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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 OCTOBER 2, 1999
Commission file number 0-5971
[ ] TRANSITION REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
WOODHEAD INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 36-1982580
-------- ----------
(State or other jurisdiction of incorporation (I.R.S. Employer Identification
or organization) Number)
THREE PARKWAY NORTH, SUITE 550, DEERFIELD, IL. 60015
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (847) 236-9300
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 27, 1999 was $151,249,596. Shares outstanding as of
November 27, 1999 were 11,308,381.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's definitive proxy statement dated December 17, 1999,
for the annual meeting of stockholders to be held January 28, 2000, and portions
of the Annual Report to Stockholders for the year ended October 2, 1999 are
incorporated by reference in Parts I, II, III, and IV.
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<PAGE>
ANNUAL REPORT FORM 10-K
FOR THE YEAR ENDED OCTOBER 2, 1999
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..................................................... 4
4. Submission of Matters to a Vote of Securities Holders................. 4
5. Market for Registrant's Common Equity and Related Stock Matters....... 5-6
6. Selected Financial Data............................................... 6
7. Management's Discussion and Analysis of Financial Condition
and Results of Operations........................................... 6
7A.Quantitative and Qualitative Disclosures about Market Risk............ 6-7
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.................... 7-9
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 17-19)..................... 10-14
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.
Woodhead Industries, Inc. (NASDAQ: WDHD) is an integrated group of leading
companies in two business segments serving a diverse group of customers and
industries worldwide: Industrial Communications and Connectivity Products and
Electrical Safety & Specialty Products.
Woodhead's Industrial Communications and Connectivity Products segment, our
primary growth driver, provides system components on a global basis to connect
devices in open networks for automated manufacturing or material handling
applications. Our Connectivity businesses include SST, Brad Harrison, mPm, and
AI/FOCS.
Electrical Safety & Specialty Products, our core business, manufactures
highly customized products to improve safety and productivity in the industrial
workplace. Woodhead companies serving customers in this area include Woodhead
L.P. (formerly Daniel Woodhead Company), Aero-Motive Company and AKAPP Electro
Industrie B.V.
In all, Woodhead comprises 13 businesses operating 16 facilities in 10
countries, with global sales, engineering and distribution that enables us to
serve customers virtually anywhere they do business. We are decentralized to
encourage market responsiveness and innovation, but integrated to share
resources and cooperate seamlessly to meet specific customer needs.
There were no material changes in the manner in which the Company conducted
its business during fiscal 1999.
BUSINESS SEGMENTS
Footnote 8, "Segment and Geographic Data" appearing on pages 38 and 39 of
the Annual Report to Stockholders for the year ended October 2, 1999, is
incorporated herein by reference and filed as an exhibit to this report.
PRODUCTS
The Company's products are designed for and used primarily in industrial
applications for industrial communication, interconnectivity, and power
distribution. The Company's Industrial Communications and Connectivity Products
segment offers interface cards, quick-disconnect connectors, molded connectors
and specials. Products sold by the Electrical Safety & Specialty Products
segment include wiring devices, portable lighting, tool balancers, and conductor
bars. There are widespread applications for the Company's products throughout a
broad range of industries such as automotive, electronic equipment
manufacturing, food processing, petro-chemical, and airframe.
2
<PAGE>
Part I - cont'd
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. The distributors are
serviced by both a direct sales force and 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 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 27, 1999, there were unshipped orders totaling approximately
$14.9 million. Last year's backlog at approximately the same date was $12.2
million.
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.
3
<PAGE>
Part I - cont'd
RESEARCH AND DEVELOPMENT
For the years ended October 2, 1999, October 3, 1998, and September 27,
1997, the Company expended approximately $6,169,000, $9,695,000, and $3,025,000,
respectively, on the development of new products and the improvement of existing
products. Included in the amount for the year ended October 3, 1998 are
$5,971,000 related to in process research and development expensed in connection
with the acquisition of the assets of SST. These expenditures included the
compensation of engineers, designers, and drafters who were engaged in product
development.
EMPLOYEES
The Company has 1,616 full-time employees.
FOREIGN AND EXPORT BUSINESS
Footnote 8, "Segment and Geographic Data" appearing on pages 38 and 39 of the
Annual Report to Stockholders for the year ended October 2, 1999, is
incorporated herein by reference and filed as an exhibit to this report.
FORWARD LOOKING STATEMENTS
Certain statements contained herein constitute "forward- looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements involve numerous assumptions, known and unknown
risks, uncertainties and other factors which may cause actual and future
performance or achievements of the Company to be materially different from any
future results, performance or achievement expressed or implied by such
forward-looking statements. Such factors include: achieving sales levels to
fulfill revenue expectations; the absence of presently unexpected costs or
charges, certain of which may be outside the control of the Company; general
economic and business conditions; competition; and other factors described
elsewhere in the Company's SEC filings.
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 11.5 acres 131,000 sq. ft.
Barneveld, Netherlands 1.3 acres 30,000 sq. ft.
Ebbw Vale, Wales, U.K. 4.5 acres 42,000 sq. ft.
Bretten, Germany1 .2 acres 27,000 sq. ft.
Cusano Milanino, Italy .2 acres 18,000 sq. ft.
All of the above properties are owned in fee except the land in Ebbw Vale,
Wales, U.K. which is held under a lease expiring in 2105 and the land in
Bretten, Germany which is held under a lease expiring in 2046.
4
<PAGE>
Part I - cont'd.
The Company also leases approximately 60,000 square feet in Waterloo,
Ontario, Canada; 20,000 square feet in Mississauga, Ontario, Canada; 18,300
square feet in Paderno, Italy; 11,600 square feet in Deerfield, Illinois; 10,500
square feet in Grand Rapids, Michigan; 6,500 square feet in Lagny-Sur-Marne,
France; 5,900 square feet in Singapore; and 900 square feet in Yokohama, 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 2000.
ITEM 3. LEGAL PROCEEDINGS
Footnote 6, "Contingent Liabilities" appearing on page 36 of the Annual
Report to Stockholders for the year ended October 2, 1999, is incorporated
herein by reference and filed as an exhibit to this report.
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 October 2, 1999.
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.
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, "Capital
Stock" of the Annual Report to Stockholders for the year ended October 2,
1999, for further explanation. Said footnote appearing on pages 35 and 36
of the Annual Report to Stockholders for the year ended October 2, 1999, 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:
1999 1998
------------------------------- -------------------------------
Fiscal Fiscal
Quarter High Low Quarter High Low
1st 15 1/2 9 7/8 1st 21 1/2 17 1/8
2nd 13 9 1/4 2nd 19 3/4 17 3/8
3rd 15 3/8 9 11/16 3rd 20 13 7/8
4th 12 7/16 9 23/32 4th 16 8 1/8
5
<PAGE>
Part II - cont'd.
(b) The number of holders of record of the Company's securities as of
December 13, 1999 was as follows:
Title of Class Number of Stockholders
------------------------------- ----------------------
Common Stock 512
Preferred Stock Purchase Rights 512
(c) The cash dividends declared for the past two years were as follows:
1999 1998
------------------------- --------------------------
Fiscal Quarter Rate Fiscal Quarter Rate
1st $0.09 1st $0.09
2nd $0.09 2nd $0.09
3rd $0.09 3rd $0.09
4th $0.09 4th $0.09
----- -----
Total $0.36 Total $0.36
===== =====
ITEM 6. SELECTED FINANCIAL DATA
The "Financial Profile" appearing on pages 18 and 19 of the Annual Report
to Stockholders for the year ended October 2, 1999, 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 and Analysis of Operations and Financial Position"
appearing on pages 20 through 23 of the Annual Report to Stockholders for the
year ended October 2, 1999, is incorporated herein by reference and filed as an
exhibit to this report.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company, as a result of its global operating activities, is exposed to
changes in foreign currency exchange rates which may adversely affect its
results of operations and financial condition. In seeking to minimize the risks
and/or costs associated with such activities, the Company manages exposure to
changes in foreign currency exchange rates through its regular operating
activities and, when deemed appropriate, through the use of derivative financial
instruments.
The Company uses financial instruments to selectively hedge and thereby
attempts to reduce its overall exposure to the effects of foreign currency
fluctuations. The Company does not use derivative financial instruments for
speculative purposes. The Company uses foreign currency forward and swap
contracts to hedge a portion of the currency risks of transactions denominated
in foreign currencies. Gains and losses on these foreign currency hedges are
generally offset by corresponding losses and gains on the underlying
transactions.
6
<PAGE>
Part II - cont'd.
In 1998 the Company entered into a foreign currency swap agreement with an
AA- rated counterparty to hedge a portion of its investment in its Italian
subsidiary. Under the terms of the agreement, the Company will swap 35.52
billion Lire for $20.0 million U.S. Dollars amortized over 8 years. In addition,
the contract provides for the Company to make annual interest payments of 6.50%
on the outstanding Lire balance, while receiving 7.43% on the outstanding Dollar
balance. Due to the fact that this contract is an effective hedge of an
investment in a foreign entity, any gain or loss on the contract is recorded
directly to cumulative translation adjustment in stockholders' equity.
The following table indicates the values to be exchanged over the next 5
years relating to the Lire swap.
(All numbers in thousands)
Amortizing Outstanding Amortizing Outstanding
Date Amount USD Notional USD Amount ITL Notional ITL
9-30-00 $2,000 $17,000 ITL 3,552,000 ITL 30,192,000
9-30-01 3,000 14,000 5,328,000 24,864,000
9-30-02 3,000 11,000 5,328,000 19,536,000
9-30-03 3,000 8,000 5,328,000 14,208,000
9-30-04 3,000 5,000 5,328,000 8,880,000
Thereafter $5,000 $ -- ITL 8,800,000 ITL --
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The "Report of Independent Public Accountants" included on page 17 and the
consolidated financial statements with accompanying footnotes appearing on pages
24 through 40 of the Annual Report to Stockholders for the year ended October 2,
1999, are incorporated herein by reference and filed as exhibits to this report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
Part III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information appearing under the heading "Nominees and Continuing Directors"
on pages 1 through 3 of the Registrant's definitive proxy statement dated
December 17, 1999, for the annual meeting of stockholders to be held on January
28, 2000, is 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 57 Chairman and Chief July, 1993
Executive Officer
Philippe Lemaitre 50 President and Chief October, 1999
Operating Officer
7
<PAGE>
Part III - cont'd
Position Held
Name of Officer Age Position Since
- --------------- --- -------- -------------
Charles P. Anderson 46 Vice President, President January, 1999
Woodhead Connectivity,
North America
Gregory E. Baker 36 Vice President, Corporate October, 1997
Development and
Strategic Planning
Robert G. Jennings 61 Vice President, Finance and July, 1993
Chief Financial Officer
Robert A. Moulton 50 Vice President, Human May, 1987
Resources
Joseph P. Nogal 44 Vice President, Treasurer/ January, 1999
Controller and Assistant
Secretary
W. Arwel Rees 43 Vice President, President January, 1999
Woodhead Connectivity,
Europe
Robert J. Tortorello 50 Vice President, General January, 1991
Counsel and 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 28, 2000.
The business experience of those executive officers who are not directors
or nominees is as follows:
Mr. Charles P. Andersen became President of the Company's Aero-Motive
Company subsidiary in June, 1994. He was appointed President of Woodhead
Connectivity, North America in October, 1998, and elected Corporate Vice
President in January, 1999. He previously had served as Vice President,
General Manager of Blue M Electric, a unit of General Signal Corp., from
1992 to 1994.
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. 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.
8
<PAGE>
Part III - cont'd.
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.
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,
and was elected Vice President in January, 1999. From 1986 to 1990, he had
served as Controller of the Company's Canadian Operations.
Mr. W. Arwel Rees became Managing Director of the Company's Aero-Motive
(U.K.) Limited subsidiary in June, 1990. He was appointed President of
Woodhead Connectivity, Europe in October, 1998, and elected Corporate Vice
President in January, 1999.
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.
Information appearing under the heading "Section 16(a) Beneficial Ownership
Reporting Compliance" on page 5 of the Registrant's definitive proxy statement
dated December 17, 1999, for the annual meeting of stockholders to be held on
January 28, 2000, is incorporated herein by reference and made a part hereof.
ITEM 11. EXECUTIVE COMPENSATION
The information contained under the headings "Directors' Compensation" on
pages 4 and 5, and "Executive Compensation" on pages 9 through 13 of the
Registrant's definitive proxy statement dated December 17, 1999, for the annual
meeting of stockholders to be held on January 28, 2000, 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 pages 6 through 8 of the
Registrant's definitive proxy statement dated December 17, 1999, for the annual
meeting of stockholders to be held on January 28, 2000, are incorporated herein
by reference and made a part hereof.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information contained under the heading "Certain Relationships and
Related Transactions" appearing on page 8 of the Registrant's definitive proxy
statement dated December 17, 1999, for the annual meeting of stockholders to be
held on January 28, 2000, is incorporated herein by reference and made a part
hereof.
9
<PAGE>
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 October 2, 1999, and October 3, 1998.
Consolidated Statements of Income - for the years ended October 2,
1999, October 3, 1998, and September 27, 1997.
Consolidated Statements of Stockholders' Investment - for the years
ended October 2, 1999, October 3, 1998, and September 27, 1997.
Consolidated Statements of Cash Flow - for the years ended October 2,
1999, October 3, 1998, and September 27, 1997.
Consolidated Statements of Comprehensive Income - for the years ended
October 2, 1999, October 3, 1998, and September 27, 1997.
Notes to Consolidated Financial Statements.
2. Financial Statement Schedules
The following consolidated financial information for the years
ended October 2, 1999, October 3, 1998, and September 27, 1997,
is submitted herewith:
Page
----
Schedule II Valuation and Qualifying Accounts 12
Supplementary Note to Consolidated Financial Statements 13
Report of Public Accountants on Schedule
and Supplementary Note 14
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 17, 18, and 19, which are
incorporated herein by reference and made a part hereof.
(b) No reports on Form 8-K were filed during the fourth quarter of the fiscal
year ended October 2, 1999.
10
<PAGE>
Part IV - cont'd
(c) Reference is made to Item 14(a) 3 above.
(d) Reference is made to Item 14(a) 2 above.
11
<PAGE>
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
For the three years ended October 2, 1999
(in thousands)
<TABLE>
<CAPTION>
Balance at Charged to Balance
Beginning Costs and Deductions- at End
Description of Period Expenses Write-offs Other* of Period
- ------------------ --------- -------- ---------- ------ ---------
<S> <C> <C> <C> <C> <C>
Allowance for Doubtful
Accounts and Sales Returns:
Year ended October 2, 1999 $ 1,089 $ 113 $(121) $ 358 $ 1,439
Year ended October 3, 1998 911 195 (79) 62 1,089
Year ended September 27, 1997 $ 695 $ 127 $(111) $ 200 $ 911
</TABLE>
- -------------
*Other relates to returns and price adjustments, which are charged to net sales.
12
<PAGE>
SUPPLEMENTARY NOTE TO CONSOLIDATED
FINANCIAL STATEMENTS
ACCRUED EXPENSES
Accrued expenses at October 2, 1999 and October 3, 1998 consisted of the
following:
(in thousands)
1999 1998
---- ----
Payroll $ 3,420 $ 2,616
Pension and profit sharing 3,012 2,337
Taxes 1,649 1,613
Commissions 1,065 1,138
Environmental 216 2,045
Unrealized loss on swap agreement -- 1,818
All other 5,162 6,089
------- -------
Total $14,524 $17,656
======= =======
13
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
ON SCHEDULE AND SUPPLEMENTARY NOTE
To the Board of Directors and Shareholders
of Woodhead Industries, Inc.:
We have audited in accordance with generally accepted auditing standards, the
consolidated financial statements included in the Woodhead Industries, Inc.'s
Annual Report to Stockholders incorporated by reference in this Form 10-K, and
have issued our report thereon dated November 18, 1999. Our audit was made for
the purpose of forming an opinion on those statements taken as a whole. The
schedule and supplementary note included on pages 12 and 13 of this Form 10-K
are the responsibility of the company's management and 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 this note 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 18, 1999
14
<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.
15
<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 Vice President,
(Chief Financial Officer) Treasurer/Contoller
(Principal Accounting Officer)
Date 12-15-99
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 12-15-99
- ----------------------------------- and C.E.O.
C. Mark DeWinter
/s/ Philippe Lemaitre President 12-15-99
- ----------------------------------- and C.O.O.
Philippe Lemaitre
/s/ Charles W. Denny Director 12-19-99
- -----------------------------------
Charles W. Denny
/s/ Linda Y. C. Lim Director 12-14-99
- -----------------------------------
Linda Y. C. Lim, Ph. D.
/s/ Sarilee K. Norton Director 12-17-99
- -----------------------------------
Sarilee K. Norton
/s/ Alan L. Shaffer Director 12-21-99
- -----------------------------------
Alan L. Shaffer
16
<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
October 3, 1998, are hereby incorporated by reference to
Exhibit (3)b of Registrant's Form 10-K Annual Report for the
year ending September 27, 1997.
(4) Instruments defining the rights of security holders, including
indentures
(a)i. Credit Agreement between Registrant and Harris Trust and
Savings Bank dated October 29, 1993, and amended on October 3,
1998, providing for a revolving credit line not exceeding
$15,000,000.
(a)ii. Credit Agreement between Registrant (Woodhead Canada
Limited) and Harris Trust and Savings Bank dated July 30, 1998
providing for a revolving credit line not exceeding
$10,000,000.
(a)iii. On September 28, 1998, the Registrant issued to private
investors $30 million and $15 million of Senior Guaranteed
Notes at 6.64% and 6.81 % per annum, maturing in 2008 and
2013, respectively.
The above documents described in this paragraph (4a) are 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,
is filed as an exhibit to this report. 20-25
(b) The 1987 Stock Compensation Plan, as amended, is filed as
an exhibit to this report. 26-32
(c) The 1990 Stock Awards Plan, as amended, is filed as an
exhibit to this report. 33-39
(d) The 1993 Stock Awards Plan, as amended, is filed as an
exhibit to this report. 40-46
(e) The 1996 Stock Awards Plan, as amended, is filed as an
exhibit to this report. 47-53
17
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description Page
- ------ ----------- ----
(10)(f) The 1999 Stock Awards Plan as set forth in Exhibit A of
Registrant's definitive proxy statement dated December 17,
1999, for the annual meeting of shareholders
to be held Janaury 28, 2000, which is incorporated 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 2000 as
described on page 17 of the Registrant's definitive proxy
statement dated December 17, 1999, for the annual meeting of
stockholders held January 28, 2000, 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 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.
(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 made a
part hereof, with C. Mark DeWinter dated September 7, 1989.
Robert G. Jennings, Philippe Lemaitre, 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 appears on page 30 of
the Annual Report to Stockholders for the year ended October 2, 1999, and
is incorporated herein by reference and filed as an exhibit to this report.
18
<PAGE>
EXHIBIT INDEX (cont'd)
Exhibit
Number Description Page
- ------ ----------- ----
(13) The following items incorporated by reference herein from the
Annual Report to Stockholders for the year ended October 2, 1999
(the "1999 Annual Report"), are filed as Exhibits to this report:
(a) Information under the footnote entitled "Segment on Geographic
Data" set forth on Pages 38 and 39 of the 1999 Annual Report;
(b) Information under the footnote entitled "Capital Stock" set
forth on Pages 35 and 36 of the 1999 Annual Report;
(c) Information under the section entitled "Financial Profile" set
forth on Pages 18 and 19 of the 1999 Annual Report;
(d) Information under the section entitled "Management's
Discussion and Analysis of Operations and Financial Position"
set forth on Pages 20 through 23 of the 1999 Annual Report;
(e) Report of Independent Public Accountants set forth on Page 17
of the 1999 Annual Report;
(f) Consolidated Financial Statements set forth on Pages 24
through 27 of the 1999 Annual Report; and
(g) Notes to Consolidated Financial Statements set forth on Pages
28 through 40 of the 1999 Annual Report.
(21) Subsidiaries of the Registrant 54
(23) Consent of Arthur Andersen LLP 55
(27) Financial Data Schedule for the year ended October 2, 1999, filed
as an exhibit to this report.
19
EXHIBIT 10(a)
DANIEL WOODHEAD, INC.
