<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
{ X } QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended March 31, 1994 Commission File #0-8408
OR
{ } TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
WOODWARD GOVERNOR COMPANY
(Exact name of registrant as specified in its charter)
Delaware 36-1984010
(State or other jurisdiction of I.R.S. Employer identification No.)
incorporation or organization)
5001 North Second Street, Rockford, Illinois 61125-7001
(Address of principal executive offices)
Registrant's telephone number - (815) 877-7441
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
As of April 30, 1994, 2,926,689 shares of common stock with a par value of
6.25 cents per share were outstanding.
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WOODWARD GOVERNOR COMPANY
FORM 10-Q
For the Quarter Ended March 31, 1994
INDEX
Description
Part I. Financial Information
Item 1. Financial Statements
Statements of Consolidated Earnings for the
Three Months Ended March 31, 1994 and 1993
Statements of Consolidated Earnings for the Six
Months Ended March 31, 1994 and 1993
Consolidated Balance Sheets as of
March 31, 1994 and September 30, 1993
Statements of Consolidated Cash Flows for the Six
Months Ended March 31, 1994 and 1993
Note to Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Part II. Other Information
Signatures
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<TABLE>
WOODWARD GOVERNOR COMPANY AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED EARNINGS
for the three months ended March 31, 1994 and 1993
(in thousands except per share amounts)
(Unaudited)
<CAPTION>
1994 1993
------- ----------
(restated)
<S> <C> <C> <C> <C>
Net billings for products and services $81,873 $82,634
------- ----------
Costs and expenses:
Cost of goods sold 60,691 60,621
Sales, service and administrative
expenses 13,433 12,865
Other (income) and expense, net:
Interest (income) ($130) ($187)
Interest expense 1,378 655
Miscellaneous expense, net 730 1,978 1,216 1,684
----- ------- ------ --------
Total costs and expenses 76,102 75,170
------- --------
Earnings before income taxes and cumulative
effect of accounting changes 5,771 7,464
Income taxes 2,481 2,957
------- --------
Earnings before cumulative effect
of accounting changes 3,290 4,507
Cumulative effect of accounting changes - -
------- --------
Net earnings $3,290 $4,507
------- --------
Net earnings per share:
Before cumulative effect of
accounting changes $1.12 $1.52
Cumulative effect of accounting changes - -
------- --------
Net earnings per share $1.12 $1.52
------- --------
Average shares outstanding 2,956 2,973
------- --------
Cash dividends per share $0.93 $0.93
------- --------
<FN>
See accompanying note to consolidated financial statements.
</TABLE>
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<TABLE>
WOODWARD GOVERNOR COMPANY AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED EARNINGS
for the six months ended March 31, 1994 and 1993
(in thousands except per share amounts)
(Unaudited)
<CAPTION>
1994 1993
---------- ----------
(restated)
<S> <C> <C> <C> <C>
Net billings for products and services $155,813 $160,483
-------- --------
Costs and expenses:
Cost of goods sold 115,227 119,040
Sales, service and administrative
expenses 26,190 25,867
Other (income) and expense, net:
Interest (income) ($312) ($383)
Interest expense 2,116 1,484
Miscellaneous expense, net 1,933 3,737 2,366 3,467
------- -------- -------- --------
Total costs and expenses 145,154 148,374
-------- --------
Earnings before income taxes and cumulative
effect of accounting changes 10,659 12,109
Income taxes 4,583 4,722
-------- --------
Earnings before cumulative effect
of accounting changes 6,076 7,387
Cumulative effect of accounting changes,
net of tax benefit of $11,360 - (17,417)
-------- --------
Net earnings (loss) $6,076 ($10,030)
-------- --------
Net earnings (loss) per share:
Before cumulative effect of
accounting changes $2.06 $2.49
Cumulative effect of accounting changes,
net of tax - (5.86)
-------- --------
Net earnings (loss) per share $2.06 ($3.37)
-------- --------
Average shares outstanding 2,956 2,973
-------- --------
Cash dividends per share $1.86 $1.86
-------- --------
<FN>
See accompanying note to consolidated financial statements.
