(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended 12/27/2003
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________________ to __________________
Commission File Number 0-5971
WOODHEAD INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
| DELAWARE | 36-1982580 | ||
| (State or other jurisdiction of | (IRS Employer | ||
| incorporation or organization) | Identification No.) | ||
THREE PARKWAY NORTH #550, Deerfield, IL | 60015 | ||
| (Address of principal executive offices) | (Zip Code) | ||
(Registrant’s telephone number, including area code) | (847)-236-9300 | ||
| (Former name, former address and former fiscal year, if changed since last report.) | |||
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 for 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 whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act) Yes X No .
The number of common shares outstanding as of January 26, 2004 was 12,093,523.
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TABLE OF CONTENTS
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Woodhead Industries, Inc.
Consolidated Balance Sheets
As of December 27, 2003 and September 27, 2003
(Amounts in Thousands)
| Unaudited | ||||||||
| 12/27/2003 | 9/27/2003 | |||||||
|---|---|---|---|---|---|---|---|---|
| Assets | ||||||||
| Current Assets | ||||||||
| Cash and short-term investments | $ | 25,922 | $ | 22,547 | ||||
| Accounts receivable, net | 31,268 | 31,017 | ||||||
| Inventories | 14,548 | 13,020 | ||||||
| Prepaid expenses | 4,516 | 4,816 | ||||||
| Refundable income taxes | 1,871 | 1,625 | ||||||
| Deferred income taxes | 2,677 | 2,403 | ||||||
| Total current assets | 80,802 | 75,428 | ||||||
| Property, plant and equipment, net | 60,782 | 60,391 | ||||||
| Other Intangible assets, net | 703 | 706 | ||||||
| Goodwill, net | 34,769 | 32,290 | ||||||
| Deferred income taxes | 3,354 | 3,018 | ||||||
| Other Assets | 745 | 616 | ||||||
| Total Assets | $ | 181,155 | $ | 172,449 | ||||
Liabilities and Stockholders’ Investment | ||||||||
| Current Liabilities | ||||||||
| Accounts payable | $ | 9,986 | $ | 8,343 | ||||
| Accrued expenses | 13,426 | 13,586 | ||||||
| Income taxes payable | 775 | 539 | ||||||
| Current portion of long-term debt | 5,700 | 5,700 | ||||||
| Total current liabilities | 29,887 | 28,168 | ||||||
| Long-term debt | 30,900 | 30,900 | ||||||
| Deferred income taxes | 3,204 | 2,496 | ||||||
| Other liabilities | 2,988 | 2,435 | ||||||
| Total Liabilities | 66,979 | 63,999 | ||||||
Stockholders’ investment: | ||||||||
| Common stock at par (shares issued: 12,086 at 12/27/03 | ||||||||
| and 12,011 at 9/27/03) | 12,086 | 12,011 | ||||||
| Additional paid-in capital | 19,369 | 18,578 | ||||||
| Deferred stock compensation | (885 | ) | (773 | ) | ||||
| Accumulated other comprehensive loss | 6,949 | 2,832 | ||||||
| Retained earnings | 76,657 | 75,802 | ||||||
| Total stockholders’ investment | 114,176 | 108,450 | ||||||
| Total Liabilities and Stockholders’ Investment | $ | 181,155 | $ | 172,449 | ||||
The accompanying notes are an integral part of these statements.
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Woodhead Industries, Inc.
Consolidated Statements of Income
For the Three Months ended December 27, 2003 and December 28, 2002
(Amounts in Thousands, except per share data, unaudited)
| Three Months Ended | ||||||||
|---|---|---|---|---|---|---|---|---|
| 12/27/2003 | 12/28/2002 | |||||||
| Net Sales | $ | 45,144 | $ | 42,232 | ||||
| Cost of Sales | 28,623 | 26,504 | ||||||
| Gross Profit | 16,521 | 15,728 | ||||||
| Operating Expenses | 15,001 | 13,768 | ||||||
| Restructuring and Other Related Charges | 561 | — | ||||||
| Total Operating Expenses | 15,562 | 13,768 | ||||||
Income From Operations | 959 | 1,960 | ||||||
Other Expenses | ||||||||
| Interest Expense | 633 | 700 | ||||||
| Interest Income | (61 | ) | (39 | ) | ||||
| Other (Income) / Expenses, Net | (1,930 | ) | (508 | ) | ||||
| Income Before Taxes | 2,317 | 1,807 | ||||||
| Provision For Income Taxes | 258 | 381 | ||||||
| Income From Continuing Operations | $ | 2,059 | $ | 1,426 | ||||
Discontinued Operations: | ||||||||
| Income From Discontinued AKAPP Operations | ||||||||
| (Including Gain on Disposal of $725) | — | 733 | ||||||
| Income Tax Expense | — | 3 | ||||||
| Income From Discontinued Operations | — | 730 | ||||||
| Net Income | $ | 2,059 | $ | 2,156 | ||||
Earnings per share, basic | ||||||||
| From Continuing Operations | $ | 0.17 | $ | 0.12 | ||||
| From Discontinued Operations | $ | — | $ | 0.06 | ||||
| As Reported | $ | 0.17 | $ | 0.18 | ||||
Earnings per share, diluted | ||||||||
| From Continuing Operations | $ | 0.17 | $ | 0.12 | ||||
| From Discontinued Operations | $ | — | $ | 0.06 | ||||
| As Reported | $ | 0.17 | $ | 0.18 | ||||
Basic | 11,923 | 11,835 | ||||||
| Diluted | 12,175 | 11,881 | ||||||
| Dividends Per Share | $ | 0.10 | $ | 0.09 | ||||
The accompanying notes are an integral part of these statements.