1981 STOCK COMPENSATION PLAN
(With Amendments through November 1, 1999)
STATEMENT OF 1981 STOCK COMPENSATION PLAN, dated October 23, 1981.
WHEREAS, the Board of Directors of Daniel Woodhead, Inc. deems it in the
best interests of Daniel Woodhead, Inc. (hereinafter called "Woodhead"), that
certain management personnel employed by Woodhead, by its subsidiaries, or by
any subsidiary hereafter acquired by Woodhead, be given an opportunity to
acquire a stake in the growth of Woodhead, as a means of assuring their maximum
effort and continued association with Woodhead; and
WHEREAS, the Board of Directors believes that Woodhead can best obtain
these and other benefits by being able to grant to such management personnel
incentive stock options as provided in Section 422A of the Internal Revenue Code
(hereinafter called "ISO"), and stock options which are non-qualified under
Section 422A of the Internal Revenue Code ("non-ISO").
NOW, THEREFORE, the Board of Directors has adopted this 1981 STOCK
COMPENSATION PLAN, effective upon approval thereof by the affirmative vote of
the holders of at least a majority of the outstanding stock of Woodhead entitled
to vote.
SECTION 1. DEFINITIONS
(a) "Woodhead" means Daniel Woodhead, Inc.
(b) "Subsidiary" means any corporation in which Woodhead owns at
least 50% of the voting stock, or any corporation in a chain of corporations
connected with Woodhead through ownership of at least 50% of its voting stock by
any corporation in the chain.
(c) "Common Stock" means the $1.00 par value common stock of
Woodhead.
(d) "1981 Plan" means this 1981 STOCK COMPENSATION PLAN authorizing
the granting of stock options.
(e) "Fair Market Value" of Woodhead's Common Stock on the date an
option is granted shall be the mean between the bid and asked prices quoted by a
recognized specialist in such stock at the close of the date nearest preceding
such date of grant; except that if such stock is then listed on any national
securities exchange, such fair market value shall be the mean between the high
and the low sales on the date nearest preceding such date of grant.
(f) "corporation" shall include corporations, limited partnerships,
limited liability partnerships, and limited liability companies.
All references to gender herein shall include both the masculine and feminine.
SECTION 2: PURPOSE
The purpose of the 1981 Plan is to advance the interests of Woodhead by
encouraging qualified personnel to join Woodhead and its subsidiaries, to
provide an incentive for officers and key employees to remain with Woodhead and
its subsidiaries, and to stimulate the maximum efforts of those employees on
which the success and future growth of Woodhead and its subsidiaries are
dependent. It is intended that this purpose will be effected
20
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through the granting of stock options.
SECTION 3: SHARES SUBJECT TO THE 1981 PLAN
Subject to the adjustments authorized by Section 9 of the 1981 Plan,
options to purchase a maximum of 200,000 shares of Woodhead's Common Stock may
be granted pursuant to this 1981 Plan to employees who are eligible to become
participants. The number of such available shares shall be reduced by the number
of shares subject to stock options which are awarded under the 1981 Plan and
increased by the number of shares subject to options granted under such plan
which have expired, been cancelled or otherwise terminated prior to exercise by
the optionee. Shares allotted to eligible employees may be made available from
authorized but unissued Common Stock of Woodhead or from Common Stock of
Woodhead held in the treasury or from both unissued and Treasury Stock.
SECTION 4: ELIGIBILITY
Any person regularly employed on a salary basis by Woodhead or any
subsidiary thereof shall be eligible to receive options hereunder provided he or
she is employed in one or more of the following capacities:
(a) As an officer of Woodhead;
(b) As an officer of any subsidiary of Woodhead;
(c) As president or vice-president of any division of Woodhead;
(d) As an employee of Woodhead or of any subsidiary of Woodhead
acting in a managerial or staff capacity with respect to sales, administration,
research or manufacturing.
No stock option may be granted to any employee who immediately after such
option is granted would own stock of Woodhead or a subsidiary (within the
meanings of Sections 422A and 425 of the Internal Revenue Code and any
Regulations thereunder) possessing more than ten percent (10%) of the total
combined voting power or value of all classes of stock of Woodhead or a
subsidiary corporation.
Participation under the 1981 Plan shall not affect eligibility for
participation in any pension, profit sharing, stock option, or other welfare or
compensation plan of Woodhead or any of its subsidiaries now existing or
hereafter adopted.
SECTION 5: LIMIT ON OPTIONS
No person shall be granted in any calendar year ISO's (under this or any
other plan) for a number of shares of Common Stock (or other stock of Woodhead
or any parent or subsidiary thereof) having a fair market value (determined as
of the time of the grant of the option) exceeding $100,000.00, increased by such
person's unused carryovers to such year. The carryover arising in any year shall
be one-half (1/2) of the excess (if any) of $100,000.00 over the total fair
market value (determined as of the time of the grant) of the shares of Common
Stock for which ISO's were granted to such person during such year. The
carryovers arising in any calendar year after 1980 may be used in the three
succeeding years. For purposes hereof, options granted in any calendar year
shall be treated as first using up the $100,000.00 limitation for such year, and
then using up the unused portions of the carryovers in the order of the years in
which they arose. Said carryover of the unused limit shall be calculated in
accordance with Section 422A(c)(4) of the Internal Revenue Code.
21
<PAGE>
SECTION 6: ADMINISTRATION
The 1981 Plan shall be administered by a Stock Option Committee
(hereinafter referred to as the "Committee") in accordance with applicable laws
and regulations of governmental agencies. The Committee shall consist of a
minimum of three members of the Board of Directors who are not employees or
officers of Woodhead or any of its subsidiaries, and such Committee shall be
appointed from time to time by a majority of the whole Board of Directors. Any
member of such Committee may be removed by a majority of the whole Board of
Directors at any time with or without cause. No member of the Committee shall be
eligible to participate in the 1981 Plan. The Committee shall have full
authority to:
(a) Determine (i) the employees to whom options under the 1981 Plan
will be granted; and (ii) the number of and type (ISO or non-ISO) of options to
be awarded to each employee and the number of shares subject to each such
option;
(b) Interpret, construe, and implement the provisions of the 1981
Plan;
(c) Establish, amend, and rescind appropriate rules and regulations
relating to the 1981 Plan.
All determinations of the Committee shall be by a majority of its members.
Any interpretation by the Committee of the terms and conditions of the 1981 Plan
shall be final unless changed by the Board of Directors.
SECTION 7: STOCK OPTIONS
Options granted under the 1981 Plan shall be evidenced by written stock
option agreements consistent with the terms of the 1981 Plan, each of which
shall be executed by Woodhead and the employee. The agreements, in such form as
the Committee shall from time to time approve, shall contain the following terms
and conditions:
A. Exercise of Stock Options.
(1) Time of Exercise. The stock option shall be exercisable by the
employee anytime on or after the date of grant, unless otherwise specified by
the Committee at the time of the grant, provided that at the time of exercise
(except as hereinafter otherwise provided), he is then an employee of either
Woodhead or a subsidiary and then only if at all times during the period
beginning with the date the option is granted and ending at the time of the
exercise of such option he has been in the continuous employ of Woodhead and/or
a subsidiary or any two or more of them in succession. All rights to exercise a
stock option shall expire 10 years after the date such option is granted.
(2) Prior Options. No ISO granted under this 1981 Plan may be
exercised in whole or in part while there is outstanding (within the meaning of
subsection (c)(7) of Section 422A of the Internal Revenue Code) any ISO granted
to the employee before the granting of such option, to purchase Woodhead Stock
or stock in a corporation which (at the time of the granting of such option) is
a parent or subsidiary corporation of Woodhead, or stock in a predecessor
corporation of any of such corporations.
(3) Purchase Price. The purchase price per share of Common Stock
deliverable upon the exercise of a stock option shall be determined by the
Committee at the time of grant, but shall in no event be less than 100 percent
of the fair market value of the stock on the date the option is granted.
(4) Method of Exercise. In order to exercise a stock option in whole
or in part, the employee shall give written notice to Woodhead's Secretary at
3411 Woodhead Drive, Northbrook, Illinois, of his intention to exercise such
option, stating the number of shares with respect to which he intends to
exercise his option. Option shares may be purchased by payment in cash, or in
Common Stock, or partly in each. The employee's notice of exercise of any option
shall be accompanied by full payment in cash for the number of shares with
respect to which
22
<PAGE>
the option is to be exercised if payment for such shares is to be made entirely
in cash, or by payment of cash and the tender of Common Stock sufficient to pay
the purchase price of such shares if payment is to be made partly or wholly in
Common Stock. The Committee shall then determine the fair market value of any
Common Stock tendered at the date of tender, and shall refund any cash or Common
Stock submitted by the employee in excess of the amount neededto purchase such
shares. Fractional shares of Common Stock shall not be accepted in payment for
option stock. Shares of Common Stock transferred to Woodhead in payment for
option shares may be reissued to the employee by Woodhead as shares issued under
the option.
(5) Effect of Termination.
(a) If an employee ceases to be employed by Woodhead or any of
its Subsidiaries for any reason except retirement, death or
disability, any unexercised option granted to him under the
1981 Plan, which is then exercisable, may be exercised for
thirty (30) days following said cessation, unless it expires
sooner.
(b) If an employee ceases to be employed by Woodhead or any of
its Subsidiaries by reason of his retirement at age 55 or
later with at least five years of service, any unexercised
option granted to him under the 1981 Plan, will continue to
mature and become exercisable in accordance with Section
7(A)(1) above and may be exercised prior to its expiration and
within five years after such retirement. An unexercised ISO
will cease to be treated as such and become a non-ISO three
months after retirement.
(c) If an employee dies while employed by Woodhead or any
Subsidiary, any unexercised option granted to him under the
1981 Plan may be exercised prior to its expiration by the
estate of such employee, or by any person who acquired such
option by bequest or inheritance from the employee, at any
time within two years after the death of the employee. An
unexercised ISO will cease to be treated as such and become a
non-ISO twelve months after the employee's death. Each option
shall immediately become exercisable without regard to the
exercise period set forth in 7(A)(1) above.
(d) If an employee suffers a disability (within the meaning of
section 22 (e)(3) of the Internal Revenue Code) while employed
by Woodhead or any Subsidiary, any unexercised option granted
to him under the 1981 Plan may be exercised prior to its
expiration at any time within two years after the employee's
termination on account of such disability. An unexercised ISO
will cease to be treated as such and become a non-ISO twelve
months after the employee's termination on account of such
disability. Each option shall immediately become exercisable
without regard to the exercise period set forth in 7(A)(1)
above.
B. Additional Terms and Conditions.
Each employee shall agree to such other terms, provisions and conditions
consistent with the 1981 Plan as may be determined by the Committee or the Board
of Directors.
SECTION 8: NON-TRANSFERABILITY OF OPTIONS.
Stock options granted under the 1981 Plan are not transferable by an
employee other than by will or by the laws of descent and distribution. During
the employee's lifetime, stock options shall be exercised only by him.
23
<PAGE>
SECTION 9: ADJUSTMENTS IN THE EVENT OF CHANGES IN
CAPITAL STRUCTURE, REORGANIZATION, STOCK
DIVIDENDS
(a) Changes in Capital Structure. If at any time, or from time to
time, after the grant but prior to the exercise of all or any part of an option
granted under the 1981 Plan, Woodhead shall effect a subdivision or combination
of its $1.00 par value Common Stock, or other option stock as that term is used
below, into a greater or smaller number of shares or a reclassification of such
$1.00 par value Common Stock or other option stock into shares of another class
or into securities, or Woodhead shall be merged with any other corporation and
Woodhead shall be the surviving corporation in such merger, then there shall be
thereafter deliverable by Woodhead, upon any exercise of such option, in lieu of
each share of $1.00 par value Common Stock or other option stock and for the
option price for each such share, such shares of stock or securities or such
shares of stock and securities as shall have been substituted for a share of
$1.00 par value Common Stock or other option stock in connection with such
subdivision, combination, reclassification or merger. Such substituted shares of
stock or securities or such additional shares of stock and securities shall be
deemed option stock for all purposes of the 1981 Plan.
(b) Reorganization--Continuation of 1981 Plan. Upon the effective
date of the dissolution or liquidation of Woodhead, or of a reorganization,
merger or consolidation of Woodhead with one or more corporations in which
Woodhead is not the surviving corporation, or a transfer of substantially all of
the property or more than 80 percent of the then outstanding shares of Woodhead
to another corporation, the 1981 Plan and any option previously granted under
the 1981 Plan shall terminate unless provision be made in writing in connection
with such transaction for the continuation of the 1981 Plan and for the
assumption of the options previously granted, or for the substitution of new
options covering the shares of a successor employer corporation, or a parent or
subsidiary thereof, in which event the 1981 Plan and the options previously
granted or new options substituted therefor shall continue in the manner and
under the terms so provided.
(c) Reorganization--Termination of 1981 Plan. In the event of a
dissolution, liquidation, reorganization, merger, consolidation, transfer of
assets or transfer of shares, as provided in Section 9(b), and if provision is
not made in such transaction for he continuance of the 1981 Plan and for the
assumption of options previously granted thereunder or the substitution of new
options covering the shares of a successor employer corporation or a parent or
subsidiary thereof, then a participating employee under the 1981 Plan shall be
entitled to written notice prior to the effective date of any such transaction
stating that rights under any stock option then held by him must be exercised
within 60 days of the date of such notice, but only to the extent that the
option is then exercisable in accordance with the provisions of the 1981 Plan
and the option, otherwise said option shall be terminated.
(d) Stock Dividends. If at any time, or from time to time, after the
grant but prior to the exercise of all or any part of an option under the 1981
Plan, the Board of Directors shall declare in respect of Woodhead's $1.00 par
value Common Stock or other option stock any dividend payable in shares of stock
of Woodhead, of any class, then there shall be deliverable upon any exercise
thereafter of any option under this Plan, in addition to each share of option
stock, and for no additional stock price, such additional share or shares of
stock as shall have been distributable as a result of such stock dividend in
respect of a share of option stock, except that fractional shares shall not be
so deliverable. Any such stock dividend shall be deemed part of the option stock
for all purposes of this Plan.
(e) In the event of changes in the outstanding $1.00 par value
Common Stock of Woodhead by reason of any stock dividend, any subdivision or
combination of such stock into a greater or smaller number of shares, any
reclassification of such stock into shares of another class or other securities,
or any merger or consolidation, then the number and class of shares or other
securities remaining available for options under the 1981 Plan in the aggregate
shall be correspondingly adjusted except the fractional shares shall be
disregarded. In the
24
<PAGE>
event a stock option expires, is cancelled or terminates prior to its exercise
by the optionee and between the date such option is granted and such expiration,
cancellation or termination, the number and class of shares and/or securities as
so adjusted which are subject to such option at the time of its expiration,
cancellation or termination shall be added to the aggregate number of shares of
stock or securities available for option under the 1981 Plan.
SECTION 10: RIGHTS AS STOCKHOLDERS.
A participating employee shall have no rights whatsoever as a stockholder
of Woodhead with respect to any shares covered by a stock option until the date
of the issuance of a stock certificate to him pursuant to such option. No
adjustment shall be made for dividends or other rights for which the record date
is prior to the date such stock certificate is issued.
SECTION 11: AMENDMENT.
The Board of Directors of Woodhead, upon recommendation of the Committee,
shall have the power to amend or revise the terms of the 1981 Plan or any part
thereof without further action of the stockholders provided, however, that no
such amendment shall, without stockholder approval:
(a) Impair any option or deprive any employee of shares he may have
acquired through the 1981 Plan, without the employee's consent;
(b) Increase the total number of shares reserved for the purpose of
the 1981 Plan;
(c) Change the class of employees eligible to receive options under
the 1981 Plan;
(d) Extend the period during which any option may be granted or
exercised.
Notwithstanding the foregoing, the Committee shall have the power, without
the approval of the Board, to amend the 1981 Plan in such manner as may be
necessary to retain its qualification to grant ISO's or to comply with any other
requirement of law.
SECTION 12: EFFECTIVE DATE AND TERMINATION OF PLAN
(a) Effective date. The effective date of the 1981 Plan shall be
October 23, 1981.
(b) Termination. The Board of Directors may terminate the 1981 Plan
at any time with respect to any shares that are not subject to stock options.
Unless terminated earlier by the Board of Directors, the 1981 Plan shall
terminate 10 years after the effective date and no stock options shall be
granted under this plan after such date. Termination of this plan will not
affect the rights and obligations of any employee with respect to stock options
granted prior to termination, except as provided in Section 9 hereof.
(c) Tax Withholding. The Committee shall have the power to
withhold, or require an employee to remit to Woodhead, an amount sufficient to
satisfy any withholding or other tax due with respect to any shares issuable
under the 1981 Plan, and the Committee may defer such issuance unless
indemnified to its satisfaction. The Committee may permit the withholding
obligations to be satisfied through the surrender of shares of Common Stock
which the employee already owns, or through the surrender of shares of Common
Stock to which the employee is otherwise entitled under the 1981 Plan.
25
EXHIBIT 10(b)
WOODHEAD INDUSTRIES, INC.
1987 STOCK COMPENSATION PLAN
(WITH AMENDMENTS THROUGH NOVEMBER 1, 1999)
STATEMENT OF 1987 STOCK COMPENSATION PLAN, dated November 21, 1987.
WHEREAS, the Board of Directors of Woodhead Industries, Inc. deems
it in the best interests of Woodhead Industries, Inc. (hereinafter called
"Woodhead"), that certain management personnel employed by Woodhead, its
subsidiaries, or any subsidiary hereafter acquired by Woodhead, be given an
opportunity to acquire a stake in the growth of Woodhead, as a means of
encouraging their maximum effort and continued association with Woodhead; and
WHEREAS, the Board of Directors believes that Woodhead can best
obtain these and other benefits by being able to grant to such management
personnel incentive stock options ("ISOs") as provided in Section 422A of the
Internal Revenue Code of 1986 (the "Code"), and non-qualified stock options
which do not satisfy the requirements of Section 422A of the Code ("non-ISOs").
NOW, THEREFORE, the Board of Directors has adopted this 1987 STOCK
COMPENSATION PLAN, effective upon approval thereof by the shareholders of
Woodhead.
SECTION 1. DEFINITIONS
(a) "Woodhead" means Woodhead Industries, Inc.
(b) "Subsidiary" means any corporation in which Woodhead owns at least 50%
of the voting stock, or any corporation in a chain of corporations
connected with Woodhead through ownership of at least 50% of its voting
stock by any corporation in the chain.
(c) "Common Stock" means the $1.00 par value common stock of Woodhead.
(d) "1987 Plan" means this 1987 STOCK COMPENSATION PLAN authorizing the
granting of stock options.
(e) "Fair Market Value" of Woodhead's Common Stock on the date an option
is granted shall be the mean between the bid and asked prices quoted by a
recognized specialist in such stock at the close of the date nearest
preceding such date of grant; except that if such stock is then listed on
any national securities exchange, such fair market value shall be the mean
between the high and the low sales on the date nearest preceding such date
of grant.
(f) "corporation" shall include corporations, limited partnerships,
limited liability partnerships, and limited liability companies.
All references to gender herein shall include both the masculine and
feminine.
SECTION 2: PURPOSE
The purpose of the 1987 Plan is to advance the interests of Woodhead
by encouraging qualified personnel to join Woodhead and its subsidiaries, to
provide an incentive for officers and key employees to remain with Woodhead and
its subsidiaries, and to stimulate the maximum efforts of those employees
26
<PAGE>
on which the success and future growth of Woodhead and its subsidiaries are
dependent.
SECTION 3: SHARES SUBJECT TO THE 1987 PLAN
Subject to the adjustments authorized by Section 8 of the 1987 Plan,
options to purchase a maximum of 250,000 shares of Woodhead's Common Stock may
be granted pursuant to this 1987 Plan to employees who are eligible to become
participants. The number of such available shares shall be reduced by the number
of shares subject to stock options which are awarded under the 1987 Plan and
increased by the number of shares subject to options granted under such plan
which have expired, been cancelled or otherwise terminated prior to exercise by
the optionee. Shares allotted to eligible employees may be made available from
authorized but unissued Common Stock of Woodhead or from Common Stock of
Woodhead held in the treasury or from both unissued and Treasury Stock.