</TABLE>
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<TABLE>
WOODWARD GOVERNOR COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands of dollars)
<CAPTION>
March September
31, 1994 30, 1993
----------- ------------
(Unaudited)
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents $9,230 $10,497
Accounts receivable, less allowance
for losses of $2,080 for March
and $1,989 for September 56,322 64,024
Inventories 84,495 83,128
Deferred income taxes 14,549 12,519
----------- ------------
Total current assets 164,596 170,168
----------- ------------
Property, plant and equipment, at cost:
Land 6,145 6,156
Buildings and improvements 141,021 140,780
Machinery and equipment 167,790 158,043
Construction in progress 2,180 3,792
----------- ------------
317,136 308,771
Less allowance for depreciation 177,743 164,755
----------- ------------
Property, plant and equipment - net 139,393 144,016
Intangibles and other assets 5,955 5,887
Deferred income taxes 12,395 12,390
----------- ------------
Total Assets $322,339 $332,461
----------- ------------
Liabilities and Shareholders' Equity
Current Liabilities:
Short-term borrowings $10,655 $18,123
Current portion of long-term debt 3,889 3,889
Accounts payable and accrued expenses 36,081 35,915
Taxes on income 4,608 4,432
----------- ------------
Total current liabilities 55,233 62,359
----------- ------------
Long-term debt, less current portion 36,152 36,246
Other liabilities 27,634 27,634
Commitments and contingencies - -
Shareholders' equity represented by:
Preferred stock - -
Common stock 190 190
Additional paid-in capital 13,887 13,884
Unearned stock plan compensation (22,052) (22,327)
Currency translation adjustment 12,135 12,786
Retained earnings 208,692 207,924
----------- ------------
212,852 212,457
Less treasury stock, at cost 9,532 6,235
----------- ------------
203,320 206,222
----------- ------------
Total liabilities and shareholders' equity $322,339 $332,461
----------- ------------
<FN>
See accompanying note to consolidated financial statements.
</TABLE>
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<TABLE>
WOODWARD GOVERNOR COMPANY AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOW
FOR THE SIX MONTHS ENDED MARCH 31, 1994 AND 1993
(in thousands of dollars)
(Unaudited)
<CAPTION>
1994 1993
----------- ---------
(restated)
<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss) $6,076 ($10,030)
----------- ---------
Adjustments to reconcile net earnings to
net cash provided (used) by operating activities:
Cumulative effect of accounting changes,
net of tax - 17,417
Depreciation 13,228 13,143
Deferred income taxes, noncurrent (5) 5
Stock plan compensation expense 275 400
Changes in assets and liabilities:
Accounts receivable 7,499 11,515
Inventories (1,602) (5,264)
Current liabilities, other than short-term
borrowings and current portion of
long-term debt (61) (11,916)
Other, net (2,073) 559
----------- ---------
Total adjustments 17,261 25,859
----------- ---------
Net cash provided by operating activities 23,337 15,829
----------- ---------
Cash flows from investing activities:
Payments for purchase of property, plant
and equipment (8,946) (11,176)
Other 124 (1)
----------- ---------
Net cash (used) in investing activities (8,822) (11,177)
----------- ---------
Cash flows from financing activities:
Cash dividends paid (5,517) (5,530)
Purchase of treasury stock (3,310) -
Payments of long-term debt (94) (74)
Short-term borrowings, by original maturity:
More than three months - proceeds - -
More than three months - payments - -
Three months or less, net (8,674) (1,532)
Tax benefit applicable to ESOP dividend 206 182
----------- ---------
Net cash (used) in financing activities (17,389) (6,954)
----------- ---------
Effect of exchange rate changes on cash 1,607 (81)
---------- ---------
Net change in cash and cash equivalents (1,267) (2,383)
Cash and cash equivalents, beginning of year 10,497 7,633
----------- ---------
Cash and cash equivalents, end of quarter $9,230 $5,250
----------- ---------
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid
(net of amount capitalized) $2,301 $1,797
Income taxes paid $5,959 $5,134
<FN>
See accompanying note to consolidated financial statements.
</TABLE>
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WOODWARD GOVERNOR COMPANY AND SUBSIDIARIES
NOTE TO CONSOLIDATED FINANCIAL STATEMENTS
The consolidated balance sheet as of March 31, 1994, and the statements of
consolidated earnings and cash flows for the three and six month periods
ended March 31, 1994 and 1993, have been prepared by the Company without
audit. The September 30, 1993 consolidated balance sheet was derived from
audited financial statements, but does not include all disclosures required
by generally accepted accounting principles. Information furnished in this
10-Q report is based in part on approximations and is subject to year-end
adjustment and audit. The figures do reflect all adjustments necessary, in
the opinion of management, to present fairly the Company's financial
position as of March 31, 1994, and the results of its operations for the
three and six month periods ended March 31, 1994 and 1993, and cash flows
for the six months then ended. All such adjustments are of a normal and
recurring nature. The statements have been prepared in accordance with
accounting policies set forth in the Company's 1993 annual report on Form
10-K and should be read in conjunction with the Notes to Consolidated
Financial Statements therein. The results for the last fiscal year have
been restated to reflect the adoption of Statements of Financial Accounting
Standards No. 106, "Employers' Accounting for Postretirement Benefits Other
Than Pensions", No. 109 "Accounting for Income Taxes", and No. 112
"Employers' Accounting for Post-employment Benefits", which the company
adopted in the fourth quarter of fiscal 1993. The statements of
consolidated earnings for the three and six month periods ended March 31,
1994 are not necessarily indicative of the results to be expected for other
interim periods or for the full year.
