SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES ACT OF 1934
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES ACT OF 1934
For the Quarter Ended December 27, 1997 Commission File Number 0-5971
WOODHEAD INDUSTRIES, INC.
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DELAWARE 36-1982580
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(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
THREE PARKWAY NORTH, SUITE 550, DEERFIELD, IL. . 60015
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code (847) 236-9300
2150 E, LAKE COOK RD., SUITE 400, BUFFALO GROVE, IL. 60089
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(Former name, former address or former fiscal year, if changes since
last reports)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Act of 1934 during the
preceding 12 months, and (2) has been subject to such filing requirements for
the past 90 days.
Yes X No
On January 24, 1998 there were 10,571,414 shares of the Registrant's common
stock outstanding.
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<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION
WOODHEAD INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
December 27, 1997 and September 27, 1997
ASSETS (Amounts in thousands)
Unaudited
CURRENT ASSETS 12/27/97 9/27/97
--------- -------
<S> <C> <C>
Cash and short-term securities $ 6,596 $ 8,284
Accounts receivable 19,582 20,051
Inventories (Note 3) 17,891 18,067
Prepaid expenses 5,393 5,054
-------- --------
Total current assets $ 49,462 $51,456
------- -------
OTHER ASSETS $ 229 $ 271
PROPERTY, PLANT & EQUIPMENT, at cost $ 77,743 $74,514
Less: Accumulated depreciation (44,974) (44,016)
------- -------
Net property, plant and equipment $ 32,769 $ 30,498
------- -------
GOODWILL $ 6,717 $ 6,774
-------- --------
TOTAL ASSETS $ 89,177 $ 88,999
======== =======
LIABILITIES & STOCKHOLDERS' INVESTMENT
CURRENT LIABILITIES
Accounts payable $ 5,321 $ 6,465
Accrued expenses 9,896 13,041
Income taxes 2,333 223
Portion of long-term debt
payable within one year - -
----------- -----------
Total current liabilities $ 17,550 $ 19,729
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DEFERRED INCOME TAXES $ 2,183 $ 2,015
----------- -----------
LONG-TERM DEBT $ - $ -
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STOCKHOLDERS' INVESTMENT: (Note 5)
Preferred stock $ - $ -
Common stock 10,571 10,541
Additional paid-in capital 2,956 2,765
Cumulative translation adjustment (1,377) (1,487)
Retained earnings 57,294 55,436
----------- -----------
Total stockholders' investment $ 69,444 $ 67,255
----------- -----------
TOTAL LIABILITIES & STOCKHOLDERS' INVESTMENT $ 89,177 $ 88,999
=========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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<TABLE>
<CAPTION>
WOODHEAD INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Amounts in thousands except per share data, unaudited)
THREE MONTHS ENDED
--------------------------
12/27/97 12/28/96
--------- --------
<S> <C> <C>
NET SALES $ 34,350 $ 32,163
COST OF SALES 19,380 17,807
-------- --------
GROSS PROFIT $ 14,970 $ 14,356
% of Net Sales 43.6% 44.6%
OPERATING EXPENSES 9,934 9,736
-------- --------
INCOME FROM OPERATIONS $ 5,036 $ 4,620
OTHER (INCOME)/EXPENSES, NET 360 261
-------- --------
INCOME BEFORE INCOME TAXES $ 4,676 $ 4,359
PROVISION FOR INCOME TAXES $ 1,868 $ 1,755
-------- --------
NET INCOME $ 2,808 $ 2,604
======== ========
NET INCOME PER COMMON AND COMMON
EQUIVALENT SHARE (Note 4)
BASIC $ 0.27 $ 0.25
======== ========
DILUTED $ 0.25 $ 0.24
======== ========
COMMON AND COMMON EQUIVALENT
SHARES OUTSTANDING
BASIC 10,561 10,429
======== ========
DILUTED 11,223 10,946
======== ========
DIVIDENDS PER SHARE $ 0.090 $ 0.070
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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<TABLE>
<CAPTION>
WOODHEAD INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(Amounts in thousands - unaudited)
THREE MONTHS ENDED
--------------------
12/27/97 12/28/96
-------- --------
<S> <C> <C>
Cash Flows from Operating Activities:
Net income for the period $ 2,808 $ 2,604
Adjustments to reconcile net income to net cash
flows from operating activities:
Depreciation and amortization 1,292 1,216
Change in Assets and Liabilities:
Decreases/(Increases) in:
Accounts receivable 469 (413)
Inventories 176 (1,916)
Prepaid expenses (339) 59
Other assets 2 4
Increases/(Decreases) in:
Accounts payable (1,144) (161)
Accrued expenses (3,145) (1,483)
Income taxes 2,110 1,020
Deferred income taxes 168 118
------- -------
Net cash flows provided by operating activities $ 2,397 $ 1,048
------- -------
Cash Flows from Investing Activities:
Purchases of property, plant & equipment $(3,474) $(1,601)
Retirements or sales of property, plant and equipment 28 22
------- -------
Net cash flows used for investing activities $(3,446) $(1,579)