SECTION 4: ELIGIBILITY
Any person regularly employed on a salary basis by Woodhead or any
subsidiary thereof shall be eligible to receive options hereunder provided he or
she is employed in one or more of the following capacities:
(a) As an officer of Woodhead;
(b) As an officer of any subsidiary of Woodhead;
(c) As president or vice-president of any division of Woodhead;
(d) As a key employee of Woodhead or of any subsidiary of Woodhead
who is deemed eligible by the Compensation and Stock Option Committee of the
Board of Directors of Woodhead.
No ISO (within the meaning of Section 422A of the Code) may be
granted to any employee who, at the time such option is granted, owns stock of
Woodhead or a subsidiary possessing more than ten percent (10%) (including the
attribution of ownership rules of Section 425(d) of the Code) of the total
combined voting power of all classes of stock of Woodhead or a subsidiary
corporation.
Participation under the 1987 Plan shall not affect eligibility for
participation in any pension, profit sharing, stock option, or other welfare or
compensation plan of Woodhead or any of its subsidiaries now existing or
hereafter adopted.
SECTION 5: ADMINISTRATION
The 1987 Plan shall be administered by the Compensation and Stock
Option Committee (hereinafter referred to as the "Committee") in accordance with
applicable laws and regulations of governmental agencies. The Committee shall
consist of a minimum of three members of the Board of Directors who are not
employees or officers of Woodhead or any of its subsidiaries, and such Committee
shall be appointed from time to time by a majority of the full Board of
Directors. Any member of such Committee may be removed by a majority of the full
Board of Directors at any time with or without cause. No member of the Committee
shall be eligible to participate in the 1987 Plan. The Committee shall have full
authority to:
(a) Determine (i) the employees to whom options under the 1987 Plan will be
granted; and (ii) the number of and type (ISO or non-ISO) of options to
27
<PAGE>
be awarded to each employee and the number of shares subject to each such
option;
(b) Interpret, construe, and implement the provisions of the 1987 Plan;
(c) Establish, amend, and rescind appropriate rules and regulations
relating to the 1987 Plan.
All determinations of the Committee shall be by a majority of its
members. Any interpretation by the Committee of the terms and conditions of the
1987 Plan shall be final unless changed by the Board of Directors.
SECTION 6: TERMS AND CONDITIONS
Options granted under the 1987 Plan shall be evidenced by written
stock option agreements between Woodhead and the employee (in such form as the
Committee shall from time to time approve) and in accordance with the following
terms and conditions:
(a) Exercise of Stock Options.
(1) Time of Exercise. The stock option shall be exercisable by the
employee anytime on or after the date of grant, unless otherwise specified
by the Committee at the time of the grant, provided that at the time of
exercise (except as hereinafter otherwise provided), he is then an
employee of either Woodhead or a subsidiary and then only if at all times
during the period beginning with the date the option is granted and ending
at the time of the exercise of such option he has been in the continuous
employ of Woodhead and/or a subsidiary or any two or more of them in
succession. All rights to exercise a stock option shall expire 10 years
after the date such option is granted.
(2) Purchase Price. The purchase price per share of Common Stock
deliverable upon the exercise of a stock option shall be determined by the
Committee at the time of grant, but shall in no event be less than 100
percent of the fair market value of the stock on the date the option is
granted.
(3) Amount Exercisable. Options for no more than $100,000 of fair market
value (determined at the time the ISO is granted) of the stock with
respect to which the ISOs are granted (under all stock option plans
maintained by Woodhead or any of its subsidiaries) can become exercisable
for the first time by an individual during any calendar year.
(4) Method of Exercise. In order to exercise a stock option in whole or in
part, the employee shall give written notice to Woodhead's Secretary at
3411 Woodhead Drive, Northbrook, Illinois, of his intention to exercise
such option, stating the number of shares with respect to which he intends
to exercise his option. Option shares may be purchased by payment in cash,
or in Common Stock, or partly in each. The employee's notice of exercise
of any option shall be accompanied by full payment in cash for the number
of shares with respect to which the option is to be exercised if payment
for such shares is to be made entirely in cash, or by payment of cash and
the tender of Common Stock sufficient to pay the purchase price of such
shares if payment is to be made partly or wholly in Common Stock. The
Committee shall then determine the fair market value of any Common Stock
tendered at the date of tender, and shall refund any cash or Common Stock
submitted by the employee in excess of the amount needed to purchase such
shares. Fractional shares of Common Stock shall not be accepted in payment
for option stock. Shares of Common Stock transferred to Woodhead in
payment for option shares may be reissued to the employee
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by Woodhead as shares issued under the option.
(5) Effect of Termination.
(i) If an employee ceases to be employed by Woodhead or any of its
Subsidiaries for any reason except retirement, death or disability, any
unexercised option granted to him under the 1987 Plan, which is then
exercisable, may be exercised for thirty (30) days following said
cessation, unless it expires sooner.
(ii) If an employee ceases to be employed by Woodhead or any of its
Subsidiaries by reason of his retirement at age 55 or later with at least
five years of service, any unexercised option granted to him under the
1987 Plan, will continue to mature and become exercisable in accordance
with Section 6(a)(1) above and may be exercised prior to its expiration
and within five years after such retirement. An unexercised ISO will cease
to be treated as such and become a non-ISO three months after retirement.
(iii) If an employee dies while employed by Woodhead or any Subsidiary,
any unexercised option granted to him under the 1987 Plan may be exercised
prior to its expiration by the estate of such employee, or by any person
who acquired such option by bequest or inheritance from the employee, at
any time within two years after the death of the employee. An unexercised
ISO will cease to be treated as such and become a non-ISO twelve months
after the employee's death. Each option shall immediately become
exercisable without regard to the exercise period set forth in 6(a)(1)
above.
(iv) If an employee suffers a disability (within the meaning of section 22
(e)(3) of the Code) while employed by Woodhead or any Subsidiary, any
unexercised option granted to him under the 1987 Plan may be exercised
prior to its expiration at any time within two years after the employee's
termination on account of such disability. An unexercised ISO will cease
to be treated as such and become a non-ISO twelve months after the
employee's termination on account of such disability. Each option shall
immediately become exercisable without regard to the exercise period set
forth in 6(a)(1) above.
(b) Additional Terms and Conditions. Each employee shall agree to such
other terms, provisions and conditions consistent with the 1987 Plan as
may be determined by the Committee or the Board of Directors.
SECTION 7: NON-TRANSFERABILITY OF OPTIONS.
Stock options granted under the 1987 Plan are not transferable by an
employee other than by will or by the laws of descent and distribution. During
the employee's lifetime, stock options shall be exercised only by him.
SECTION 8: ADJUSTMENTS IN THE EVENT OF CHANGES IN CAPITAL STRUCTURE,
REORGANIZATION, STOCK DIVIDENDS
(a) Changes in Capital Structure. If at any time, or from time to time,
after the grant but prior to the exercise of all or any part of an option
granted under the 1987 Plan, Woodhead shall effect a subdivision or
combination of its $1.00 par value Common Stock, or other option stock as
that term is used below, into a greater or smaller number of shares or a
reclassification of such $1.00 par value Common Stock or other option
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stock into shares of another class or into securities, or Woodhead shall
be merged with any other corporation and Woodhead shall be the surviving
corporation in such merger, then there shall be thereafter deliverable by
Woodhead, upon any exercise of such option, in lieu of each share of $1.00
par value Common Stock or other option stock and for the option price for
each such share, such shares of stock or securities or such shares of
stock and securities as shall have been substituted for a share of $1.00
par value Common Stock or other option stock in connection with such
subdivision, combination, reclassification or merger. Such substituted
shares of stock or securities or such additional shares of stock and
securities shall be deemed option stock for all purposes of the 1987 Plan.
(b) Reorganization--Continuation of 1987 Plan. Upon the effective date of
the dissolution or liquidation of Woodhead, or of a reorganization, merger
or consolidation of Woodhead with one or more corporations in which
Woodhead is not the surviving corporation, or a transfer of substantially
all of the property or more than 80 percent of the then outstanding shares
of Woodhead to another corporation, the 1987 Plan and any option
previously granted under the 1987 Plan shall terminate unless provision be
made in writing in connection with such transaction for the continuation
of the 1987 Plan and for the assumption of the options previously granted,
or for the substitution of new options covering the shares of a successor
employer corporation, or a parent or subsidiary thereof, in which event
the 1987 Plan and the options previously granted or new options
substituted therefor shall continue in the manner and under the terms so
provided.
(c) Reorganization--Termination of 1987 Plan. In the event of a
dissolution, liquidation, reorganization, merger, consolidation, transfer
of assets or transfer of shares, as provided in Section 8(b), and if
provision is not made in such transaction for the continuance of the 1987
Plan and for the assumption of options previously granted thereunder or
the substitution of new options covering the shares of a successor
employer corporation or a parent or subsidiary thereof, then a
participating employee under the 1987 Plan shall be entitled to written
notice prior to the effective date of any such transaction stating that
rights under any stock option then held by him must be exercised within 60
days of the date of such notice, but only to the extent that the option is
then exercisable in accordance with the provisions of the 1987 Plan and
the option, otherwise said option shall be terminated.
(d) Stock Dividends. If at any time, or from time to time, after the grant
but prior to the exercise of all or any part of an option under the 1987
Plan, the Board of Directors shall declare in respect of Woodhead's $1.00
par value Common Stock or other option stock any dividend payable in
shares of stock of Woodhead, of any class, then there shall be deliverable
upon any exercise thereafter of any option under this Plan, in addition to
each share of option stock, and for no additional stock price, such
additional share or shares of stock as shall have been distributable as a
result of such stock dividend in respect of a share of option stock,
except that fractional shares shall not be so deliverable. Any such stock
dividend shall be deemed part of the option stock for all purposes of this
Plan.
(e) In the event of changes in the outstanding $1.00 par value Common
Stock of Woodhead by reason of any stock dividend, any subdivision or
combination of such stock into a greater or smaller number of shares, any
reclassification of such stock into shares of another class or other
securities, or any merger or consolidation, then the number and class of
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shares or other securities remaining available for options under the 1987
Plan in the aggregate shall be correspondingly adjusted except that
fractional shares shall be disregarded. In the event a stock option
expires, is cancelled or terminates prior to its exercise by the optionee
and between the date such option is granted and such expiration,
cancellation or termination, the number and class of shares and/or
securities as so adjusted which are subject to such option at the time of
its expiration, cancellation or termination shall be added to the
aggregate number of shares of stock or securities available for option
under the 1987 Plan.
SECTION 9: RIGHTS AS STOCKHOLDERS.
A participating employee shall have no rights whatsoever as a
stockholder of Woodhead with respect to any shares covered by a stock option
until the date of the issuance of a stock certificate to him pursuant to such
option. No adjustment shall be made for dividends or other rights for which the
record date is prior to the date such stock certificate is issued.
SECTION 10: AMENDMENT.
The Board of Directors of Woodhead, upon recommendation of the
Committee, shall have the power to amend or revise the terms of the 1987 Plan or
any part thereof without further action of the stockholders provided, however,
that no such amendment shall, without stockholder approval:
(a) Impair any option or deprive any employee of shares he may have
acquired through the 1987 Plan, without the employee's consent;
(b) Increase the total number of shares reserved for the purpose of the
1987 Plan;
(c) Change the class of employees eligible to receive options under the
1987 Plan;
(d) Extend the period during which any option may be granted or exercised.
Notwithstanding the foregoing, the Committee shall have the power,
without the approval of the Board, to amend the 1987 Plan in such manner as may
be necessary to retain its qualification to grant ISOs or to comply with any
other requirement of law.
SECTION 11: EFFECTIVE DATE AND TERMINATION OF PLAN
(a) Effective date. The effective date of the 1987 Plan shall be November
21, 1987.
(b) Termination. The Board of Directors may terminate the 1987 Plan at any
time with respect to any shares that are not subject to stock options.
Unless terminated earlier by the Board of Directors, the 1987 Plan shall
terminate 10 years after the effective date and no stock options shall be
granted under this plan after such date. Termination of this plan will not
affect the rights and obligations of any employee with respect to stock
options granted prior to termination, except as provided in Section 8
hereof.
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(c) Tax Withholding. The Committee shall have the power to withhold, or
require an employee to remit to Woodhead, an amount sufficient to satisfy
any withholding or other tax due with respect to any shares issuable under
the 1987 Plan, and the Committee may defer such issuance unless
indemnified to its satisfaction. The Committee may permit the withholding
obligations to be satisfied through the surrender of shares of Common
Stock which the employee already owns, or through the surrender of shares
of Common Stock to which the employee is otherwise entitled under the 1987
Plan.
32
EXHIBIT 10(c)
WOODHEAD INDUSTRIES, INC.
1990 STOCK AWARDS PLAN
(WITH AMENDMENTS THROUGH NOVEMBER 1, 1999)
SECTION 1: PURPOSE
The purpose of the Woodhead Industries, Inc. 1990 Stock Awards Plan (the
"1990 Plan") is to advance the long-term financial interests of Woodhead by (a)
encouraging qualified personnel to join Woodhead and its Subsidiaries, (b)
providing an incentive for officers and key employees to remain with Woodhead
and its Subsidiaries, and (c) furthering the identity of interests of
participating employees with those of Woodhead's shareholders.
SECTION 2. DEFINITIONS
The following definitions are applicable to the 1990 Plan:
(a) "Board of Directors" means the Board of Directors of Woodhead.
(b) "Code" means the Internal Revenue Code of 1986, as amended, and any
successor statute.
(c) "Common Stock" means the $1.00 par value common stock of Woodhead,
except as this definition may be modified as provided in Section 8.
(d) "Fair Market Value" of Woodhead's Common Stock on any given date shall
mean the average of the highest and lowest sales prices of the Common
Stock on such date (or, if the Common Stock was not traded on such date,
on the next preceding day on which such stock was traded) as reported in
THE WALL STREET JOURNAL under the heading "NASDAQ National Market Issues"
or any similar or successor heading.
(e) "ISO or ISOs" mean incentive stock option(s) as provided for in
section 422A of the Code.
(f) "non-ISO or non-ISOs" mean stock options that do not satisfy the
requirements of section 422A of the Code.
(g) "Participant" means an eligible employee who has been granted an award
pursuant to the 1990 Plan.
(h) "Subsidiary" means any corporation in which Woodhead owns at least 50%
of the voting stock, or any corporation in a chain of corporations
connected with Woodhead through ownership of at least 50% of its voting
stock by any corporation in the chain.
(i) "Woodhead" means Woodhead Industries, Inc., and its successors.
(j) "corporation" shall include corporations, limited partnerships,
limited liability partnerships, and limited liability companies.
All references to gender herein shall include both the masculine and
feminine.
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SECTION 3: SHARES SUBJECT TO THE 1990 PLAN
Subject to the adjustments authorized by Section 8 of the 1990 Plan, a
maximum of 250,000 shares of Woodhead's Common Stock may be granted in the form
of stock options or restricted stock, pursuant to this 1990 Plan to employees
who are eligible to become participants. The number of such available shares
shall be reduced by the number of shares subject to awards which are granted
under the 1990 Plan and increased by the number of shares subject to awards
granted under such plan which have expired unexercised or unpaid, been cancelled
or otherwise terminated prior to the issuance of shares of Common Stock
thereunder. Shares allotted to eligible employees may be made available from
authorized but unissued Common Stock of Woodhead or from Common Stock of
Woodhead held in the treasury or from both unissued and Treasury Stock.
SECTION 4: ADMINISTRATION
The 1990 Plan shall be administered by the Compensation and Stock Option
Committee of the Board of Directors (the "Committee") in accordance with
applicable laws and regulations of governmental agencies. The Committee shall
consist of a minimum of three members of the Board of Directors who are not
employees or officers of Woodhead or any Subsidiaries, and such Committee shall
be appointed from time to time by a majority of the Board of Directors. Any
member of such Committee may be removed by a majority of the Board of Directors
at any time with or without cause. No member of the Committee shall be eligible
to participate in the 1990 Plan. The Committee shall have full authority to:
(a) Determine (i) the employees to whom awards under the 1990 Plan will be
granted; and (ii) the number and type of awards to be granted to each
employee and the number of shares subject to each such award;
(b) Interpret, construe, and implement the provisions of the 1990 Plan;
(c) Adopt, amend, and rescind appropriate rules and regulations relating
to the 1990 Plan.
All determinations of the Committee shall be by a majority of its members.
The Committee's interpretation and construction of any provision of the 1990
Plan or any award shall be binding and conclusive unless otherwise determined by
the Board of Directors.
SECTION 5: ELIGIBILITY
Any person employed on a full-time salaried basis by Woodhead or any
Subsidiary shall be eligible to receive awards hereunder provided he or she is
employed in one or more of the following capacities ("eligible employee"):
(a) As an officer of Woodhead;
(b) As an officer of any Subsidiary;
(c) As a key employee of Woodhead or any Subsidiary who is deemed eligible
by the Committee.
No ISO (within the meaning of section 422A of the Code) may be granted to
any employee who, at the time such option is granted, owns stock of Woodhead or
a Subsidiary possessing more than ten percent (10%) (including the attribution
of ownership rules of section 425(d) of the Code) of the total
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combined voting power of all classes of stock of Woodhead or a Subsidiary.
Participation under the 1990 Plan shall not affect eligibility for
participation in any pension, profit sharing, stock option, or other welfare or
compensation plan of Woodhead or any of its Subsidiaries now existing or
hereafter adopted.
SECTION 6: AWARDS
The Committee may grant to eligible employees, in accordance with this
Section 6 and the other provisions of this 1990 Plan, restricted stock grants
and/or stock option grants.
(a) Stock Options
Stock options granted under the 1990 Plan may be in the form of ISOs or
non-ISOs and shall be evidenced by written stock option agreements between
Woodhead and the participant in such form as the Committee shall from time
to time approve and shall be subject to the following terms and
conditions:
(i) Time of Exercise. The stock option shall be exercisable by the
participant anytime on or after the date of grant, unless otherwise
specified by the Committee at the time of the grant, provided that
at the time of exercise (except as hereinafter otherwise provided),
he is then an employee of either Woodhead or a Subsidiary and then
only if at all times during the period beginning with the date the
option is granted and ending at the time of the exercise of such
option he has been in the continuous employ of Woodhead and/or a
Subsidiary or any two or more of them in succession. All rights to
exercise a stock option shall expire 10 years after the date such
option is granted.
(ii) Purchase Price. The purchase price per share of Common Stock
deliverable upon the exercise of a stock option shall be determined
by the Committee at the time of grant, but shall in no event be less
than 100 percent of the Fair Market Value of the Common Stock on the
date the option is granted.
(iii) Amount Exercisable. Options for no more than $100,000 of Fair
Market Value (determined at the time the ISO is granted) of the
Common Stock with respect to which the ISOs are granted (under all
stock option plans maintained by Woodhead or any of its
Subsidiaries) can become exercisable for the first time by an
individual during any calendar year.
(iv) Method of Exercise. In order to exercise a stock option in
whole or in part, the participant shall give written notice to
Woodhead's Secretary at 3411 Woodhead Drive, Northbrook, Illinois,
of his intention to exercise such option, stating the number of
shares with respect to which he intends to exercise his option.
Option shares may be purchased by payment in cash, or in Common
Stock, or partly in each. The participant's notice of exercise of
any option shall be accompanied by full payment in cash for the
number of shares with respect to which the option is to be exercised
if payment for such shares is to
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be made entirely in cash, or by payment of cash and/or the tender of
Common Stock sufficient to pay the purchase price of such shares if
payment is to be made partly or wholly in Common Stock. The Fair
Market Value of any Common Stock tendered shall be determined as of
the date of receipt of such Common Stock by Woodhead's Secretary.
Any cash or Common Stock submitted by the participant in excess of
the amount needed to purchase such shares shall be refunded to the
participant. Fractional shares of Common Stock shall not be accepted
in payment for option stock. Shares of Common Stock transferred to
Woodhead in payment for option shares may be reissued to the
participant by Woodhead as shares issued under the option.
(v) Effect of Termination.
(A) If a Participant ceases to be employed by Woodhead or any
of its Subsidiaries for any reason except retirement, death or
disability, any unexercised option granted to him under the
1990 Plan, which is then exercisable, may be exercised for
thirty (30) days following said cessation, unless it expires
sooner.