<PAGE>
PART I - ITEM 2
WOODWARD GOVERNOR COMPANY AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Net billings for products and services delivered to customers in the second
quarter of fiscal year 1994 were $81,873,000, down 1% from $82,634,000 in
1993. Costs and expenses during the same period increased from $75,170,000
in 1993 to $76,102,000 in 1994. As a result, earnings before income taxes
and cumulative effect of accounting changes decreased from $7,464,000 to
$5,771,000. Net earnings for the three months were $3,290,000 compared to
$4,507,000 in 1993.
For the first six months of the fiscal year, net billings were
$155,813,000, 3% less than 1993's $160,483,000. Total costs and expenses
for the six month period were $145,154,000, compared to $148,374,000 last
year. Earnings before income taxes and cumulative effect of accounting
changes decreased 12% to $10,659,000 in 1994 from $12,109,000 last year.
Due to these reduced earnings and the increase in effective tax rate from
39% to 43%, earnings before the cumulative effect of accounting changes
decreased from $7,387,000 to $6,076,000. Earnings per share before
cumulative effect of accounting changes decreased from $2.49 per share
through the second quarter last year to $2.06 per share this year.
The depressed state of the commercial aircraft industry continues to impact
shipment levels. Second quarter shipments of the Aircraft Controls group
were $35,898,000, 13% less than the $41,374,000 shipped in the same period
last year. Year-to-date shipments of aircraft products total $67,822,000 or
17% less than last year's total of $81,856,000. The strong trend of the
first quarter for Industrial Controls shipments continued into the second
quarter. Industrial Controls shipments in the second quarter totaled
$45,975,000, 11% greater than the $41,260,000 reported in the second
quarter last year. For the six months ended March 31, Industrial Controls
shipments were $87,991,000, compared to $78,625,000 for the same period
last year. Shipments from the overseas business units of industrial
control products totaled $37,920,000, up $4,739,000 or 14% from last year's
total of $33,181,000 for the same period. Domestic shipments of industrial
control products were also strong for the six months at $50,071,000, up 10%
from last year's $45,443,000.
Although costs and expenses have decreased 2% for the six month period from
$148,374,000 to $145,154,000, costs and expenses for the three month period
ended March 31 increased from $75,170,000 to $76,102,000. While the
increase for the three months is disappointing, there are some specific
reasons for it. We have reported for many years about the management
information system migration project that we undertook. We are very close
to the initial implementation stage of this project and, as a result, we
have been performing additional scrutiny and review of our system records
so as to migrate only accurate, current information.
As a result of this review, in the second quarter, we recorded over
$1,000,000 of obsolete inventory write-offs compared to none through the
second quarter last year and approximately $450,000 in total for all of
last year. In addition, we closed old tool and production orders which
added over $600,000 of additional expense. Research and development costs
also remain high as we continue to devote resources to fund projects to
ensure future growth. As a result of completing the settlement of an
income tax review, we recorded $665,000 of interest expense in the second
quarter. This does not minimize our disappointment over the increase in costs
and expenses, nor does it reduce our commitment to contain our cost base, but
it does help explain some of the reasons for the increase in the second
quarter. For the six month period, it is also important to recognize there
were six months of occupancy costs for the Loveland facility this year
compared to three months last year. Worker membership, including 100 members
at the recently acquired company in Germany, totaled 3,305 at March 31, 1994,
compared to 3,563 at March 31, 1993.
Cash and cash equivalents have decreased and totaled $9,230,000 at March
31, 1994 compared to $10,497,000 at September 30, 1993. Accounts
receivable have decreased from $64,024,000 at September 30, 1993 to
$56,322,000 at March 31, 1994 due to the higher level of shipments in the
last two months of last fiscal year. As a reflection of economic
conditions, customers have taken longer over the last year to pay accounts
and it requires more effort to collect receivables. Inventories have
increased slightly to $84,495,000 at March 31, 1994 from $83,128,000 at
September 30, 1993. Property, plant and equipment-net has decreased from
September 30, 1993 due to capital expenditures being less than
depreciation. Short-term borrowings and long-term debt was $50,696,000 at
March 31, 1994, down from $58,258,000 at September 30, 1993.
The company's effective tax rate for the six months ended March 31, 1994
and 1993 was 43.0% and 39.0%, respectively. The effective tax rate for the
fiscal year ended September 30, 1993 was 42.0%.
<PAGE>
PART II - OTHER INFORMATION
Item 6(b)
No Form 8-K was filed for the quarter ended March 31, 1994.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WOODWARD GOVERNOR COMPANY
May 11, 1994 /s/ John A. Halbrook
John A. Halbrook, President
and Chief Executive Officer
May 11, 1994 /s/ Vern H. Cassens
Vern H. Cassens, Senior Vice
President, Treasurer, and Chief
Financial Officer