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Cash Flows from Financing Activities:
Sales of stock $ 221 $ 232
Dividend payments (950) (730)
------- -------
Net cash flows used for financing activities $ (729) $ (498)
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Effect of exchange rates $ 90 $ 264
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Net Decrease in Cash & short-term securities $(1,688) $ (765)
======= =======
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 10 $ 10
Income taxes $ 360 $ 290
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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<PAGE>
WOODHEAD INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
December 27, 1997
(Unaudited)
(1) The condensed consolidated balance sheets at December 27, 1997, and
September 27, 1997, and the condensed consolidated statements of
income and cash flow for the three-month periods ended December 27,
1997, and December 28, 1996, reflect, in the opinion of the Company,
all adjustments necessary to present fairly the financial position for
such periods. All such adjustments were of a normal recurring nature.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to
S.E.C. rules and regulations, although the Company believes that the
disclosures are adequate to make the information presented not
misleading. It is suggested that these condensed consolidated
financial statements be read in conjunction with the consolidated
financial statements and notes thereto included in the Company's
latest annual report on Form 10-K.
(2) The results of operations for the three-month periods ended December
27, 1997, and December 28, 1996, are not necessarily indicative of the
results to be expected for the full year.
(3) The estimated breakdown of raw materials and work-in-process and
finished goods inventories at December 27, 1997, and September 27,
1997, is as follows:
(in thousands)
12/27/97 9/27/97
-------- -------
Raw materials $12,294 $12,391
Work-in-process and finished goods 10,059 10,138
------ -------
Inventories before LIFO reserve 22,353 22,529
Less: Reserve to reduce to LIFO (4,462) (4,462)
------ -------
Inventories, net $17,891 $18,067
======= =======
(4) Income per share is based upon the weighted average number of shares
outstanding for the basic calculation (10,561,000 for the quarter ended
December 27, 1997 and 10,429,000 for the quarter ended December 28,
1996) and the weighted average number of shares outstanding plus the
effect of common shares equivalents during the period for the diluted
calculation (11,223,000 for the quarter ended December 27, 1997 and
10,946,000 for the quarter ended December 28, 1996).
(5) Authorized stock is 40,000,000 shares consisting of 10,000,000 shares
of preferred stock, par value $.01 per share, and 30,000,000 shares of
common stock, par value $l.00 per share. No shares of preferred stock
have been issued. Common shares outstanding at December 27, 1997 and
September 27, 1997 were 10,571,000 and 10,541,000, respectively.
-5-
<PAGE>
WOODHEAD INDUSTRIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION
Working capital increased by $.2 million during the quarter ended
December 27, 1997 with a current ratio of 2.8/1 compared with 2.6/1 at the end
of the prior fiscal year. There was no long-term or short-term debt at the end
of the quarter. Return on assets rose to 14.7% from 14.5% and return on equity
decreased to 19.2% from 19.7% for the comparable 12-month periods ending
December 27, 1997 and December 28, 1996, respectively. The company's financial
position remains strong and significant borrowing capacity is available should
the need arise.
The Company is a party to an environmental matter which obligates it to
investigate, remediate or mitigate the effects on the environment of the release
of certain substances at one of the Company's facilities. For additional
information concerning the environmental matter, see "Item 1. Legal
Proceedings".
OPERATING RESULTS
First quarter net sales rose 6.8% to $34.4 million from $32.2 million
reported for the same period last year. Domestic sales increased 9.5% during the
quarter with the highest growth rates occurring in the balancer, lighting and
molded connector product lines. International sales increased 0.2% over the
first quarter of fiscal 1997 and constituted 27% of the total sales of the
quarter just ended. In local currencies, international sales increased 6.8% over
the same period last year. The backlog of unfilled orders was $9.5 million
compared with $8.8 million at fiscal year-end 1997 and $10.4 million reported
one year ago. Selling prices increased less than 1% when compared to the same
period one year ago.
Gross profit of $15.0 million was $.6 million or 4.3% greater than the
same quarter last year. Gross profit margins decreased to 43.6% from 44.6%,
primarily due to selling price concessions at one subsidiary, AI/FOCS.