(B) If a Participant ceases to be employed by Woodhead or any
of its Subsidiaries by reason of his retirement at age 55 or
later with at least five years of service, any unexercised
option granted to him under the 1990 Plan, will continue to
mature and become exercisable in accordance with Section
6(a)(i) above and may be exercised prior to its expiration and
within five years after such retirement. An unexercised ISO
will cease to be treated as such and become a non-ISO three
months after retirement.
(C) If a Participant dies while employed by Woodhead or any
Subsidiary, any unexercised option granted to him under the
1990 Plan may be exercised prior to its expiration by the
estate of such Participant, or by any person who acquired such
option by bequest or inheritance from the Participant, at any
time within two years after the death of the Participant. An
unexercised ISO will cease to be treated as such and become a
non-ISO twelve months after the Participant's death. Each
option shall immediately become exercisable without regard to
the exercise period set forth in 6(a)(i) above.
(D) If a Participant suffers a disability (within the meaning
of section 22(e)(3) of the Code) while employed by Woodhead or
any Subsidiary, any unexercised option granted to him under
the 1990 Plan may be exercised prior to its expiration at any
time within two years after the Participant's termination on
account of such disability. An unexercised ISO will cease to
be treated as such and become a non-ISO twelve months after
the Participant's termination on account of such disability.
Each option shall immediately become exercisable without
regard to the exercise period set forth in 6(a)(i) above.
(b) Restricted Stock.
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(i) The Committee may award to any eligible employee shares of
Common Stock, subject to this Section 6(b) and such other terms and
conditions as the Committee may prescribe (such shares being called
"restricted stock"). Each certificate for restricted stock shall be
registered in the name of the participant and deposited, together
with a stock power endorsed in blank, with the Company.
(ii) There shall be established for each restricted stock award a
restriction period (the "restriction period") of such length as
shall be determined by the Committee, but in no event less than one
year. Shares of restricted stock may not be sold, assigned,
transferred, pledged or otherwise encumbered, except as hereinafter
provided, during the restriction period. Except for such
restrictions on transfer and such other restrictions as the
Committee may impose, the participant shall have all the rights of a
holder of Common Stock as to such restricted stock (including, but
not limited to, voting and receiving dividends). At the expiration
of the restriction period, the Company shall redeliver to the
participant (or the participant's legal representative) the
certificates deposited pursuant to this section.
(iii) Except as otherwise determined by the Committee in its sole
discretion, upon a termination of employment for any reason during
the restriction period all shares still subject to restriction shall
be forfeited by the participant.
SECTION 7: NON-TRANSFERABILITY OF AWARDS.
Awards granted under the 1990 Plan are not transferable by a participant
other than by will or by the laws of descent and distribution. During the
participant's lifetime, awards shall be exercisable or received only by him or
by his guardian or legal representative. Any purported transfer contrary to this
provision will nullify the award.
SECTION 8: ADJUSTMENTS IN THE EVENT OF CHANGES IN CAPITAL STRUCTURE,
REORGANIZATION, STOCK DIVIDENDS
If there shall be any change in the Common Stock subject to the 1990 Plan
or to any award granted thereunder through merger, consolidation,
reorganization, recapitalization, stock dividend, stock split, exchange of stock
or other change in the corporate structure, appropriate adjustments shall be
made in the aggregate number and kind of shares or other securities or property
subject to the 1990 Plan, and the number and kind of shares or other securities
or property subject to outstanding and to subsequent option grants and in the
purchase price of outstanding options to reflect such changes.
SECTION 9: RIGHTS AS STOCKHOLDERS.
A participant shall have no rights whatsoever as a stockholder of Woodhead
with respect to any shares covered by a stock option until the date of the
issuance of a stock certificate to him pursuant to such option. No adjustment
shall be made for dividends or other rights for which the record date is prior
to the date such stock certificate is issued.
SECTION 10: AMENDMENT.
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The Board of Directors, upon recommendation of the Committee, shall have
the power to amend or revise the terms of the 1990 Plan or any part thereof
without further action of the stockholders provided, however, that no such
amendment shall, without stockholder approval:
(a) Impair any award or deprive any participant of shares he may have
acquired through the 1990 Plan, without the participant's consent;
(b) Increase the total number of shares reserved for the purpose of the
1990 Plan;
(c) Change the class of participants eligible to receive awards under the
1990 Plan;
(d) Extend the period during which any option may be granted or exercised.
Notwithstanding the foregoing, the Committee shall have the power, without
the approval of the Board of Directors, to amend the 1990 Plan in such manner as
may be necessary to retain its qualification to grant ISOs or to comply with any
other requirement of law.
SECTION 11: MISCELLANEOUS
(a) Additional Terms and Conditions. Each participant shall agree to such
other terms, provisions and conditions consistent with the 1990 Plan as
may be determined by the Committee or the Board of Directors.
(b) Tax Withholding. The Committee shall have the power to withhold, or
require a Participant to remit to Woodhead, an amount sufficient to
satisfy any withholding or other tax due with respect to any shares
issuable under the 1990 Plan, and the Committee may defer such issuance
unless indemnified to its satisfaction. The Committee may permit the
withholding obligations to be satisfied through the surrender of shares of
Common Stock which the Participant already owns, or through the surrender
of shares of Common Stock to which the Participant is otherwise entitled
under the 1990 Plan.
(c) Rights of Participants. Nothing in the 1990 Plan shall interfere with
or limit in any way the right of the Company or any Subsidiary to
terminate any participant's employment at any time, nor confer upon any
participant any right to continue in the employ of the Company or any
Subsidiary for any period of time or to continue his or her present or any
other rate of compensation. No employee shall have a right to be selected
as a participant, or, having been so selected, to be selected again as a
participant.
SECTION 12: EFFECTIVE DATE AND TERMINATION OF PLAN
(a) Effective date. The effective date of the 1990 Plan shall be October
23, 1990; provided, however, that the 1990 Plan is approved and ratified
by holders of a majority of the shares of Common Stock present in person
or by proxy at the 1991 Annual Meeting of Stockholders.
(b) Termination. The Board of Directors may terminate the 1990 Plan at any
time with respect to any shares that are not subject to awards. Unless
terminated earlier by the Board of Directors, the 1990 Plan shall
terminate 10 years after the effective date and no awards shall be granted
under this 1990 Plan after such date. Termination of this 1990 Plan will
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not affect the rights and obligations of any participant with respect to
awards granted prior to termination.
39
EXHIBIT 10(d)
WOODHEAD INDUSTRIES, INC.
1993 STOCK AWARDS PLAN
(WITH AMENDMENTS THROUGH NOVEMBER 1, 1999)
SECTION 1: PURPOSE
The purpose of the Woodhead Industries, Inc. 1993 Stock Awards Plan (the
"1993 Plan") is to advance the long-term financial interests of Woodhead by (a)
encouraging qualified personnel to join Woodhead and its Subsidiaries, (b)
providing an incentive for officers and key employees to remain with Woodhead
and its Subsidiaries, and (c) furthering the identity of interests of
participating employees with those of Woodhead's shareholders.
SECTION 2. DEFINITIONS
The following definitions are applicable to the 1993 Plan:
(a) "Board of Directors" means the Board of Directors of Woodhead.
(b) "Change in Control means a situation where (i) any "person" (as such
term is used in Sections 13(d) and 14(d) of the Exchange Act), other than
a trustee or other fiduciary holding securities under an employee benefit
plan of Woodhead or a corporation owned, directly or indirectly, by the
stockholders of Woodhead in substantially the same proportions as their
ownership of Woodhead stock, is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
Woodhead securities representing 25% or more of the combined voting power
of Woodhead's then outstanding securities; or (ii) during any period of
two consecutive years, individuals who at the beginning of such period
constitute the Board of Directors and any new director (other than a
director designated by a person who has entered into an agreement with
Woodhead to effect a transaction described in clauses (i) or (iii) of this
Subsection) whose election by the Board of Directors or nomination for
election by Woodhead's stockholders was approved by a vote of at least
two-thirds (2/3) of the directors then still in office who either were
directors at the beginning of the period or whose election or nomination
for election was previously so approved, cease for any reason to
constitute a majority thereof; or (iii) Woodhead's shareholders approve a
merger or consolidation of Woodhead with any other corporation, other than
a merger or consolidation which would result in the voting securities of
Woodhead outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting
securities of the surviving entity) at least 80% of the combined voting
power of the voting securities of Woodhead or such surviving entity
outstanding immediately after such merger or consolidation, or the
shareholders of Woodhead approve a plan of complete liquidation of
Woodhead or an agreement for the sale or disposition by Woodhead of all or
substantially all its assets.
(c) "Code" means the Internal Revenue Code of 1986, as amended, and any
successor statute.
(d) "Common Stock" means the $1.00 par value common stock of Woodhead,
except as this definition may be modified as provided in Section 8.
(e) "Disability" means total and permanent disability within the meaning
of Section 22(e)(3) of the Code.
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(f) "Exchange Act" means the Securities Exchange Act of 1934, as amended.
(g) "Fair Market Value" of Woodhead's Common Stock on any given date shall
mean the average of the highest and lowest sales prices of the Common
Stock on such date (or, if the Common Stock was not traded on such date,
on the next preceding day on which such stock was traded) as reported in
THE WALL STREET JOURNAL under the heading "NASDAQ National Market Issues"
or any similar or successor heading.
(h) "ISO or ISOs" mean incentive stock option(s) as provided for in
section 422 of the Code.
(i) "non-ISO or non-ISOs" mean stock options that do not satisfy the
requirements of section 422 of the Code.
(j) "Participant" means an Eligible Employee who has been granted an award
pursuant to the 1993 Plan.
(k) "Retirement" means termination of employment with Woodhead or a
Subsidiary after the Participant has reached age 55 and has completed five
years of service with Woodhead or a Subsidiary.
(l) "Subsidiary" means any corporation in which Woodhead owns at least 50%
of the voting stock, or any corporation in a chain of corporations
connected with Woodhead through ownership of at least 50% of its voting
stock by any corporation in the chain.
(m) "Woodhead" means Woodhead Industries, Inc., and its successors.
(n) "corporation" shall include corporations, limited partnerships,
limited liability partnerships, and limited liability companies.
All references to gender herein shall include both the masculine and
feminine.
SECTION 3: SHARES SUBJECT TO THE 1993 PLAN
Subject to the adjustments authorized by Section 8 of the 1993 Plan, a
maximum of 310,000 shares of Woodhead's Common Stock may be issued pursuant to
this 1993 Plan; provided, however, that no more than 31,000 shares may be
granted in the form of restricted stock awards. The number of such available
shares shall be reduced by the number of shares subject to awards which are
granted under the 1993 Plan and increased by the number of shares subject to
awards granted under such plan which have expired unexercised or unpaid, been
canceled, forfeited or otherwise terminated. Shares allotted to Eligible
Employees may be made available from authorized but unissued Common Stock or
from Common Stock held in the treasury or from both unissued and treasury Common
Stock.
SECTION 4: ADMINISTRATION
The 1993 Plan shall be administered by the Compensation and Stock Option
Committee of the Board of Directors (the "Committee") in accordance with
applicable laws and regulations of governmental agencies. The Committee shall
consist solely of a minimum of two members of the Board of Directors who are
"disinterested persons" within the meaning of Rule 16b-3 under the Exchange Act,
and such Committee shall be appointed from time to time by a majority of the
Board of Directors. Any member of such Committee may be removed by a majority of
the Board of Directors at any time with or without
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cause. No member of the Committee shall be eligible to participate in the 1993
Plan. The Committee may, with respect to Participants who are not subject to
Section 16 of the Exchange Act, delegate such of its powers, authority and
duties under the 1993 Plan as it deems appropriate to designated officers or
employees of Woodhead. The Committee shall have full authority to:
(a) Determine (i) the employees to whom awards under the 1993 Plan will be
granted; and (ii) the number and type of awards to be granted to each
employee and the number of shares subject to each such award;
(b) Interpret, construe, and implement the provisions of the 1993 Plan;
(c) Adopt, amend, and rescind appropriate rules and regulations relating
to the 1993 Plan.
All determinations of the Committee shall be by a majority of its members.
The Committee's interpretation and construction of any provision of the 1993
Plan or any award shall be binding and conclusive for all purposes and on all
persons.
SECTION 5: ELIGIBILITY
Any person employed on a full-time salaried basis by Woodhead or any
Subsidiary shall be eligible to receive awards hereunder; provided he or she is
employed in one or more of the following capacities ("Eligible Employee"):
(a) As an officer of Woodhead;
(b) As an officer of any Subsidiary;
(c) As a key employee of Woodhead or any Subsidiary who is deemed eligible
by the Committee.
Participation under the 1993 Plan shall not affect eligibility for
participation in any pension, profit sharing, stock option, or other welfare or
compensation plan of Woodhead or any of its Subsidiaries now existing or
hereafter adopted.
SECTION 6: AWARDS
The Committee may grant to Eligible Employees, in accordance with this
Section 6 and the other provisions of this 1993 Plan, stock option grants and/or
restricted stock grants.
(a) Stock Options
Stock options granted under the 1993 Plan may be in the form of ISOs or
non-ISOs and shall be evidenced by written stock option agreements between
Woodhead and the Participant in such form as the Committee shall from time
to time approve and shall be subject to the following terms and
conditions:
(i) Exercisability. A stock option shall become exercisable by the
Participant twelve months after the date of grant, unless a later
date is specified by the Committee, in its sole discretion. All
rights to exercise a stock option shall expire 10 years after the
date such option is granted.
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(ii) Purchase Price. The purchase price per share of Common
Stock deliverable upon the exercise of a stock option shall be
determined by the Committee at the time of grant, but shall in
no event be less than 100 percent of the Fair Market Value of
the Common Stock on the date the option is granted.
(iii) ISO's Exercisable. The aggregate Fair Market Value
(determined at the time an ISO is granted) of the Common Stock
with respect to which an ISO is exercisable for the first time
(under all stock option plans maintained by Woodhead or any of
its Subsidiaries) by a Participant during any calendar year
shall not exceed $100,000. No ISO may be granted to any
employee who, at the time such option is granted, owns stock
of Woodhead or a Subsidiary possessing more than ten percent
(10%) of the total combined voting power of all classes of
stock of Woodhead or a Subsidiary.
(iv) Method of Exercise. In order to exercise a stock option
in whole or in part, the Participant shall give written notice
to Woodhead's Secretary at 2150 East Lake Cook Road, Suite
400, Buffalo Grove, Illinois, of his intention to exercise
such option, stating the number of shares with respect to
which he intends to exercise his option. Option shares may be
purchased by payment in cash, or in Common Stock, or partly in
each. The Participant's notice of exercise of any option shall
be accompanied by full payment in cash for the number of
shares with respect to which the option is to be exercised if
payment for such shares is to be made entirely in cash, or by
payment of cash and/or the tender of Common Stock sufficient
to pay the purchase price of such shares if payment is to be
made partly or wholly in Common Stock. The Fair Market Value
of any Common Stock tendered shall be determined as of the
date of receipt of such Common Stock by Woodhead's Secretary.
Any cash or Common Stock submitted by the Participant in
excess of the amount needed to purchase such shares shall be
refunded to the Participant. Fractional shares of Common Stock
shall not be accepted in payment for option stock. Shares of
Common Stock transferred to Woodhead in payment for option
shares may be reissued to the Participant by Woodhead as
shares issued under the option.
(v) Effect of Termination.
(A) If a Participant ceases to be employed by Woodhead
or any of its Subsidiaries for any reason except
Retirement, death or Disability, any unexercised option
granted to him under the 1993 Plan, which is then
exercisable, may be exercised for thirty (30) days
following said cessation, unless it expires sooner.
(B) If a Participant ceases to be employed by Woodhead
or any of its Subsidiaries by reason of his Retirement,
any unexercised option granted to him under the 1993
Plan, will continue to mature and become exercisable in
accordance with Section 6(a)(i) above and may be
exercised prior to its expiration and within five years
after such Retirement. An unexercised ISO will cease to
be treated as such and become a non-ISO three months
after Retirement.
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(C) If a Participant dies while employed by Woodhead or
any Subsidiary, any unexercised option granted to him
under the 1993 Plan may be exercised prior to its
expiration by the estate of such Participant, or by any
person who acquired such option by bequest or
inheritance from the Participant, at any time within two
years after the death of the Participant. An unexercised
ISO will cease to be treated as such and become a
non-ISO twelve months after the Participant's death.
Each option shall immediately become exercisable without
regard to the exercise period set forth in 6(a)(i)
above.
(D) If a Participant suffers a Disability while employed
by Woodhead or any Subsidiary, any unexercised option
granted to him under the 1993 Plan may be exercised
prior to its expiration at any time within two years
after the Participant's termination on account of such
Disability. An unexercised ISO will cease to be treated
as such and become a non-ISO twelve months after the
Participant's termination on account of such Disability.
Each option shall immediately become exercisable without
regard to the exercise period set forth in 6(a)(i)
above.
(vi) Change in Control. In the event of a Change in Control,
all stock options shall immediately become exercisable without
regard to the exercise period set forth in 6(a)(i) above.
(b) Restricted Stock.
(i) The Committee may award to any Eligible Employee shares of
Common Stock, subject to this Section 6(b) and such other
terms and conditions as the Committee may prescribe (such
shares being called "restricted stock"). Each certificate for
restricted stock shall be registered in the name of the
participant and deposited, together with a stock power
endorsed in blank, with Woodhead.
(ii) There shall be established for each restricted stock
award a restriction period (the "restriction period") of such
length as shall be determined by the Committee, but in no
event less than one year. Shares of restricted stock may not
be sold, assigned, transferred, pledged or otherwise
encumbered, except as hereinafter provided, during the
restriction period. Except for such restrictions on transfer
and such other restrictions as the Committee may impose, the
Participant shall have all the rights of a holder of Common
Stock as to such restricted stock (including, but not limited
to, voting and receiving dividends). At the expiration of the
restriction period, Woodhead shall redeliver to the
Participant (or the Participant's legal representative) the
certificates deposited pursuant to this section.
(iii) Except as otherwise determined by the Committee in its
sole discretion, upon a termination of employment for any
reason during the restriction period all shares still subject
to restriction shall be forfeited by the Participant.
(iv) In the event of a Change in Control, restrictions shall
lapse on all restricted stock as of the date of such Change in
Control.
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SECTION 7: NON-TRANSFERABILITY OF AWARDS.
Awards granted under the 1993 Plan are not transferable by a Participant
other than by will or by the laws of descent and distribution. During the
Participant's lifetime, awards shall be exercisable or received only by him or
by his guardian or legal representative. Any purported transfer contrary to this
provision will nullify the award.
SECTION 8: ADJUSTMENTS IN THE EVENT OF CHANGES IN CAPITAL STRUCTURE,
REORGANIZATION, STOCK DIVIDENDS
If there shall be any change in the Common Stock subject to the 1993 Plan
or to any award granted thereunder through merger, consolidation,
reorganization, recapitalization, stock dividend, stock split, exchange of stock
or other change in the corporate structure, appropriate adjustments shall be
made in the aggregate number and kind of shares or other securities or property
subject to the 1993 Plan, and the number and kind of shares or other securities
or property subject to outstanding and to subsequent option grants and in the
purchase price of outstanding options to reflect such changes.
SECTION 9: RIGHTS AS STOCKHOLDERS.
A Participant shall have no rights whatsoever as a stockholder of Woodhead
with respect to any shares covered by a stock option until the date of the
issuance of a stock certificate to him pursuant to such option. No adjustment
shall be made for dividends or other rights for which the record date is prior
to the date such stock certificate is issued.
SECTION 10: AMENDMENT.
The Board of Directors, upon recommendation of the Committee, shall have
the power to amend or revise the terms of the 1993 Plan or any part thereof
without further action of the stockholders provided, however, that no such
amendment shall, without stockholder approval:
(a) Impair any award or deprive any Participant of shares he may have
acquired through the 1993 Plan, without the Participant's consent;
(b) Increase the total number of shares reserved for the purpose of the
1993 Plan;
(c) Change the class of employees eligible to receive awards under the
1993 Plan;
Notwithstanding the foregoing, the Committee shall have the power, without
the approval of the Board of Directors, to amend the 1993 Plan in such manner as
may be necessary to retain its qualification to grant ISOs or to comply with any
other requirement of law.
SECTION 11: MISCELLANEOUS
(a) Additional Terms and Conditions. Each Participant shall agree to such
other terms, provisions and conditions consistent with the 1993 Plan as
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may be determined by the Committee or the Board of Directors.