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Woodhead Industries, Inc.
Consolidated Statements of Cash Flows
For the Three Months ended December, 27 2003 and December 28, 2002
(Amounts in Thousands, unaudited)
| Three Months ended | ||||||||
| 12/27/2003 | 12/28/2002 | |||||||
| Cash flows from operating activities: | ||||||||
| Net income for the period | $ | 2,059 | $ | 2,156 | ||||
| Adjustments to reconcile net income to net | ||||||||
| cash flows from operating activities: | ||||||||
| Depreciation and amortization | 3,077 | 2,630 | ||||||
| Income from discontinued operations | — | (730 | ) | |||||
| Deferred tax expense | 189 | 220 | ||||||
| (Increase) Decrease in: | ||||||||
| Accounts receivable | 936 | 2,060 | ||||||
| Inventories | (995 | ) | (512 | ) | ||||
| Prepaid expenses | 383 | 126 | ||||||
| Other assets | 691 | 175 | ||||||
| (Decrease) Increase in: | ||||||||
| Accounts payable | 1,273 | 87 | ||||||
| Accrued expenses | (476 | ) | 1,076 | |||||
| Income taxes payable | 209 | (30 | ) | |||||
| Other liabilities | 289 | 35 | ||||||
| Net cash flows provided by operating activities | 7,635 | 7,293 | ||||||
| Cash flows from investing activities: | ||||||||
| Purchases of property, plant & equipment | (1,839 | ) | (930 | ) | ||||
| Dispositions of property, plant & equipment | — | 5 | ||||||
| Retirements or sale of property, plant & equipment | 162 | — | ||||||
| Cash from sale of AKAPP operations (less cash sold) | — | 4,187 | ||||||
| Net cash provided by (used for) investing activities | (1,677 | ) | 3,262 | |||||
| Cash flows from financing activities: | ||||||||
| Sales of stock | 754 | — | ||||||
| Dividend payments | (1,204 | ) | (1,064 | ) | ||||
| Net cash (used for) provided by financing activities | (450 | ) | (1,064 | ) | ||||
| Effect of exchange rates | (2,133 | ) | (9 | ) | ||||
| Net increase in cash and short-term investments | 3,375 | 9,482 | ||||||
Cash and short-term investments at beginning of period | 22,547 | 13,152 | ||||||
| Cash and short-term investments at end of period | $ | 25,922 | $ | 22,634 | ||||
| Supplemental cash flow data | ||||||||
| Cash paid during the period for: | ||||||||
| Interest | $ | — | $ | — | ||||
| Income taxes | $ | 392 | $ | 129 | ||||
The accompanying notes are an integral part of these statements.
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Woodhead Industries, Inc.
Consolidated Statements of Comprehensive Income
For the Three Months ended December 27, 2003 and December 28, 2002
(Amounts in Thousands, unaudited)
| Three Months Ended | ||||||||
|---|---|---|---|---|---|---|---|---|
| 12/27/2003 | 12/28/2002 | |||||||
| Net income | $ | 2,059 | $ | 2,156 | ||||
| Other comprehensive income: | ||||||||
| Accumulated foreign currency translation | ||||||||
| Adjustment | 4,098 | 3,220 | ||||||
| Unrealized loss on cash flow hedging | ||||||||
| Instrument | 19 | (1,156 | ) | |||||
| Comprehensive income, net | $ | 6,176 | $ | 4,220 | ||||
The accompanying notes are an integral part of these statements.
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(Amounts in Thousands, except per share data, unaudited)
1. BASIS OF PRESENTATION
Our consolidated financial statements include the accounts of all our wholly owned subsidiaries, including those operating outside the United States. All material intercompany transactions have been eliminated in consolidation. We prepare our financial statements in conformity with United States Generally Accepted Accounting Principles. In preparing the financial statements, we must use some estimates and assumptions that may affect reported amounts and disclosures. Among others, we use estimates when accounting for depreciation, amortization, employee benefits, asset valuation allowances, and loss contingencies. We are also subject to risks and uncertainties that may cause actual results to differ from those estimates. Interim results are not necessarily indicative of results for a full year. Certain amounts in the prior period financial statements have been reclassified to conform to the current period presentation.