Operating expenses increased 2.0% to $9.9 million from $9.7 million in
the first quarter of fiscal 1997. Although the Company continued to invest in
engineering, a 13.5% increase, operating expenses as a percentage of sales
decreased to 28.9% from 30.3%.
Other expenses of $.4 million were $.1 million more than the same
period a year ago. The increase was due to foreign exchange losses resulting
from the strengthening U. S. dollar and expenses incurred in moving into a new
plant in Juarez, Mexico.
Net income exceeded last year's first quarter by 7.8%. Basic earnings
per share were $0.27 compared with $0.25 in the first quarter of last year, an
8.0% increase. Earnings per share on a diluted basis were $0.25 compared with
$0.24 in the first quarter of last year, a 4.2% increase. The Company's increase
in net income was primarily due to the impact of the sales increase.
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<PAGE>
PART II. OTHER INFORMATION
WOODHEAD INDUSTRIES, INC.
Item 1. Legal Proceedings
The Company is subject to federal and state hazardous substance cleanup laws
that impose liability for the costs of cleaning up contamination resulting from
past spills, disposal or other releases of hazardous substances. In this regard,
the Company has incurred, and expects to incur, assessment, remediation and
related costs at one of the Company's facilities. In 1991, the Company reported
to state regulators a release at that site from an underground storage tank
("UST"). The UST and certain contaminated soil subsequently were removed and
disposed of at an off-site disposal facility. The Company's independent
environmental consultant has been conducting an investigation of soil and
groundwater at the site with oversight by the state Department of Environmental
Quality ("DEQ"). The investigation indicates that additional soil and
groundwater at the site have been impaired by chlorinated solvents, including
tetrachloroethane and trichloroethylene, and other compounds. Also, the Company
learned that a portion of the site had been used as a disposal area by the
previous owners of the site. The Company's consultant has remediated the soils
in this area 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.
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<PAGE>
PART II. OTHER INFORMATION
WOODHEAD INDUSTRIES, INC.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(11) Computation of earnings per common and
common equivalent share
(27) Financial data schedule (Electronic filings only)
(b) Reports on Form 8-K
There were no reports on Form 8-K filed during the quarter ended
December 27, 1997.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WOODHEAD INDUSTRIES, INC.
/S/ ROBERT G. JENNINGS 2/4/98
------------------------- -----------
Robert G. Jennings Date
Vice President - Finance
(Chief Financial Officer)
/S/ JOSEPH P. NOGAL 2/4/98
------------------------- -----------
Joseph P. Nogal Date
Treasurer/Controller
(Chief Accounting Officer)
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<TABLE>
<CAPTION>
EXHIBIT 11
WOODHEAD INDUSTRIES, INC.
COMPUTATION OF EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE
(Amounts in thousands, except per share data - unaudited)
Three Months Ended Three Months Ended
12 /27/97 12/28/96
-------------------- -------------------
BASIC DILUTED BASIC DILUTED
---------- ------- -------- -------
<S> <C> <C> <C> <C>
Net Income $ 2,808 $ 2,808 $ 2,604 $ 2,604
========== ======= ======== =======
Weighted average
common shares 10,561 10,561 10,429 10,429
Incremental shares issuable
for stock options outstanding
(Treasury stock method) -- 662 -- 517
---------- ------- -------- -------
Common and Common
Equivalent Shares 10,561 11,223 10,429 10,946
========== ======= ======== =======
Earnings per common and common
equivalent shares $ 0.27 $ 0.25 $ 0.25 $ 0.24
========== ======= ======== =======
</TABLE>
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF INCOME FOUND ON
PAGES 2 AND 3 OF THE COMPANY'S FORM 10-Q FOR THE YEAR TO DATE, AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-03-1998
<PERIOD-END> DEC-27-1997
<CASH> 6,596
<SECURITIES> 0
<RECEIVABLES> 19,582
<ALLOWANCES> 0
<INVENTORY> 17,891
<CURRENT-ASSETS> 49,462
<PP&E> 77,743
<DEPRECIATION> 44,974
<TOTAL-ASSETS> 89,177
<CURRENT-LIABILITIES> 17,550
<BONDS> 0
0
0
<COMMON> 10,571
<OTHER-SE> 58,873
<TOTAL-LIABILITY-AND-EQUITY> 89,177
<SALES> 34,350
<TOTAL-REVENUES> 34,350
<CGS> 19,380
<TOTAL-COSTS> 19,380
<OTHER-EXPENSES> 360
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 4,676
<INCOME-TAX> 1,868
<INCOME-CONTINUING> 2,808
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,808
<EPS-PRIMARY> .27
<EPS-DILUTED> .25
</TABLE>