(b) Tax Withholding. The Committee shall have the power to withhold, or
require a Participant to remit to Woodhead, an amount sufficient to
satisfy any withholding or other tax due with respect to any shares
issuable under the 1993 Plan, and the Committee may defer such issuance
unless indemnified to its satisfaction. The Committee may permit the
withholding obligations to be satisfied through the surrender of shares of
Common Stock which the Participant already owns, or through the surrender
of shares of Common Stock to which the Participant is otherwise entitled
under the 1993 Plan.
(c) Rights of Participants. Nothing in the 1993 Plan shall interfere with
or limit in any way the right of Woodhead or any Subsidiary to terminate
any Participant's employment at any time, nor confer upon any Participant
any right to continue in the employ of Woodhead or any Subsidiary for any
period of time or to continue his or her present or any other rate of
compensation. No employee shall have a right to be selected as a
Participant, or, having been so selected, to be selected again as a
Participant.
SECTION 12: EFFECTIVE DATE AND TERMINATION OF PLAN
(a) Effective date. The effective date of the 1993 Plan shall be October
27, 1993; provided, however, that the 1993 Plan is approved and ratified
by holders of a majority of the shares of Common Stock present, in person
or by proxy, and entitled to vote at the 1994 Annual Meeting of
Stockholders.
(b) Termination. The Board of Directors may terminate the 1993 Plan at any
time with respect to any shares that are not subject to awards. Unless
terminated earlier by the Board of Directors, the 1993 Plan shall
terminate 10 years after the effective date and no awards shall be granted
under this 1993 Plan after such date. Termination of this 1993 Plan will
not affect the rights and obligations of any Participant with respect to
awards granted prior to termination.
46
EXHIBIT 10(e)
WOODHEAD INDUSTRIES, INC.
1996 STOCK AWARDS PLAN
(WITH AMENDMENTS THROUGH NOVEMBER 1, 1999)
SECTION 1: PURPOSE
The purpose of the Woodhead Industries, Inc. 1996 Stock Awards Plan (the
"1996 Plan") is to advance the long-term financial interests of Woodhead by (a)
encouraging qualified individuals to join Woodhead and its Subsidiaries, (b)
providing an incentive for directors, officers and key employees to remain with
Woodhead and its Subsidiaries, and (c) furthering the identity of interests of
participants with those of Woodhead's shareholders.
SECTION 2. DEFINITIONS
The following definitions are applicable to the 1996 Plan:
(a) "Board of Directors" means the Board of Directors of Woodhead.
(b) "Change in Control" means a situation where (i) any "person" (as such
term is used in Sections 13(d) and 14(d) of the Exchange Act), other than
a trustee or other fiduciary holding securities under an employee benefit
plan of Woodhead or a corporation owned, directly or indirectly, by the
stockholders of Woodhead in substantially the same proportions as their
ownership of Woodhead stock, is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
Woodhead securities representing 25% or more of the combined voting power
of Woodhead's then outstanding securities; or (ii) during any period of
two consecutive years, individuals who at the beginning of such period
constitute the Board of Directors and any new director (other than a
director designated by a person who has entered into an agreement with
Woodhead to effect a transaction described in clauses (i) or (iii) of this
Subsection) whose election by the Board of Directors or nomination for
election by Woodhead's stockholders was approved by a vote of at least
two-thirds (2/3) of the directors then still in office who either were
directors at the beginning of the period or whose election or nomination
for election was previously so approved, cease for any reason to
constitute a majority thereof; or (iii) Woodhead's shareholders approve a
merger or consolidation of Woodhead with any other corporation, other than
a merger or consolidation which would result in the voting securities of
Woodhead outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting
securities of the surviving entity) at least 80% of the combined voting
power of the voting securities of Woodhead or such surviving entity
outstanding immediately after such merger or consolidation, or the
shareholders of Woodhead approve a plan of complete liquidation of
Woodhead or an agreement for the sale or disposition by Woodhead of all or
substantially all its assets.
(c) "Code" means the Internal Revenue Code of 1986, as amended, and any
successor statute.
(d) "Common Stock" means the $1.00 par value common stock of Woodhead,
except as this definition may be modified as provided in Section 8.
(e) "Disability" means total and permanent disability within the meaning
of Section 22(e)(3) of the Code.
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(f) "Exchange Act" means the Securities Exchange Act of 1934, as amended.
(g) "Fair Market Value" of Woodhead's Common Stock on any given date shall
mean the average of the highest and lowest sales prices of the Common
Stock on such date (or, if the Common Stock was not traded on such date,
on the next preceding day on which such stock was traded) as reported in
THE WALL STREET JOURNAL under the heading "NASDAQ National Market Issues"
or any similar or successor heading.
(h) "ISO or ISOs" mean incentive stock option(s) as provided for in
section 422 of the Code.
(i) "non-ISO or non-ISOs" mean stock option(s) that do not satisfy the
requirements of section 422 of the Code.
(j) "Participant" means a director, officer or employee who has been
granted an award pursuant to the 1996 Plan.
(k) "Retirement" as it relates to an employee means termination of
employment with Woodhead or a Subsidiary after the Participant has reached
age 55 and has completed five years of service with Woodhead or a
Subsidiary. "Retirement" as it relates to a director means termination of
service at a time when the Participant would be entitled to a retirement
benefit under Woodhead's retirement plan for non-employee directors
adopted by resolution of the Board of Directors on October 26, 1984, as
may be amended from time to time.
(l) "Subsidiary" means any corporation in which Woodhead owns at least 50%
of the voting stock, or any corporation in a chain of corporations
connected with Woodhead through ownership of at least 50% of its voting
stock by any corporation in the chain.
(m) "Woodhead" means Woodhead Industries, Inc., and its successors.
(n) "corporation" shall include corporations, limited partnerships,
limited liability partnerships, and limited liability companies.
All references to gender herein shall include both the masculine and
feminine.
SECTION 3: SHARES SUBJECT TO THE 1996 PLAN
Subject to the adjustments authorized by Section 8 of the 1996 Plan, a
maximum of 500,000 shares of Woodhead's Common Stock may be issued pursuant to
this 1996 Plan; provided, however, that no more than 50,000 shares may be
granted in the form of restricted stock awards. The number of such available
shares shall be reduced by the number of shares subject to awards which are
granted under the 1996 Plan and increased by the number of shares subject to
awards granted under such plan which have expired unexercised or unpaid, been
canceled, forfeited or otherwise terminated. No more than 35% of the aggregate
shares subject to the 1996 Plan may be awarded to a single individual. Shares
allotted to Participants may be made available from authorized but unissued
Common Stock or from Common Stock held in the treasury or from both unissued and
treasury Common Stock.
SECTION 4: ADMINISTRATION
Unless otherwise determined by the Board of Directors, the 1996 Plan shall
be administered by a committee, which shall consist of two or more members of
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the Board of Directors who are "outside directors" within the meaning of Section
162(m) of the Code, and "Non-Employee Directors" within the meaning of Rule 16b-
3(b)(3) of the Exchange Act. Such committee, may, in its discretion, delegate to
a subcommittee its duties hereunder, including the grant of options. For all
purposes under the 1996 Plan, any entity which performs the duties described
herein, shall be referred to as the "Committee". The Committee shall have full
authority to:
(a) Determine (i) the individuals to whom awards under the 1996 Plan will
be granted; and (ii) the number and type of awards to be granted to each
Participant and the number of shares subject to each such award;
(b) Interpret, construe, and implement the provisions of the 1996 Plan;
(c) Adopt, amend, and rescind appropriate rules and regulations relating
to the 1996 Plan.
All determinations of the Committee shall be by a majority of its members.
The Committee's interpretation and construction of any provision of the 1996
Plan or any award shall be binding and conclusive for all purposes and on all
persons.
SECTION 5: ELIGIBILITY
Any director, officer or employee shall be eligible to receive awards
hereunder; provided he or she is currently (a) a director or officer of
Woodhead; (b) an officer of any Subsidiary; (c) a key employee of Woodhead or
any Subsidiary who is deemed eligible by the Committee (collectively "Eligible
Persons").
Participation under the 1996 Plan shall not affect eligibility for
participation in any pension, profit sharing, stock option, or other welfare or
compensation plan of Woodhead or any of its Subsidiaries now existing or
hereafter adopted.
SECTION 6: AWARDS
The Committee may grant to Eligible Persons, in accordance with this
Section 6 and the other provisions of this 1996 Plan, stock option grants and/or
restricted stock grants.
(a) Stock Options
Stock options granted under the 1996 Plan may be in the form of ISOs or
non-ISOs and shall be evidenced by written stock option agreements between
Woodhead and the Participant in such form as the Committee shall from time
to time approve and shall be subject to the following terms and
conditions:
(i) Exercisability. A stock option shall become exercisable by the
Participant six months after the date of grant, unless a later date
is specified by the Committee, in its sole discretion. All rights to
exercise a stock option shall expire not later than 10 years after
the date such option is granted.
(ii) Purchase Price. The purchase price per share of Common
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Stock deliverable upon the exercise of a stock option shall be
determined by the Committee at the time of grant, but shall in no
event be less than 100 percent of the Fair Market Value of the
Common Stock on the date the option is granted.
(iii) ISO's Exercisable. The aggregate Fair Market Value (determined
at the time an ISO is granted) of the Common Stock with respect to
which an ISO is exercisable for the first time (under all stock
option plans maintained by Woodhead or any of its Subsidiaries) by a
Participant during any calendar year shall not exceed $100,000. No
ISO may be granted to any employee who, at the time such option is
granted, owns stock of Woodhead or a Subsidiary possessing more than
ten percent (10%) of the total combined voting power of all classes
of stock of Woodhead or a Subsidiary.
(iv) Method of Exercise. In order to exercise a stock option in
whole or in part, the Participant shall give written notice to
Woodhead's Secretary at 2150 East Lake Cook Road, Suite 400, Buffalo
Grove, Illinois, of his intention to exercise such option, stating
the number of shares with respect to which he intends to exercise
his option. Option shares may be purchased by payment in cash, or in
Common Stock, or partly in each. The Participant's notice of
exercise of any option shall be accompanied by full payment in cash
for the number of shares with respect to which the option is to be
exercised if payment for such shares is to be made entirely in cash,
or by payment of cash and/or the tender of Common Stock sufficient
to pay the purchase price of such shares if payment is to be made
partly or wholly in Common Stock. The Fair Market Value of any
Common Stock tendered shall be determined as of the date of receipt
of such Common Stock by Woodhead's Secretary. Any cash or Common
Stock submitted by the Participant in excess of the amount needed to
purchase such shares shall be refunded to the Participant.
Fractional shares of Common Stock shall not be accepted in payment
for option stock. Shares of Common Stock transferred to Woodhead in
payment for option shares may be reissued to the Participant by
Woodhead as shares issued under the option.
(v) Effect of Termination.
(A) In the event of termination of employment or service on
the Board of Directors by a Participant other than by reason
of Retirement, Disability or death, any unexercised option
granted to him under the 1996 Plan, which is then exercisable,
may be exercised for thirty (30) days following said
termination, unless it expires sooner.
(B) In the event of termination of employment or service on
the Board of Directors by a Participant by reason of
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Retirement, each of the then outstanding stock options of such
Participant will continue to mature and become exercisable in
accordance with Section 6(a)(i) above and may be exercised
prior to its expiration and within five years after such
Retirement. An unexercised ISO will cease to be treated as
such and become a non-ISO three months after Retirement.
(C) In the event of the Disability or death of a Participant
while employed by Woodhead or any Subsidiary or while serving
on the Board of Directors, all unexercised stock options of
such Participant shall immediately become exercisable by the
Participant, the Participant's legal representative, or the
estate of the Participant, as the case may be, at any time
within two years after such Disability or death, but in no
event after the expiration date of the stock option. An
unexercised ISO will cease to be treated as such and become a
non-ISO twelve months after the Participant's Disability or
death.
(vi) Change in Control. In the event of a Change in Control, all
stock options shall immediately become exercisable without regard to
the exercise period set forth in 6(a)(i) above.
(b) Restricted Stock.
(i) The Committee may award to any Participant shares of Common
Stock, subject to this Section 6(b) and such other terms and
conditions as the Committee may prescribe (such shares being called
"restricted stock"). Each certificate for restricted stock shall be
registered in the name of the Participant and deposited, together
with a stock power endorsed in blank, with Woodhead.
(ii) There shall be established for each restricted stock award a
restriction period of such length as shall be determined by the
Committee (the "restriction period"), but in no event less than one
year. Shares of restricted stock may not be sold, assigned,
transferred, pledged or otherwise encumbered, except as hereinafter
provided, during the restriction period. Except for such
restrictions on transfer and such other restrictions as the
Committee may impose, the Participant shall have all the rights of a
holder of Common Stock as to such restricted stock (including, but
not limited to, voting and receiving dividends). At the expiration
of the restriction period, Woodhead shall deliver to the Participant
(or the Participant's legal representative) the certificates
deposited pursuant to this section.
(iii) Except as otherwise determined by the Committee in its sole
discretion, upon a termination of employment or service on
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the Board of Directors for any reason during the restriction period,
all shares still subject to restriction shall be forfeited by the
Participant.
(iv) In the event of a Change in Control, restrictions shall lapse
on all restricted stock as of the date of such Change in Control.
SECTION 7: NON-TRANSFERABILITY OF AWARDS.
Awards granted under the 1996 Plan are not transferable by a Participant
other than by will or by the laws of descent and distribution. During the
Participant's lifetime, awards shall be exercisable or received only by him or
by his guardian or legal representative. Any purported transfer contrary to this
provision will nullify the award.
SECTION 8: ADJUSTMENTS IN THE EVENT OF CHANGES IN CAPITAL STRUCTURE,
REORGANIZATION, STOCK DIVIDENDS
If there shall be any change in the Common Stock subject to the 1996 Plan
or to any award granted thereunder through merger, consolidation,
reorganization, recapitalization, stock dividend, stock split, exchange of stock
or other change in the corporate structure, appropriate adjustments shall be
made in the aggregate number and kind of shares or other securities or property
subject to the 1996 Plan, and the number and kind of shares or other securities
or property subject to outstanding and to subsequent option grants and in the
purchase price of outstanding options to reflect such changes.
SECTION 9: RIGHTS AS STOCKHOLDERS.
A Participant shall have no rights whatsoever as a stockholder of Woodhead
with respect to any shares covered by a stock option until the date of the
issuance of a stock certificate to him pursuant to such option. No adjustment
shall be made for dividends or other rights for which the record date is prior
to the date such stock certificate is issued.
SECTION 10: AMENDMENT.
The Board of Directors may amend, alter or discontinue the 1996 Plan, but
no amendment, alteration or discontinuation shall be made that would impair the
rights of a Participant under any award theretofore granted without such
Participant's consent.Notwithstanding the foregoing, stockholder approval of any
such amendment or alteration shall not be required under this Section except to
the extent such approval shall be required to fulfill the conditions of Rule
16b- 3 of the Exchange Act, Section 162(m) or 422 of the Code or such other
applicable statutory rules and regulations and only if Woodhead intends to
fulfill such conditions.
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SECTION 11: MISCELLANEOUS
(a) Additional Terms and Conditions. Each Participant shall agree to such
other terms, provisions and conditions consistent with the 1996 Plan as
may be determined by the Committee or the Board of Directors.
(b) Tax Withholding. The Committee shall have the power to withhold, or
require a Participant to remit to Woodhead, an amount sufficient to
satisfy any withholding or other tax due with respect to any shares
issuable under the 1996 Plan, and the Committee may defer such issuance
unless indemnified to its satisfaction. The Committee may permit the
withholding obligations to be satisfied through the surrender of shares of
Common Stock which the Participant already owns, or through the surrender
of shares of Common Stock to which the Participant is otherwise entitled
under the 1996 Plan.
(c) Rights of Participants. Nothing in the 1996 Plan shall interfere with
or limit in any way the right of Woodhead or any Subsidiary to terminate
any Participant's employment or service on the Board of Directors at any
time, nor confer upon any Participant any right to continue in the employ
or service of Woodhead or any Subsidiary for any period of time or to
continue his present or any other rate of compensation. No director or
employee shall have a right to be selected as a Participant, or, having
been so selected, to be selected again as a Participant.
SECTION 12: EFFECTIVE DATE AND TERMINATION OF PLAN
(a) Effective date. The effective date of the 1996 Plan shall be October
23, 1996; provided, however, that the 1996 Plan is approved and ratified
by holders of a majority of the shares of Common Stock present, in person
or by proxy, and entitled to vote at the 1997 Annual Meeting of
Stockholders.
(b) Termination. The Board of Directors may terminate the 1996 Plan at any
time with respect to any shares that are not subject to awards. Unless
terminated earlier by the Board of Directors, the 1996 Plan shall
terminate 10 years after the effective date and no awards shall be granted
under this 1996 Plan after such date. Termination of this 1996 Plan will
not affect the rights and obligations of any Participant with respect to
awards granted prior to termination.
53
EXHIBIT 13
REPORTS OF MANAGEMENT AND INDEPENDENT PUBLIC ACCOUNTANTS
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 and Chief Executive Officer Vice President, Finance and Chief
Financial Officer
To The Board of Directors and Shareholders of Woodhead Industries, Inc.:
We have audited the accompanying consolidated balance sheets of WOODHEAD
INDUSTRIES, INC. (a Delaware corporation) AND SUBSIDIARIES as of October 2,
1999, and October 3, 1998, and the related consolidated statements of income,
stockholders' investment, comprehensive income, and cash flows for each of the
three years in the period ended October 2, 1999. 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 October 2, 1999, and October 3, 1998, and the results of
their operations and their cash flows for each of the three years in the period
ended October 2, 1999, in conformity with generally accepted accounting
principles.