The accompanying unaudited, consolidated financial statements have been prepared pursuant to rules and regulations of the Securities and Exchange Commission and, therefore, do not include all information and footnote disclosures normally included in audited financial statements. In the opinion of management, all normal and necessary adjustments have been made to ensure a fair statement of the results for the interim period.
The information included in this Form 10-Q should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations, and Financial Statements and Notes thereto included in the Woodhead Industries, Inc. 2003 Form 10-K.
2. RECENT ACCOUNTING PRONOUNCEMENTS
In December 2002 the FASB issued SFAS No. 148 Accounting for Stock-Based Compensation – Transition and Disclosure (SFAS 148), which amends SFAS No. 123, Accounting for Stock-Based Compensation. SFAS No. 148 provides alternative methods of transition for companies that voluntarily change to the fair value-based method of accounting for stock-based employee compensation, and also requires expanded disclosures in both interim and annual financial statements. We are required to adopt the expanded disclosure requirements of SFAS No. 148 for the quarter ending June 28, 2003. Our expanded disclosure regarding pro forma amounts for the effects of not recording FAS 123 expense is included in Footnote No. 7.
In January 2003 we adopted FASB Statement No. 146 Accounting for Costs Associated with Exit or Disposal Activities, which generally requires that a liability for costs associated with an exit or disposal activity be expensed as incurred. Exit costs primarily consist of future minimum lease payments on vacated facilities, facility closure costs and facility consolidation costs. Employee separation costs consist primarily of severance costs. At each reporting date, we will evaluate our accruals for exit costs and employee separation costs to ensure that the accruals are still appropriate. In certain circumstances, accruals are no longer required because of efficiencies in carrying out the plans or because employees previously identified for separation resigned unexpectedly and did not receive severance or were redeployed due to circumstances not foreseen when the original plans were initiated. For the quarter ending December 27, 2003 our expanded disclosure regarding restructuring and other related charges is included in Footnote No. 10.
In January 2003 the FASB issued FASB Interpretation No. 46 (“FIN 46”) Consolidation of Variable Interest Entities, which requires certain variable interest entities to be consolidated by the primary beneficiary of the entity if the equity investors in the entity do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. FIN 46 was effective immediately for all new variable interest entities created or acquired after January 31, 2003. We do not have any variable interest entities that require consolidation under FIN 46.
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3. INVENTORIES
Inventories at the balance sheet dates were comprised of the following:
| 12/27/03 |
9/27/03 | |||||||
|---|---|---|---|---|---|---|---|---|
| Inventories valued using FIFO | $ | 9,560 | $ | 8,463 | ||||
| Inventories valued using LIFO: | ||||||||
| At FIFO cost | 8,019 | 7,636 | ||||||
| Less: Reserve to reduce to LIFO | (3,031 | ) | (3,079 | ) | ||||
| LIFO Inventories | 4,988 | 4,557 | ||||||
| Total Inventories | $ | 14,548 | $ | 13,020 | ||||
| Inventory composition using FIFO | ||||||||
| Raw materials | 9,803 | 8,978 | ||||||
| Work-in-process and finished goods | 7,776 | 7,121 | ||||||
| Total Inventories at FIFO | $ | 17,579 | $ | 16,099 | ||||
There was no LIFO impact on net income for the three months ended December 27, 2003. For the quarter ended December 28, 2002 had we used the FIFO method for all inventories net income would have been $0.1 million less than reported.
4. PROPERTY, PLANT AND EQUIPMENT
| 12/27/03 |
9/27/03 | |||||||
|---|---|---|---|---|---|---|---|---|
| Property, plant and equipment, at cost | $ | 152,040 | $ | 147,451 | ||||
| Less: Accumulated depreciation and amortization | (91,258 | ) | (87,060 | ) | ||||
| Property, plant and equipment, net | $ | 60,782 | $ | 60,391 | ||||
During the first quarter of fiscal 2004 we purchased $1.8 million of property, plant and equipment compared to $0.9 million in the first quarter of fiscal 2003.
5. LONG TERM DEBT
Effective March 30, 2002 we amended our revolving credit agreement with a bank to increase the maximum ratio of debt to EBITDA, as defined, from 2.5 to 2.9, and reduce the minimum interest coverage ratio, as defined, from 3.0 to 2.0. This amendment expired on March 29, 2003, when the maximum debt to EBITDA ratio reverted back to 2.5 and the minimum interest coverage ratio reverted back to 3.0. We are in compliance with all provisions of our funding arrangements. At December 27, 2003 we had unused revolving credit agreements with a bank that provide for borrowings of up to $25.0 million at the bank’s prime or offered rate. This agreement expires on February 28, 2004. We are in the process of negotiating credit facilities for the time after the current agreement expires. At December 27, 2003 and September 27, 2003 we had no short-term borrowings.
Included in our financial statements is a 6.64% senior guaranteed note, which is held by a subsidiary and has a parental guarantee. In addition, there is a 6.81% senior guaranteed note held by the parent company, which is guaranteed by our U.S. subsidiaries.
6. EARNINGS PER SHARE
Basic earnings per share exclude dilution, and diluted earnings per share reflect the pote