.
(E) CHANGE IN OWNERSHIP OF SUBSIDIARY
These entries reflect the impact of the acquisition of the
remaining 44% of MPM Handels GmbH at a price of 454,000 Deutsche
Marks (approximately 253,000 USD). Goodwill of $244,000 USD has
been reflected as a result of this transaction.
(F) SALE OF PROPERTY, PLANT AND EQUIPMENT
As a result of the acquisition, a building with a net book value
of Lire 2,878 million was sold, as well as an apartment with a
book value of Lire 975 million (approximately $2,190,000 USD).
(G) TRANSACTIONS WITH MIN-TEC INDUSTRIALE S.R.L.
These entries reflect the impact of not recognizing rental income
of Lire 150 million, on property that was sold to Min-TEC
Industriale S.r.l. as a result of the acquisition (approximately
$88,000 USD). Also reflected is the impact of the payment of the
Lire 650 million (approximately $369,000 USD) receivable from
Min-TEC as a result of the transaction.
(H) INCOME TAXES
This pro forma adjustment recognizes the income tax effect of the
pro forma adjustments related to the acquisition of The MPM Group.
The pro forma results have been prepared for comparative purposes only
and do not purport to indicate what necessarily would have occurred had
the entities been acquired at the beginning of the periods presented, or
as of the dates indicated, nor what results may be in the future.
<PAGE>
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
As independent certified public accountants, we hereby consent to the
incorporation of our report for The MPM Group dated May 4, 1998, included in or
made a part of this Form 8-K/A.
/s/ Arthur Anderson S.p.A.
--------------------------
Arthur Anderson S.p.A.
Milan, Italy,
May 5, 1998
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
May 13, 1998 Woodhead Industries, Inc.
By: /s/ C. MARK DEWINTER
---------------------
C. Mark DeWinter,
Chairman, President and
Chief Executive Officer