/s/ Arthur Andersen LLP
Chicago, Illinois
November 18, 1999
17 WOODHEAD INDUSTRIES, INC.
<PAGE>
FINANCIAL PROFILE
(Amounts in thousands, except per share data, employees, and stockholders)
<TABLE>
<CAPTION>
1999 1998 1997 1996
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATIONS
Net sales $ 168,696 $ 147,560 $ 136,886 $ 123,680
- -------------------------------------------------------------------------------------------------------
Cost of sales 95,615 84,002 74,914 68,549
- -------------------------------------------------------------------------------------------------------
Gross profit 73,081 63,558 61,972 55,131
% of net sales 43.3% 43.1% 45.3% 44.6%
- -------------------------------------------------------------------------------------------------------
Operating and other expenses 55,929 56,995 41,647 38,299
% of net sales 33.2% 38.6% 30.4% 31.0%
Income before income taxes 17,152 6,563 20,325 16,832
% of net sales 10.2% 4.4% 14.8% 13.6%
- -------------------------------------------------------------------------------------------------------
Provision for income taxes 6,258 2,633 8,045 6,161
- -------------------------------------------------------------------------------------------------------
Net income 10,894 3,930 12,280 10,671
% of net sales 6.5% 2.7% 9.0% 8.6%
% of average assets 6.9% 3.2% 14.7% 14.1%
Return on stockholders' average investment 13.9% 5.5% 19.6% 19.7%
- -------------------------------------------------------------------------------------------------------
Earnings per share
Diluted $ .96 $ .35 $ 1.10 $ .98
- -------------------------------------------------------------------------------------------------------
Dividends per share .36 .36 .32 .27
Weighted-average common shares outstanding
Diluted 11,372 11,201 11,167 10,931
- -------------------------------------------------------------------------------------------------------
Memo: EBIT 20,581 7,750 20,035 16,671
% of net sales 12.2% 5.3% 14.6% 13.5%
EBITDA 30,858 14,348 24,844 21,484
% of net sales 18.3% 9.7% 18.1% 17.4%
Interest expense (income) 3,429 1,187 (290) (161)
% of net sales 2.0% .8% (.2)% (.1)%
Depreciation and amortization 10,277 6,598 4,809 4,813
% of net sales 6.1% 4.5% 3.5% 3.9%
Engineering and development 6,169 9,695 3,025 2,513
% of net sales 3.7% 6.6% 2.2% 2.0%
- -------------------------------------------------------------------------------------------------------
YEAR-END POSITIONS
Total assets $ 157,641 $ 155,941 $ 88,999 $ 78,385
- -------------------------------------------------------------------------------------------------------
Total liabilities 75,187 81,391 21,744 20,508
- -------------------------------------------------------------------------------------------------------
Working capital 38,287 31,315 31,727 28,321
- -------------------------------------------------------------------------------------------------------
Current ratio 2.5 to 1 2.2 to 1 2.6 to 1 2.5 to 1
- -------------------------------------------------------------------------------------------------------
Stockholders' investment 82,454 74,550 67,255 57,877
- -------------------------------------------------------------------------------------------------------
Long-term debt 47,120 53,000 - -
- -------------------------------------------------------------------------------------------------------
Book value per share $ 7.34 $ 6.76 $ 6.38 $ 5.55
- -------------------------------------------------------------------------------------------------------
Number of employees 1,616 1,268 1,259 1,125
- -------------------------------------------------------------------------------------------------------
Number of stockholders 511 552 548 584
- -------------------------------------------------------------------------------------------------------
</TABLE>
18 WOODHEAD INDUSTRIES, INC.
<PAGE>
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991 1990 1989
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$120,003 $105,689 $89,864 $79,518 $73,499 $72,168 $71,443
- ----------------------------------------------------------------------------------------------------------------------------
67,541 59,070 50,238 43,756 41,753 41,034 42,070
- ----------------------------------------------------------------------------------------------------------------------------
52,462 46,619 39,626 35,762 31,746 31,134 29,373
43.7% 44.1% 44.1% 45.0% 43.2% 43.1% 41.1%
- ----------------------------------------------------------------------------------------------------------------------------
38,110 35,096 30,125 28,007 26,552 22,708 22,195
31.8% 33.2% 33.5% 35.2% 36.1% 31.5% 31.1%
14,352 11,523 9,501 7,755 5,194 8,426 7,178
12.0% 10.9% 10.6% 9.8% 7.1% 11.7% 10.0%
- ----------------------------------------------------------------------------------------------------------------------------
5,124 4,273 3,698 3,000 2,374 3,406 2,878
- ----------------------------------------------------------------------------------------------------------------------------
9,228 7,250 5,803 4,755 2,820 5,020 4,300
7.7% 6.9% 6.5% 6.0% 3.8% 7.0% 6.0%
13.6% 12.2% 11.1% 10.3% 6.6% 12.6% 10.3%
19.8% 18.2% 16.6% 15.2% 9.7% 18.4% 17.7%
- ----------------------------------------------------------------------------------------------------------------------------
$ .85 $ .68 $ .55 $ .47 $ .29 $ .52 $ .45
- ----------------------------------------------------------------------------------------------------------------------------
.26 .23 .23 .23 .23 .21 .20
10,883 10,666 10,559 10,145 9,791 9,672 9,492
- ----------------------------------------------------------------------------------------------------------------------------
14,449 11,701 9,540 7,617 5,237 8,127 7,721
12.0% 11.1% 10.6% 9.6% 7.1% 11.3% 10.8%
18,924 15,900 13,317 10,846 8,299 10,588 10,083
15.8% 15.0% 14.8% 13.6% 11.3% 14.7% 14.1%
97 178 39 (138) 43 (299) 543
.1% .2% .0% (.2)% .1% (.4)% .8%
4,475 4,199 3,777 3,229 3,062 2,461 2,362
3.7% 4.0% 4.2% 4.1% 4.2% 3.4% 3.3%
2,404 2,148 2,105 2,041 1,749 1,577 1,377
2.0% 2.0% 2.3% 2.6% 2.4% 2.2% 1.9%
- ----------------------------------------------------------------------------------------------------------------------------
$ 73,411 $ 62,263 $56,360 $48,564 $43,709 $41,216 $38,534
- ----------------------------------------------------------------------------------------------------------------------------
23,007 19,316 19,700 15,460 14,147 12,638 12,530
- ----------------------------------------------------------------------------------------------------------------------------
19,654 14,572 10,538 14,129 11,443 15,542 13,245
- ----------------------------------------------------------------------------------------------------------------------------
1.9 to 1 1.8 to 1 1.7 to 1 2.1 to 1 2.0 to 1 2.5 to 1 2.3 to 1
- ----------------------------------------------------------------------------------------------------------------------------
50,404 42,947 36,660 33,104 29,562 28,578 26,004
- ----------------------------------------------------------------------------------------------------------------------------
- 63 2,047 500 500 - 153
- ----------------------------------------------------------------------------------------------------------------------------
$ 4.86 $ 4.15 $ 3.57 $ 3.31 $ 3.05 $ 2.98 $ 2.68
- ----------------------------------------------------------------------------------------------------------------------------
1,126 1,079 947 764 816 788 732
- ----------------------------------------------------------------------------------------------------------------------------
571 598 634 640 710 751 822
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
19 WOODHEAD INDUSTRIES, INC.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS
AND FINANCIAL POSITION
FISCAL 1999 RESULTS COMPARED WITH 1998
SALES
Net sales reached a record of $168.7 million surpassing last year's net
sales of $147.6 million by $21.1 million or 14.3 percent. The sales increase
came from the strong performance by the Industrial Communications and
Connectivity Products segment with sales growth of 29.6 percent to $102.1
million from $78.8 million. The full year sales impact of mPm S.r.l. and SST
acquired during fiscal 1998 combined with strengthening Brad Harrison(R) product
sales in North America accounted for the majority of this improvement. The
Company's Electrical Safety & Specialty Products segment's sales declined by 3.2
percent to $66.6 million from $68.8 million primarily due to a weakness in the
industrial MRO markets served by this segment. The Company's net sales in
markets outside the United States represented 37.0 percent compared with 33.4
percent in 1998. During the year, competitive pressure resulted in a price
reduction of less than one percent.
The backlog of unfilled orders was $12.4 million compared to $11.5 million
at the end of 1998.
GROSS PROFIT
Gross profit as a percentage of sales increased to 43.3 percent in 1999 from
43.1 percent in 1998, resulting in an increase to $73.1 million from $63.6
million in 1998. Gross profit was favorably impacted by a reduction of the LIFO
reserve, which resulted from lower production costs. Cost savings and higher
capacity utilization were partially offset by selling price reductions.
OPERATING EXPENSES
Operating expenses increased by 8.0 percent to $52.7 million from $48.8
million in 1998. The full year impact of spending at SST and mPm were almost
completely offset by the absence of the write-off for in-process research and
development which was charged to operating expenses in 1998. As a percentage of
sales, operating expenses declined to 31.2 percent from 33.1 percent.
SEGMENT OPERATING INCOME
The Company's Industrial Communications and Connectivity segment's operating
income grew 6.2 percent to $10.3 million from $9.7 million, excluding special
charges. Segment operating income for the Electrical Safety & Specialty Products
segment declined slightly to $11.7 million from $11.9 million.
OTHER EXPENSES/INCOME
Other expenses decreased to $3.2 million in 1999 from $4.8 million in 1998.
Interest expense increased to $3.4 million from $1.2 million, which is the
result of the long-term debt incurred to finance the two acquisitions in 1998.
Total environmental and foreign exchange expenses were lower by $2.8 million
when compared to 1998. In addition, the Company's severance expenses were $.7
million lower in 1999.
NET INCOME
Net Income increased 179.5 percent to $10.9 million from $3.9 million. The
absence of special charges accounted for most of this increase. mPm has been
accretive to earnings since it was acquired, and although the sales of SST
continued to grow and its financial results improved during the year, the
Company's net income was adversely affected by SST in fiscal 1999. The Company's
effective tax rate decreased to 36.5 percent from 40.1 percent, primarily due to
a state tax refund for prior years, combined with recognizing foreign tax
credits.
20 WOODHEAD INDUSTRIES, INC.
<PAGE>
FINANCIAL POSITION
The Company's financial position remains strong. Working capital increased
22.3 percent to $38.3 million from $31.3 million, the current ratio increased to
2.5 to 1 from 2.2 to 1, and total assets increased to $157.6 million from $155.9
million. Looking forward, internal cash flow is expected to be more than
adequate to fund the operating requirements in 2000, and significant borrowing
is available, should the need arise.
YEAR 2000 READINESS DISCLOSURE
The Year 2000 problem stems from the use of a two digit date to represent
the year in computer software and firmware. As a result, computer systems may
experience operating difficulties unless the systems or applications are
modified to process adequately the information related to the date change.
The Company has been assessing and addressing the impact of the Year 2000
issue on its business over the past three years. The Company's products are
primarily electrical connectors and safety devices, which are not
date-sensitive.
The Company's first phase to achieve Year 2000 readiness included
performing a comprehensive inventory and assessment of all systems, both
Information Technology (IT) and non-IT related, which has been completed. The
second phase includes the replacement, remediation, and testing of all systems
for compliance, which is approximately 99% complete. The third phase of the
Company's plan involves determining the compliance status of all relevant third
parties, including significant suppliers, customers, and service providers who
are deemed to be critical to business operations. This phase is essentially 99%
complete. The final phase includes the development of contingency plans to
reduce the risk of business interruption that may result from Year 2000
non-compliance. This may involve developing emergency backup procedures in
instances of system failures, stockpiling raw and packaging materials,
increasing finished goods inventory levels, and identifying alternative
suppliers. This phase has begun and will continue to be monitored as 2000
approaches.
Since the Company is operated in a decentralized manner, each of its
operating locations has been addressing Year 2000 compliance as indicated by the
four-phase plan. The compliance status at each subsidiary is being monitored by
corporate personnel on an ongoing basis to ensure that required courses of
action are being executed in a timely fashion. The Company expects to complete
all phases of the plan by November 1999.
In the event that the Year 2000 issue is not adequately addressed by the
Company, its major service providers, suppliers, or customers on a timely basis,
there can be no assurance that the Company will not experience a material
adverse effect on its operations. Although the Company is not anticipating any
major non-compliance problems, it does believe that the greatest risk associated
with the Year 2000 issues is the readiness of its third parties. Due to the
inherent uncertainty of the Year 2000 issue, the Company has not determined the
most likely worst-case scenario, but it has developed contingency plans to
mitigate any possible disruption of operations that may result from
non-compliance.
The costs incurred to date approximate $1,800,000. These costs are based
upon management's best estimates using numerous assumptions. These costs also
have not had and are not expected to have a material effect on the Company's
financial position, assuming that the Company will not be obligated to incur
significant Year 2000 related costs on behalf of its customers or suppliers.
There can be no assurance that actual costs could not be significantly different
from the estimates.
21 WOODHEAD INDUSTRIES, INC.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS
AND FINANCIAL POSITION (CONTINUED)
IMPACT OF THE EURO CURRENCY
On January 1, 1999, the members of the European Union established fixed
conversion rates between the existing currencies ("legacy currencies"), and one
common currency, the "Euro". As a result the Euro now trades on currency
exchanges and may be used for business transactions utilizing electronic funds
transfer. Conversion to the Euro has the effect of eliminating exchange rate
risk between member countries, as exchange rates are now permanent. The
Company's subsidiaries that are affected by the Euro conversion are modifying
business processes to accommodate the Euro denominated transactions. The
anticipated future increase in Euro denominated transactions is not expected to
have a material impact on the Company's business or results of operations, and
the Company believes that its currency risk in participating countries may be
reduced as the legacy currencies are converted to the Euro.
FISCAL 1998 RESULTS COMPARED WITH 1997
SALES
The Company's sales of $147.6 million exceeded fiscal 1997 results of $136.9
million by $10.7 million or 7.8 percent. The revenue increase was primarily
attributable to the acquisitions of mPm S.r.l. and SST during the year. Strong
sales in Europe also contributed to the increase, although offset by a slight
decline in domestic sales in the Company's Brad Harrison(R) product line. The
currency crisis in Asia continued to negatively impact the industrial markets
served by the Company and reduced sales by $1.3 million in 1998. During 1998,
the Company experienced price erosion of approximately 1.5 percent, primarily
reflecting selling price concessions at its AI/FOCS subsidiary.
The backlog of unfilled orders was $11.5 million at year end compared with
$8.8 million at fiscal year end 1997. This $2.7 million increase is attributable
to the acquisition of mPm S.r.l.
GROSS PROFIT
Gross profit of $63.6 million was $1.6 million or 2.6 percent greater than
in 1997. The decrease in the gross profit rate to 43.1 percent in 1998 from 45.3
percent in 1997 reflected the dilutive effect of lower gross profit percentages
at mPm S.r.l. and SST. Also contributing to the lower gross profit rate was a
reduction in productivity associated with lower sales volume in North America
and the price concessions at AI/FOCS.
OPERATING EXPENSES
Operating expenses of $48.8 million in 1998 were 20.4 percent higher than
the $40.5 million spent in 1997.
The Company recorded a write-off of approximately $6 million of in-process
research and development in conjunction with the acquisition of SST. This
write-off caused operating expenses as a percentage of sales to increase to 33.1
percent as compared with 29.6 percent in 1997. The Company also recorded a $3.4
million write-off of goodwill as an impairment of long-lived assets at its
AI/FOCS subsidiary.
OTHER EXPENSE/INCOME
Other expenses increased to $4.8 million from $1.1 million in 1997. The
increase in interest expense of $1.5 million during the year resulted from
long-term debt incurred to finance the acquisitions of mPm S.r.l. and SST. The
Company also recorded $1.7 million for additional expenses for environmental
assessment and remediation costs and $.6 million due to the negative impact of
foreign exchange related to the acquisition of SST.
22 WOODHEAD INDUSTRIES, INC.
<PAGE>
NET INCOME
Net income of $3.9 million was $8.4 million or 68 percent less than in 1997.
The decrease primarily resulted from the amortization, interest expense, and
additional charges recorded in conjunction with the new acquisitions in 1998.
The impairment of long-lived asset charge and the accrual for environmental
cleanup also contributed to the significant decrease in net income. The
Company's effective tax rate increased from 39.6 percent to 40.1 percent.
FINANCIAL POSITION
Working capital decreased to $31.3 million from $31.7 million 1997. Total
assets increased by $66.9 million to $155.9 million from $89.0 million in 1997.
This increase in total assets, working capital, and the addition of $53.0
million in long-term debt in 1998 were attributable to the new acquisitions.
FORWARD-LOOKING STATEMENTS
CERTAIN STATEMENTS CONTAINED HEREIN CONSTITUTE "FORWARD-LOOKING STATEMENTS"
WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. SUCH
FORWARD-LOOKING STATEMENTS INVOLVE NUMEROUS ASSUMPTIONS, KNOWN AND UNKNOWN
RISKS, UNCERTAINTIES AND OTHER FACTORS WHICH MAY CAUSE ACTUAL AND FUTURE
PERFORMANCE OR ACHIEVEMENTS OF THE COMPANY TO BE MATERIALLY DIFFERENT FROM ANY
FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH
FORWARD-LOOKING STATEMENTS. SUCH FACTORS INCLUDE: ACHIEVING SALES LEVELS TO
FULFILL REVENUE EXPECTATIONS; THE ABSENCE OF PRESENTLY UNEXPECTED COSTS OR
CHARGES, CERTAIN OF WHICH MAY BE OUTSIDE THE CONTROL OF THE COMPANY; GENERAL
ECONOMIC AND BUSINESS CONDITIONS; COMPETITION; AND OTHER FACTORS DESCRIBED
ELSEWHERE IN THE COMPANY'S SEC FILINGS.
COMMON STOCK PRICE RANGE BY QUARTER
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:
<TABLE>
<CAPTION>
Price (Amounts in Dollars) Price (Amounts in Dollars)
- ------------------------------------------------ ------------------------------------------------
FY 1999 High Low Dividend FY 1998 High Low Dividend
- ------------------------------------------------ ------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1st 15 1/2 9 7/8 $0.09 1st 21 1/2 17 1/8 $0.09
2nd 13 9 1/4 $0.09 2nd 19 3/4 17 3/8 $0.09
3rd 15 3/8 9 11/16 $0.09 3rd 20 13 7/8 $0.09
4th 12 7/16 9 23/32 $0.09 4th 16 8 1/8 $0.09
- ------------------------------------------------ ------------------------------------------------
</TABLE>
23 WOODHEAD INDUSTRIES, INC.
<PAGE>
CONSOLIDATED BALANCE SHEETS
As of October 2, 1999 and October 3, 1998.
(Amounts in thousands)
<TABLE>
<CAPTION>
1999 1998
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and short-term securities $ 1,425 $ 2,923
Accounts receivable, less allowances of $1,439 in 1999 and $1,089 in 1998 29,276 26,792
Refundable income taxes (Note 3) 1,109 795
Inventories (Note 1) 24,099 19,431
Deferred taxes and other prepaid expenses (Note 3) 7,171 7,695
- ----------------------------------------------------------------------------------------------------------------
Total current assets $ 63,080 $ 57,636
- ----------------------------------------------------------------------------------------------------------------
Deferred income taxes and other assets (Note 3) $ 3,315 $ 2,324
- ----------------------------------------------------------------------------------------------------------------
Property, plant and equipment (Note 1) $121,281 $114,076
Less: Accumulated depreciation 56,836 48,792
- ----------------------------------------------------------------------------------------------------------------
Net property, plant and equipment $ 64,445 $ 65,284
- ----------------------------------------------------------------------------------------------------------------
Goodwill (Notes 1 and 10) $ 26,801 $ 30,697
- ----------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $157,641 $155,941
- ----------------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' INVESTMENT
Current Liabilities:
Notes payable $ 125 $ -
Accounts payable 8,564 7,828
Accrued expenses 14,524 17,656
Income taxes payable 1,580 837
Portion of long-term debt payable within one year (Note 2) - -
- ----------------------------------------------------------------------------------------------------------------
Total current liabilities $ 24,793 $ 26,321
- ----------------------------------------------------------------------------------------------------------------
Other liabilities $ 3,274 $ 2,070
- ----------------------------------------------------------------------------------------------------------------
Deferred income taxes (Note 3) $ - $ -
- ----------------------------------------------------------------------------------------------------------------
Long-term debt, less portion payable within one year shown above (Note 2) $ 47,120 $ 53,000
- ----------------------------------------------------------------------------------------------------------------
Stockholders' investment (Notes 1,2,5, and 10):
Preferred stock $ - $ -
Common stock at par, (Shares issued- 11,237 in 1999 and 11,032 in 1998) 11,237 11,032
Additional paid-in capital 11,230 9,276
Deferred stock compensation (315) -
Accumulated other comprehensive income (2,117) (1,276)
Retained earnings 62,419 55,518
- ----------------------------------------------------------------------------------------------------------------
Total stockholders' investment $ 82,454 $ 74,550
- ----------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' INVESTMENT $157,641 $155,941
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these statements.
24 WOODHEAD INDUSTRIES, INC.
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME
For the years ended October 2, 1999, October 3, 1998, and September 27, 1997.
(Amounts in thousands, except per share data)
<TABLE>
<CAPTION>
1999 1998 1997
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $168,696 $147,560 $136,886
- -----------------------------------------------------------------------------------------------------------
Cost of sales 95,615 84,002 74,914
- -----------------------------------------------------------------------------------------------------------
Gross profit $ 73,081 $ 63,558 $ 61,972
Percent of net sales 43.3% 43.1% 45.3%
- -----------------------------------------------------------------------------------------------------------
Operating expenses:
Engineering and product development (Notes 1 and 10) $ 6,169 $ 9,695 $ 3,025
Marketing and sales 26,392 23,319 22,811
General and administrative 20,132 15,765 14,677
- -----------------------------------------------------------------------------------------------------------
Total operating expenses $ 52,693 $ 48,779 $ 40,513
Percent of net sales 31.2% 33.1% 29.6%
- -----------------------------------------------------------------------------------------------------------
Impairment of long-lived assets (Note 1) $ - $ 3,408 $ -
Income from operations $ 20,388 $ 11,371 $ 21,459
Percent of net sales 12.1% 7.7% 15.7%
- -----------------------------------------------------------------------------------------------------------
Other expenses (income):
Interest expense (income) $ 3,429 $ 1,187 $ (290)
Other, net (193) 3,621 1,424
- -----------------------------------------------------------------------------------------------------------
Net other expenses $ 3,236 $ 4,808 $ 1,134
- -----------------------------------------------------------------------------------------------------------
Income before income taxes $ 17,152 $ 6,563 $ 20,325
Percent of net sales 10.2% 4.4% 14.8%
Provision for income taxes (Note 3) 6,258 2,633 8,045
- -----------------------------------------------------------------------------------------------------------
Net income $ 10,894 $ 3,930 $ 12,280
Percent of net sales 6.5% 2.7% 9.0%
- -----------------------------------------------------------------------------------------------------------
Earnings per share (Note 1)
Basic $ .98 $ .37 $ 1.17
Diluted $ .96 $ .35 $ 1.10
- -----------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these statements.
25 WOODHEAD INDUSTRIES, INC.
<PAGE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' INVESTMENT
For the years ended October 2, 1999, October 3, 1998, and September 27, 1997.
(Amounts in thousands, except per share data)
<TABLE>
<CAPTION>
Accumulated
Additional Deferred Other Total
Common Paid-in Stock Comprehensive Retained Stockholders'
Stock Capital Compensation Income Earnings Investment
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance September 28, 1996 $10,419 $ 1,571 - $ (616) $46,503 $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 $67,255
Net income for the year - - - - 3,930 3,930
Translation adjustment - - - 211 - 211
Cash dividends, $.36 per share - - - - (3,848) (3,848)
Stock option plans 91 911 - - - 1,002
Common stock issued for acquisition 400 5,600 - - - 6,000
- ---------------------------------------------------------------------------------------------------------------------------------
Balance October 3, 1998 $11,032 $ 9,276 - $(1,276) $55,518 $74,550
Net income for the year - - - - 10,894 10,894
Translation adjustment - - - (841) - (841)
Cash dividends, $.36 per share - - - - (3,993) (3,993)
Stock option plans 205 1,954 (315) - - 1,844
- ---------------------------------------------------------------------------------------------------------------------------------
BALANCE OCTOBER 2, 1999 $11,237 $11,230 $ (315) $(2,117) $62,419 $82,454
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these statements.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the years ended October 2, 1999, October 3, 1998, and September 27, 1997.
(Amounts in thousands)
<TABLE>
<CAPTION>
1999 1998 1997
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Income $10,894 $3,930 $12,280
Other comprehensive Income:
Accumulated foreign currency translation
adjustment, before tax (841) 211 (871)
Income tax (expense) benefit related to
other comprehensive income - - -
- ---------------------------------------------------------------------------------------------------------------------------------
Comprehensive Income, net of tax $10,053 $4,141 $11,409
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these statements.
26 WOODHEAD INDUSTRIES, INC.
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended October 2, 1999, October 3, 1998, and September 27, 1997.
(Amounts in thousands)
<TABLE>
<CAPTION>
1999 1998 1997
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income for the year $ 10,894 $ 3,930 $ 12,280
- ---------------------------------------------------------------------------------------------------------
Adjustments to reconcile net income to net
cash flows from operating activities:
Depreciation and amortization 10,277 6,598 4,809
Fair value of research & development costs acquired - 5,971 -
(Increase) Decrease in:
Accounts receivable (2,484) (2,465) (1,274)
Inventories (4,668) 42 (5,360)
Prepaid expenses 524 (2,437) 462
Deferred income taxes and other assets (1,008) (2,346) (62)
(Decrease) Increase in:
Accounts payable 736 527 303
Accrued expenses (3,132) 4,197 1,787
Other liabilities 1,204 - -
Income taxes payable 429 (681) (1,090)
Deferred income taxes - (2,015) 236
- ---------------------------------------------------------------------------------------------------------
Net cash flows from operating activities $ 12,772 $ 11,321 $ 12,091
- ---------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant & equipment $ (7,780) $(10,107) $(11,610)
Payments for businesses acquired - (60,970) -
Retirements or sales of property, plant & equipment 2 314 58
- ---------------------------------------------------------------------------------------------------------
Net cash used for investing activities $ (7,778) $(70,763) $(11,552)
- ---------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in short-term debt $ 125 $ - $ -
(Decrease) Increase in long-term debt (5,880) 53,000 -
Sales of stock 1,844 1,002 1,316
Issuance of stock related to acquisition - 6,000 -
Dividend payments (3,993) (3,848) (3,347)
- ---------------------------------------------------------------------------------------------------------
Net cash (used for) provided by financing activities $ (7,904) $ 56,154 $ (2,031)
- ---------------------------------------------------------------------------------------------------------
EFFECT OF EXCHANGE RATES $ 1,412 $ (2,073) $ (274)
- ---------------------------------------------------------------------------------------------------------
NET (DECREASE) INCREASE IN CASH AND SHORT-TERM SECURITIES $ (1,498) $ (5,361) $ (1,766)
Cash and short-term securities at beginning of year 2,923 8,284 10,050
Cash and short-term securities at end of year $ 1,425 $ 2,923 $ 8,284
- ---------------------------------------------------------------------------------------------------------
SUPPLEMENTAL CASH FLOW DATA
Cash paid during the year for:
Interest $ 3,555 $ 1,204 $ 45
Income taxes $ 6,344 $ 7,736 $ 7,906
- ---------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these statements.
27 WOODHEAD INDUSTRIES, INC.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(Amounts in thousands, except shares and per share data, 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 material intercompany transactions have been eliminated in
consolidation. The Company follows the practice of ending its fiscal year on the
Saturday closest to September 30, which resulted in a 53 week period in 1998.
INVENTORIES
The Company values its inventory at the lower of cost or market, cost being
determined using the first-in first-out (FIFO) or last-in first-out (LIFO)
method. The total inventories at the balance sheet dates were as follows:
1999 1998
- --------------------------------------------------------------------------------
Inventories valued using FIFO $13,596 $ 9,896
- --------------------------------------------------------------------------------
Inventories valued using LIFO
At FIFO cost $14,868 $14,585
Less: Reserve to reduce to LIFO 4,365 5,050
LIFO inventories $10,503 9,535
- --------------------------------------------------------------------------------
Total Inventories $24,099 $19,431
- --------------------------------------------------------------------------------
Inventory composition at FIFO
Raw materials $14,801 $12,881
Work-in-process and finished goods 13,663 11,600
- --------------------------------------------------------------------------------
Total Inventories at FIFO $28,464 $24,481
- --------------------------------------------------------------------------------
Had the FIFO method been used for all inventories, net income would have been
$438,000 lower in 1999, $368,000 higher in 1998, and $196,000 lower in 1997.
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
Software technology 9 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:
1999 1998
- --------------------------------------------------------------------------------
Land $ 2,996 $ 2,538
Buildings and improvements 23,505 23,320
Machinery and equipment 24,588 22,786
Dies and molds 23,754 22,137
Software technology 26,784 25,540
Furniture and office equipment 19,654 17,755
- --------------------------------------------------------------------------------
Total $121,281 $114,076
- --------------------------------------------------------------------------------
28 WOODHEAD INDUSTRIES, INC.
<PAGE>
1. SUMMARY OF ACCOUNTING POLICIES (CONTINUED)
FINANCIAL INSTRUMENTS
The Company uses financial instruments to selectively hedge and thereby
attempts to reduce its overall exposure to the effects of foreign currency
fluctuations. The Company does not use derivative financial instruments for
speculative purposes. The Company uses foreign currency forward and swap
contracts to hedge a portion of the currency risks of transactions denominated
in foreign currencies. Gains and losses on these foreign currency hedges are
generally offset by corresponding losses and gains on the underlying
transactions.
In 1998 the Company entered into a foreign currency swap agreement with an
AA-rated counterparty to hedge a portion of its investment in its Italian
subsidiary. Under the terms of the agreement, the Company will swap 35.52
billion Lire for $20.0 million U.S. Dollars amortized over 8 years. In addition,
the contract provides for the Company to make annual interest payments at 6.50%
on the outstanding Lire balance, while receiving 7.43% on the outstanding Dollar
balance. Due to the fact that this contract is an effective hedge of an
investment in a foreign entity, any gain or loss on the contract is recorded
directly to accumulated other comprehensive income in stockholders' equity.
SOFTWARE
Costs related to the conceptual formulation and design of programs are
normally expensed as research and development. In the fourth quarter of fiscal
1998 the Company acquired the business and certain assets of SST including
software technology which is being amortized over nine years. During fiscal 1999
software amortization was $2,997,000. As of October 2, 1999, $23,314,000 remains
as capitalized software technology. During fiscal 1998 software amortization was
$473,000, and as of October 3, 1998, $25,076,000 remained as capitalized
software technology.
RESEARCH AND DEVELOPMENT COSTS
Research and development costs are expensed as incurred.
In 1998 the Company acquired the assets of SST which included $5,971,000 for
in-process research and development projects. The $5,971,000 was expensed at the
time of purchase and recorded as operating expenses in engineering and product
development.
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.
As a consequence of changing market conditions, the Company in 1998 reviewed
the operations of its AI/FOCS subsidiary and determined that goodwill associated
with the fiber segment of the business was impaired. Since the sum of future
cash flows was less than the carrying amount of the assets, a write-off in the
amount of $3,408,000 was recorded in the fourth quarter of fiscal 1998.
FOREIGN CURRENCY TRANSLATION
Assets and liabilities of foreign subsidiaries (except the Mexican
subsidiary, whose functional currency is the U.S. Dollar) are translated into
U.S. Dollars at fiscal year-end exchange rates, and income statement accounts
are translated at weighted-average rates during the year. Unrealized currency
translation adjustments in the consolidated balance sheets are recorded to
accumulated other comprehensive income in shareholders' equity. The financial
statements of the Company's Mexican operations are translated into U.S. Dollars
using both current and historical exchange rates, with translation gains and
losses included in net income.
29 WOODHEAD INDUSTRIES, INC.
<PAGE>
1. SUMMARY OF ACCOUNTING POLICIES (CONTINUED)
EARNINGS PER SHARE
In February 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 128: "Earnings Per Share", which
was adopted by the Company in the first quarter of fiscal 1998. The earnings per
share (EPS) information in prior periods has been restated to conform to such
presentation. 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 reflects the potential dilution
that could occur if securities or other contracts to issue common stock were
exercised or converted.
1999 1998 1997
- --------------------------------------------------------------------------------
Net Income $10,894 $ 3,930 $12,280
- --------------------------------------------------------------------------------
Earnings per share
Basic $ 0.98 $ 0.37 $ 1.17
Diluted $ 0.96 $ 0.35 $ 1.10
- --------------------------------------------------------------------------------
Weighted-average number of shares
outstanding used for basic earnings
per share, in thousands 11,101 10,653 10,466
- --------------------------------------------------------------------------------
Dilutive common stock options, in thousands 271 548 701
- --------------------------------------------------------------------------------
Weighted-average number of shares
outstanding, plus dilutive common
stock options, in thousands 11,372 11,201 11,167
- --------------------------------------------------------------------------------
Outstanding common stock options having
no dilutive effect, in thousands 560 145 -
- --------------------------------------------------------------------------------
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 have an original maturity of three
months or less in order to be considered short-term for cash flows.
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.
NEW ACCOUNTING RULES
Statement of Position 98-1: "Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use" was issued in March 1998. The statement
provides guidance on accounting for the cost of computer software developed or
obtained for internal use. Adoption of this standard is scheduled for fiscal
year 2000. Adoption of this standard is not expected to have a material impact
on the financial statements.
Statement of Position 98-5: "Reporting on the Costs of Start-Up Activities"
was issued in April 1998. This statement provides guidance on the financial
reporting of start-up costs and organization costs. It requires costs of
start-up activities and organization costs to be expensed as incurred. Adoption
of the new standard is scheduled for fiscal year 2000. Adoption of this standard
is not expected to have a material impact on the financial statements.
SFAS No. 133: "Accounting for Derivative Instruments and Hedging
Activities" was issued in June 1998. This statement addresses the accounting for
derivative instruments, including certain derivative instruments embedded in
other contracts, and hedging activities. The Company is evaluating this new
pronouncement to determine its impact upon current reporting. Adoption of the
new standard is scheduled for the first quarter of fiscal year 2001.
30 WOODHEAD INDUSTRIES, INC.
<PAGE>
2. LONG-TERM DEBT AND SHORT-TERM BORROWING
Long-term debt consisted of the following:
<TABLE>
<CAPTION>
1999 1998 1997
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Bank Revolving Credit Agreements $ 2,120 $ 8,000 $ -
6.64% Notes, Due September 30th, annually, 2002-2008 30,000 30,000
6.81% Notes, Due September 30th, annually, 2004-2013 15,000 15,000
- ------------------------------------------------------------------------------------------------------------
Total $47,120 $53,000 $ -
- ------------------------------------------------------------------------------------------------------------
Less: Portion of long-term debt payable within one year - - -
- ------------------------------------------------------------------------------------------------------------
Net long-term debt $47,120 $53,000 $ -
- ------------------------------------------------------------------------------------------------------------
</TABLE>
The future maturities of the long-term debt are summarized as follows:
<TABLE>
<S> <C>
2001.........................................................................$ 2,120
2003.........................................................................$ 4,200
2004.........................................................................$ 5,700
2005 and thereafter..........................................................$35,100
</TABLE>
The Company has Revolving Credit Agreements (the "Agreements") with a bank that
provides for borrowings of up to $25,000,000 at the bank's prime or offered
rate. These Agreements expire on February 28, 2001. The average amount owed to
the bank was $7,558,000 in 1999, $19,947,000 in 1998, and $0 in 1997, at
weighted average interest rates of 5.84%, 6.18%, and 0.0%, respectively. In
September 1998, the Company issued $30 million and $15 million of Senior
Guaranteed Notes at 6.64% and 6.81% per annum beginning to mature in 2002 and
2004 continuing through 2008 and 2013, respectively. The proceeds from these
financings were used to refinance bank borrowings related to the acquisitions of
mPm S.r.l. and SST. Under the various funding arrangements the Company is
required, among other things, to maintain consolidated net worth, as defined, of
not less than $61,724,000, and a debt to EBITDA ratio of not more than 2.5 to 1.
In addition, there are certain restrictions on the creation or assumption of any
lien or security interest upon any of its assets. The Company is in compliance
with all the provisions of its funding arrangements.
Short-term borrowing averaged $64,000 in 1999, $10,000 in 1998, and $19,000
in 1997, at weighted average interest rates of 5.5%, 6.5%, and 7.7%,
respectively.
3. INCOME TAXES
The provision for income taxes for 1999, 1998, and 1997 consisted of the
following:
<TABLE>
<CAPTION>
1999 1998 1997
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U. S. federal income tax $4,968 $ 3,064 $5,257
State income taxes 514 1,010 1,191
Foreign income taxes 776 (1,441) 1,597
- ------------------------------------------------------------------------------------------------------------
Total $6,258 $ 2,633 $8,045
- ------------------------------------------------------------------------------------------------------------
Current provision $6,750 $ 7,339 $8,505
Deferred provision (492) (4,706) (460)
- ------------------------------------------------------------------------------------------------------------
Total $6,258 $ 2,633 $8,045
- ------------------------------------------------------------------------------------------------------------
</TABLE>
A reconciliation of the federal statutory rate to the effective tax rate is as
follows:
<TABLE>
<CAPTION>
1999 1998 1997
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Federal statutory rate 34.0% 34.0% 34.0%
State income taxes, net of federal benefit 2.0 3.4 3.9
Difference between U.S. and foreign rates .7 (7.0) 1.4
Benefit of state loss carryforward that may not be realized - 3.9 -
Other, net (.2) 5.8 .3
- ------------------------------------------------------------------------------------------------------------
Total 36.5% 40.1% 39.6%
- ------------------------------------------------------------------------------------------------------------
</TABLE>
31 WOODHEAD INDUSTRIES, INC.
<PAGE>
3. INCOME TAXES (CONTINUED)
The components of income before income taxes consisted of the following:
<TABLE>
<CAPTION>
1999 1998 1997
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Domestic $15,234 $ 9,449 $16,445
Foreign 1,918 (2,886) 3,880
- -----------------------------------------------------------------------------------------------------------
Total $17,152 $ 6,563 $20,325
- -----------------------------------------------------------------------------------------------------------
</TABLE>
The components of the deferred tax provisions are:
<TABLE>
<CAPTION>
1999 1998 1997
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Excess of tax over book depreciation
and amortization (book over tax) $ 143 $ 71 $ (19)
Excess of book loss on disposal of property (7) (16) (4)
Write-off of purchased research and development - (2,625) -
Write-off of impaired long-lived assets - (1,363) -
Accounts receivable reserves (108) (21) (83)
Inventory reserves (289) 50 (89)
Litigation reserves 14 (15) 58
Environmental reserves (100) (573) 77
Employee benefit reserves (118) (211) (330)
Other reserves (27) (3) (70)
- -----------------------------------------------------------------------------------------------------------
Total $ (492) $(4,706) $ 460
- -----------------------------------------------------------------------------------------------------------
</TABLE>
The significant deferred tax assets and liabilities at October 2, 1999, October
3, 1998, and September 27, 1997, were as follows:
<TABLE>
<CAPTION>
1999 1998 1997
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Deferred tax liabilities
Accelerated depreciation & amortization $ 2,705 $ 1,685 $ 2,015
- -----------------------------------------------------------------------------------------------------------
Total Deferred Tax Liabilities $ 2,705 $ 1,685 $ 2,015
- -----------------------------------------------------------------------------------------------------------
Less deferred tax assets
Write-off of purchased research and development $ 2,745 $ 2,625 $ -
Employee benefit reserves 1,657 1,516 1,330
Write-off of impaired long-lived assets 1,087 1,363 -
Software amortization 925 - -
Environmental reserves 858 982 538
Inventory reserves 744 451 449
Accounts receivable reserves 424 316 287
Litigation reserves 66 80 65
Other reserves 579 596 -
- -----------------------------------------------------------------------------------------------------------
Total Deferred Tax Assets $ 9,085 $ 7,929 $ 2,669
- -----------------------------------------------------------------------------------------------------------
Net Deferred Tax Assets $ 6,380 $ 6,244 $ 654
- -----------------------------------------------------------------------------------------------------------
</TABLE>
Income taxes have not been recorded on $9.2 million in undistributed earnings of
subsidiaries, either because any taxes on dividends would be offset
substantially by foreign tax credits or because the Company intends to reinvest
those earnings indefinitely.
32 WOODHEAD INDUSTRIES, INC.
<PAGE>
4. PENSION AND OTHER EMPLOYEE BENEFITS
The Company has adopted SFAS No. 132: "Employers' Disclosures About Pensions
and Other Postretirement Benefits" in fiscal year 1999.
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 $430,000 in 1999, $306,000 in
1998, and $245,000 in 1997.
Net periodic pension cost for the non-union plans for 1999, 1998, and 1997
included the following components:
<TABLE>
<CAPTION>
1999 1998 1997
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost-benefits earned during the year $ 431 $ 363 $ 372
Interest cost on projected benefit obligation 570 512 433
Expected return on plan assets (492) (470) (430)
Amortization of prior service cost 16 16 16
Amortization of transitional asset (7) (7) (15)
Recognized actuarial(gain) or loss 95 5 (32)
- ----------------------------------------------------------------------------------------------
Total $ 613 $ 419 $ 344
- ----------------------------------------------------------------------------------------------
</TABLE>
Assumptions used in accounting for the pension plans are as follows:
<TABLE>
<CAPTION>
1999 1998 1997
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Discount rate 7.3% 6.8% 7.5%
Rate of increase in compensation levels 5.6% 5.6% 5.6%
Expected long-term rate of return on assets 7.5% 7.5% 7.5%
- ----------------------------------------------------------------------------------------------
</TABLE>
The following table reconciles the plans' funded status and the amount
recognized in the Company's consolidated balance sheets at October 2, 1999,
October 3, 1998, and September 27, 1997, for its non-union plans:
<TABLE>
<CAPTION>
1999 1998 1997
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Change in benefit obligation
Benefit obligation at beginning of year $ 8,291 $ 6,402 $ 5,621
Service cost 431 363 372
Interest cost 570 512 433
Benefits paid (461) (373) (228)
Actuarial(gain) or loss (457) 1,387 204
- ----------------------------------------------------------------------------------------------
Benefit obligation at end of year $ 8,374 $ 8,291 $ 6,402
- ----------------------------------------------------------------------------------------------
Change in plan assets
Fair value of plan assets at beginning of year $ 6,419 $ 7,478 $ 6,289
Actual return on plan assets 866 (318) 1,157
Employer contributions 321 200 260
Conversion to defined contribution plan - (568) -
Benefits paid (461) (373) (228)
- ----------------------------------------------------------------------------------------------
Fair value of plan assets at end of year $ 7,145 $ 6,419 $ 7,478
- ----------------------------------------------------------------------------------------------
Reconciliation of funded status
Under (Over) funded status $ 1,229 $ 1,873 $(1,076)
Unrecognized actuarial gain or (loss) (502) (1,428) 675
Unrecognized transition obligation (19) (13) (6)
Unrecognized prior service cost (65) (80) (96)
- ----------------------------------------------------------------------------------------------
Accrued (prepaid) pension cost included
in the consolidated balance sheets $ 643 $ 352 $ (503)
- ----------------------------------------------------------------------------------------------
</TABLE>
33 WOODHEAD INDUSTRIES, INC.
<PAGE>
4. PENSION AND OTHER EMPLOYEE BENEFITS (CONTINUED)
Amounts recognized in the consolidated balance sheets were:
1999 1998 1997
- --------------------------------------------------------------------------------
Prepaid benefit cost $ (279) $ (374) $ (986)
Accrued benefit liability 922 726 483
- --------------------------------------------------------------------------------
Accrued (prepaid) pension cost included
in the consolidated balance sheets $ 643 $ 352 $ (503)
- --------------------------------------------------------------------------------
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 accumulated benefit obligation and fair value of
plan assets for the plan with accumulated benefit obligations in excess of plan
assets were $624,000 and $0, respectively, as of October 2, 1999; $388,000 and
$0, respectively, as of October 3, 1998; and $315,000 and $0, respectively, as
of September 27, 1997. The Company charged to expense $218,000 in 1999, $162,000
in 1998, and $135,000 in 1997, 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 $191,000 in 1999, $199,000 in 1998, and $181,000 in 1997,
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 plans' 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 $1,003,000 in 1999,
$834,000 in 1998, and $1,009,000 in 1997.
The Company makes matching contributions of 50% of employees' contributions
up to 4% of compensation. Matching contributions were $243,000 in 1999, $261,000
in 1998, and $232,000 in 1997.
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.
In fiscal years 1999, 1998, and 1997, the components of cost of these
postretirement benefits, principally healthcare, were as follows:
1999 1998 1997
- --------------------------------------------------------------------------------
Service Cost $ 85 $ 69 $ 64
Interest Cost 140 128 111
Amortization of transition obligation 55 55 55
Amortization of loss 17 1 -
- --------------------------------------------------------------------------------
Total $ 297 $ 253 $ 230
- --------------------------------------------------------------------------------
34 WOODHEAD INDUSTRIES, INC.
<PAGE>
4. PENSION AND OTHER EMPLOYEE BENEFITS (CONTINUED)
The funded status of these benefits for the fiscal years ended October 2, 1999,
October 3, 1998, and September 27, 1997, were as follows:
<TABLE>
<CAPTION>
1999 1998 1997
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Actuarial present value of benefit obligations
Retirees $ 598 $ 646 $ 595
Eligible active employees 607 608 319
Other active employees 897 849 715
- ----------------------------------------------------------------------------------------------
Accumulated postretirement benefit obligation $2,102 $2,103 $1,629
- ----------------------------------------------------------------------------------------------
Fair value of plan assets at end of year - - -
- ----------------------------------------------------------------------------------------------
Underfunded status $2,102 $2,103 $1,629
Unrecognized transition obligation (769) (824) (879)
Unrecognized net loss (227) (412) (85)
- ----------------------------------------------------------------------------------------------
Accrued postretirement benefit cost
included in the consolidated balance sheets $1,106 $ 867 $ 665
- ----------------------------------------------------------------------------------------------
</TABLE>
Assumptions used in the accounting were:
<TABLE>
<CAPTION>
1999 1998 1997
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Discount rate 7.3% 6.8% 7.5%
Health care trend rate in first year 7.0% 8.0% 10.0%
Gradually declining to a trend rate of 6.0% 6.0% 6.0%
in the year 2000 2000 2000
- ----------------------------------------------------------------------------------------------
</TABLE>
A one percentage point increase in the assumed health care trend would have the
following effects on:
<TABLE>
<CAPTION>
1999 1998 1997
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Aggregate of service and interest cost $ 46 $ 40 $ 36
Accumulated postretirement benefit obligation $ 381 $ 378 $ 297
- ----------------------------------------------------------------------------------------------
</TABLE>
POSTEMPLOYMENT BENEFITS
The Company provides certain postemployment benefits to former or inactive
employees after employment but before retirement. The costs associated with the
Company's postemployment benefits are considered to be immaterial.
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
35 WOODHEAD INDUSTRIES, INC.
<PAGE>
5. CAPITAL STOCK (CONTINUED)
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.
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 but believes that it is a major 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. The Company continues to monitor and analyze conditions to
determine the continued efficacy of this system. The Company also continues to
analyze remedial alternatives for the off-site groundwater contamination and is
reviewing these alternatives with the DEQ. The Company continues to investigate
the extent of other sources of contamination in addition to the removed UST and
the above-referenced disposal area, including possible evidence of past or
current releases by others in the vicinity around the Company's facilities.
The Company's consultant estimates that a minimum of approximately
$1,659,000 of investigation and remediation expenses remain to be incurred, both
on-site and off-site. The Company has a reserve for such purposes. The Company
has filed a complaint in federal district court seeking contribution from the
previous owners of the site for the cost of the investigation and remediation of
the site. Also, the Company is evaluating similar claims against various
insurers. The consultant's cost estimate was based on a review of currently
available data and assumptions concerning the extent of contamination,
geological conditions, and the costs and effectiveness of certain treatment
technologies. The cost estimate continues to be subject to substantial
uncertainty because of the extent of the contamination area, the variety and
nature of geological conditions throughout the contamination area, changes in
remediation technology, and ongoing DEQ feedback. The Company is continuing to
monitor the conditions at the site and will adjust its reserve if necessary. The
Company may incur significant additional assessment, remediation and related
costs at the site, and such costs could materially and adversely affect the
Company's consolidated net income for the period in which such costs are
incurred. At this time, the Company, however, cannot estimate the time or
potential magnitude of such costs, if any.
36 WOODHEAD INDUSTRIES, INC.
<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 October 2, 1999, 1,391,230 unissued common shares were reserved under all
stock option plans which include 109,200 shares available for future grants. The
following grants were outstanding and exercisable:
Fiscal Year Number of Option Price Expiration
of Grant Shares per Share Date
- --------------------------------------------------------------------------------
1990 39,600 4.75 2000
1991 118,480 4.25 2001
1992 108,900 5.17 2002
1993 184,850 7.17 2003
1994 97,200 10.33 2004
1995 113,850 9.33 2005
1996 118,950 14.31 2006
1997 129,700 13.19-15.81 2007
1998 143,050 18.94-20.38 2008
1999 227,450 10.31-15.25 2009
- --------------------------------------------------------------------------------
Total 1,282,030
- --------------------------------------------------------------------------------
The following table summarizes the options granted, exercised, expired, and
forfeited during the last three fiscal years:
Number of Shares
-------------------------------------
Option Price per Share 1999 1998 1997
- --------------------------------------------------------------------------------
Beginning of year 1,244,250 1,191,417 1,171,150
- --------------------------------------------------------------------------------
Granted $ 10.31-20.38 237,900 151,150 147,900
Exercised 3.17-14.31 174,270 92,467 122,233
Expired 10.33 6,750 - -
Forfeited $ 13.31-20.38 19,100 5,850 5,400
- --------------------------------------------------------------------------------
End of year 1,282,030 1,244,250 1,191,417
- --------------------------------------------------------------------------------
Subsequent to October 2, 1999, stock options were granted for 109,400 shares at
an average price of $10.31 per share.
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 of the awards at the date
of grant, consistent with the provisions of SFAS No. 123, the Company's net
income and earnings per share would have been reduced to the pro forma amounts
indicated below:
1999 1998 1997
- --------------------------------------------------------------------------------
Net Income
As reported $10,894 $ 3,930 $12,280
Pro forma $10,279 $ 3,244 $11,802
- --------------------------------------------------------------------------------
Earnings Per Share, diluted
As reported $ 0.96 $ 0.35 $ 1.10
Pro forma $ 0.90 $ 0.29 $ 1.06
- --------------------------------------------------------------------------------
The pro forma effect on net income may not be representative of the pro forma
effect on net income of future years.
37 WOODHEAD INDUSTRIES, INC.
<PAGE>
7. STOCK OPTION PLANS (CONTINUED)
The Company has ten-year and five-year options. Options granted to outside
directors and employees vest six months and twelve months, respectively, after
grant date. 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 grants:
<TABLE>
<CAPTION>
1999 1998 1997
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Expected volatility 30.76% 26.70% 27.85%
Risk-free interest rate 5.15% 6.14% 6.46%
Expected life in years 7.56 6.63 7.27
Dividend yield 2.63% 1.77% 2.08%
Weighted fair market value $ 4.52 $ 6.91 $ 4.73
- -----------------------------------------------------------------------------------------------------------------
Total value of options granted $ 1,029 $ 1,004 $ 675
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
8. SEGMENT AND GEOGRAPHIC DATA
Effective October 4, 1998, the Company adopted SFAS No. 131: "Disclosures about
Segments of an Enterprise and Related Information". This statement requires that
public business enterprises report certain financial information in a similar
manner as reported to the chief operating decision maker of the company for the
purpose of evaluating performance and allocating resources to the various
operating segments. The Company has identified the Chief Executive Officer as
the chief operating decision maker. The Company's operating segments are based
on the organization of business groups comprised of similar products and
services. The Company's Industrial Communications and Connectivity Products
segment's revenues are primarily derived from sales of molded connectors,
interface cards, and field-attachable connectors. The Company's Electrical
Safety & Specialty Products segment's revenues are primarily derived from sales
of electrical wiring devices, portable lighting, material handling products, and
mobile electrification products. The Company sells its products through
distributors and system integrators as well as directly to OEM customers. Sales
between segments were not significant. Certain corporate expenses, primarily
those related to the overall management of the Company, were not allocated to
the segments or geographic areas. Corporate assets are primarily investments in
subsidiaries. Sales in geographic areas are determined by location of producing
facility. No single customer accounted for 10 percent or more of total revenue.
Sales in foreign countries, other than in Canada in 1999, do not meet minimum
disclosure requirements.
<TABLE>
<CAPTION>
Net Sales Income from Operations
---------------------------------- -------------------------------------
1999 1998 1997 1999 1998 1997
- -------------------------------------------------------------------- -------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Industrial Communications
and Connectivity Products $102,056 $78,768 $68,635 $10,341 $ 9,659 $ 9,629
Electrical Safety &
Specialty Products 66,640 68,792 68,251 11,746 11,884 12,628
Corporate and Other (1,699) (793) (798)
Unusual - (9,379) -
- -------------------------------------------------------------------- -------------------------------------
Total $168,696 $147,560 $136,886 $20,388 $11,371 $21,459
- -------------------------------------------------------------------- -------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Total Assets Depreciation and Amortization
--------------------- -------------------------------------
1999 1998 1999 1998 1997
- ------------------------------------------------------- -------------------------------------
<S> <C> <C> <C> <C> <C>
Industrial Communications
and Connectivity Products $120,972 $110,716 $ 7,711 $ 4,119 $ 2,465
Electrical Safety &
Specialty Products 34,431 36,424 2,417 2,365 2,266
Corporate and Other 2,238 8,801 149 114 78
- ------------------------------------------------------- -------------------------------------
Total $157,641 $155,941 $10,277 $ 6,598 $ 4,809
- ------------------------------------------------------- -------------------------------------
</TABLE>
38 WOODHEAD INDUSTRIES, INC.
<PAGE>
8. SEGMENT AND GEOGRAPHIC DATA (CONTINUED)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
Reconciliation of income from operations to net income 1999 1998 1997
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Income from operations $20,388 $11,371 $21,459
Less: Interest income (expense), net (3,429) (1,187) 290
Other income (expense), net 193 (3,621) (1,424)
Income taxes (6,258) (2,633) (8,045)
- ----------------------------------------------------------------------------------------------------
Net income $10,894 $ 3,930 $12,280
- ----------------------------------------------------------------------------------------------------
</TABLE>
The unusual charges in 1998 were related to the Industrial Communications and
Connectivity Products segment, and included a $5,971,000 write-off of in-process
research and development, and a $3,408,000 charge for impairment of goodwill.
GEOGRAPHIC DATA
<TABLE>
<CAPTION>
Net Sales Total Assets
----------------------------------- ----------------------
1999 1998 1997 1999 1998
- --------------------------------------------------------- ----------------------
<S> <C> <C> <C> <C> <C>
United States $99,116 $97,884 $99,658 $58,447 $57,119
Canada 21,851 39,140 35,753
Italy 34,888 38,440
All other countries 47,729 49,676 37,228 25,166 24,629
- --------------------------------------------------------- ----------------------
Total $168,696 $147,560 $136,886 $157,641 $155,941
- --------------------------------------------------------- ----------------------
</TABLE>
9. SUMMARY OF QUARTERLY DATA (UNAUDITED)
The following is a summary of quarterly data for 1999, 1998, and 1997.
<TABLE>
<CAPTION>
Basic Diluted
Net Gross Net Earnings Earnings
Sales Profit Income Per Share Per Share
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1999
FIRST QUARTER $ 38,836 $16,480 $ 2,353 $ .21 $ .21
SECOND QUARTER 44,468 19,483 2,914 .26 .26
THIRD QUARTER 43,190 18,554 2,231 .20 .20
FOURTH QUARTER 42,202 18,564 3,396 .30 .30
- ----------------------------------------------------------------------------------------------------
TOTAL $168,696 $73,081 $10,894 $ .98 $ .96
- ----------------------------------------------------------------------------------------------------
1998
First Quarter $ 34,350 $14,970 $ 2,808 $ .27 $ .25
Second Quarter 36,042 16,070 3,320 .31 .30
Third Quarter 37,568 16,040 2,820 .27 .25
Fourth Quarter 39,600 16,478 (5,018) (.46) (.45)
- ----------------------------------------------------------------------------------------------------
Total $147,560 $ 63,558 $ 3,930 $ .37 $ .35
- ----------------------------------------------------------------------------------------------------
1997
First Quarter $ 32,163 $14,356 $ 2,604 $ .25 $ .24
Second Quarter 35,503 16,009 3,087 .30 .28
Third Quarter 35,495 15,914 3,181 .30 .29
Fourth Quarter 33,725 15,693 3,408 .32 .30
- ----------------------------------------------------------------------------------------------------
Total $136,886 $61,972 $12,280 $ 1.17 $1.10
- ----------------------------------------------------------------------------------------------------
</TABLE>
39 WOODHEAD INDUSTRIES, INC.
<PAGE>
10. ACQUISITIONS
During 1998 the Company made the following acquisitions. Both were accounted
for using the purchase method of accounting. The Company has classified as
intangible assets the costs in excess of the fair value of the net assets of
companies acquired. The operating results of these acquired businesses have been
included in the Consolidated Statements of Income from the dates of acquisition.
In February 1998, the Company acquired all of the outstanding capital stock
of mPm S.p.A. and mPm Group S.p.A. ("mPm") and certain assets of mPm's
subsidiaries for approximately $29,900,000 plus acquisition costs. mPm is a
leading manufacturer of molded and field-attachable DIN connectors. The purchase
of mPm was financed from existing cash on hand combined with proceeds from the
Company's existing credit facility (See Note 2, Long-Term Debt). As a result of
the acquisition, $21,726,000 in goodwill was recorded by the Company and will be
amortized over a period of 20 years.
In July 1998, the Company acquired the business and certain of the assets of
the SST division of S-S Technologies, Inc. ("SST") for approximately $34,200,000
plus acquisition costs. SST is a leader in communication technology, selling
interface cards, gateways, and related software for connecting devices and
controllers to industrial automation networks. The purchase of SST was financed
from the issuance of 400,000 shares of Woodhead Industries, Inc. common stock
along with the net proceeds from an additional credit facility from the
Company's bank (See Note 2, Long-Term Debt). As a result of the acquisition,
$966,000 of goodwill was recorded by the Company and will be amortized over a
period of 15 years. Acquired in-process research and development of $5,971,000
was charged to expense in the fourth quarter of fiscal 1998.
As the Company's fiscal 1998 financial statements include only two months of
SST and seven months of mPm operations, the following selected unaudited pro
forma information is being provided to present a summary of the combined results
of the acquired companies as if the acquisitions had occurred as of the first
day of fiscal 1998 and 1997, giving effect to purchase accounting adjustments.
For the years ended October 3, 1998 and September 27, 1997 (Unaudited)
1998 1997
- -------------------------------------------------------------------------------
Sales $164,264 $166,761
Net earnings $ 1,649 $ 9,478
Basic earnings per share $ .15 $ .86
- -------------------------------------------------------------------------------
Diluted earnings per share $ .15 $ .85
- -------------------------------------------------------------------------------
The pro forma data is for informational purposes only and may not
necessarily reflect the results of operations of Woodhead Industries, Inc. had
mPm and SST operated as part of the Company for fiscal years 1998 and 1997.
Further, the pro forma results are not intended to be a projection of future
results of the combined companies.
11. LEASES
Future minimum payments for all non-cancelable lease terms in excess of one
year as of October 2, 1999 are $987,000, $957,000, $948,000, $716,000, $735,000,
and $1,689,000 for the years 2000, 2001, 2002, 2003, 2004, and thereafter,
respectively. Total lease expense for the years ended October 2, 1999,
October 3, 1998, and September 27, 1997 were $882, 000, $487,000, and $382,000
respectively.
12. SUBSEQUENT EVENTS
On November 18, 1999, the Company made an equity investment in Symphony
Systems, which will be accounted for under the cost method. This investment in
the Company's Industrial Communications and Connectivity Products segment will
enable customers to provide web-based connectivity to their industrial products.
The Company does not expect a material effect on its financial condition
resulting from this transaction.
40 WOODHEAD INDUSTRIES, INC.
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
The subsidiaries of the Company at October 2, 1999 were:
<TABLE>
<CAPTION>
State or Other Jurisdiction Percentage
Name of Subsidiary in which Organized of Ownership
---------------------------- --------------------------- ------------
<S> <C> <C>
AI/FOCS, Inc. State of Delaware 100%
Aero-Motive Company State of Michigan 100%
Aero-Motive (U.K.) Limited United Kingdom 100%
Woodhead France S.A.R.L. France 100%
Elitec S.A. France 100%
Central Rubber Company State of Illinois 100%
Daniel Woodhead Company State of Delaware 100%
H. F. Vogel GmbH Electrotechnische Fabrik Germany 100%
mPm S.r.l. Italy 100%
mPm Elettronica S.r.l Italy 100%
mPm Handels GmbH Germany 100%
E.L. Sind S.r.l. Italy 70%
Woodhead Asia Pte. Ltd. Singapore 100%
Woodhead Canada Limited Province of Nova Scotia 100%
Woodhead de Mexico S.A. de C.V. Mexico 100%
Woodhead Finance Company Province of Nova Scotia 100%
Woodhead Industries (The Netherlands)B.V. The Netherlands 100%
Akapp Electro Industrie B.V. The Netherlands 100%
Woodhead Japan Corporation Japan 100%
W.I.S. Corp. U.S. Virgin Islands 100%
</TABLE>
54
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
report dated November 18, 1999 incorporated by reference in this Form 10-K, into
Woodhead Industries, Inc.'s previously filed Registration Statement File No.
333-26379.
ARTHUR ANDERSEN LLP
Chicago, Illinois
December 23, 1999
55
<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> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-02-1999
<PERIOD-END> OCT-02-1999
<CASH> 1,425
<SECURITIES> 0
<RECEIVABLES> 30,715
<ALLOWANCES> 1,439
<INVENTORY> 24,099
<CURRENT-ASSETS> 63,080
<PP&E> 121,281
<DEPRECIATION> 56,836
<TOTAL-ASSETS> 157,641
<CURRENT-LIABILITIES> 24,793
<BONDS> 0
0
0
<COMMON> 11,237
<OTHER-SE> 71,217
<TOTAL-LIABILITY-AND-EQUITY> 157,641
<SALES> 168,696
<TOTAL-REVENUES> 168,696
<CGS> 95,615
<TOTAL-COSTS> 95,615
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,429
<INCOME-PRETAX> 17,152
<INCOME-TAX> 6,258
<INCOME-CONTINUING> 10,894
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,894
<EPS-BASIC> .98
<EPS-DILUTED> .96
</TABLE>
