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 June 30, 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 July 31, 1994, 2,926,239 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 June 30, 1994
INDEX
Description
Part I. Financial Information
Item 1. Financial Statements
Statements of Consolidated Earnings for the
Three Months Ended June 30, 1994 and 1993
Statements of Consolidated Earnings for the Nine
Months Ended June 30, 1994 and 1993
Consolidated Balance Sheets June 30, 1994
and September 30, 1993
Statements of Consolidated Cash Flows for the Nine
Months Ended June 30, 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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<CAPTION>
WOODWARD GOVERNOR COMPANY AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED EARNINGS
for the three months ended June 30, 1994 and 1993
(in thousands except per share amounts)
(Unaudited)
1994 1993
---------- ----------
(restated)
<S> <C> <C> <C> <C>
Net billings for products and services $83,771 $81,959
---------- ----------
Costs and expenses:
Cost of goods sold 62,292 59,603
Sales, service and administrative
expenses 13,843 13,644
Other (income) and expense, net:
Interest (income) ($283) ($195)
Interest expense 846 442
Restructuring expense 0 3,487
Miscellaneous expense, net 1,077 1,640 984 4,718
--------- ---------- -------- ----------
Total costs and expenses 77,775 77,965
---------- ----------
Earnings before income taxes and cumulative
effect of accounting changes 5,996 3,994
Income taxes 2,579 1,558
---------- ----------
Earnings before cumulative effect
of accounting changes 3,417 2,436
Cumulative effect of accounting changes - -
---------- ----------
Net earnings $3,417 $2,436
---------- ----------
Net earnings per share:
Before cumulative effect of
accounting changes $1.16 $0.81
Cumulative effect of accounting changes - -
---------- ----------
Net earnings per share $1.16 $0.81
---------- ----------
Average shares outstanding 2,946 2,973
---------- ----------
Cash dividends per share $0.93 $0.93
---------- ----------
See accompanying note to consolidated financial statements.
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<TABLE>
<CAPTION>
WOODWARD GOVERNOR COMPANY AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED EARNINGS
for the nine months ended June 30, 1994 and 1993
(in thousands except per share amounts)
(Unaudited)
1994 1993
---------- ----------
(restated)
<S> <C> <C> <C> <C>
Net billings for products and services $239,584 $242,441
---------- ----------
Costs and expenses:
Cost of goods sold 177,519 178,643
Sales, service and administrative
expenses 40,033 39,511
Other (income) and expense, net:
Interest (income) ($595) ($578)
Interest expense 2,962 1,926
Restructuring expense 0 3,487
Miscellaneous expense, net 3,010 5,377 3,350 8,185
--------- ---------- -------- ----------
Total costs and expenses 222,929 226,339
---------- ----------
Earnings before income taxes and cumulative
effect of accounting changes 16,655 16,102
Income taxes 7,162 6,280
---------- ----------
Earnings before cumulative effect
of accounting changes 9,493 9,822
Cumulative effect of accounting changes,
net of tax benefit of $11,360 - (17,417)
---------- ----------
Net earnings (loss) $9,493 ($7,595)
---------- ----------
Net earnings (loss) per share:
Before cumulative effect of
accounting changes $3.22 $3.30
Cumulative effect of accounting changes,
net of tax - (5.86)
---------- ----------
Net earnings (loss) per share $3.22 ($2.56)
---------- ----------
Average shares outstanding 2,946 2,973
---------- ----------
Cash dividends per share $2.79 $2.79
---------- ----------
See accompanying note to consolidated financial statements.
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<TABLE>
<CAPTION>
WOODWARD GOVERNOR COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(in thousands)
June September
30, 1994 30, 1993
----------- -------------
(Unaudited)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $11,451 $10,497
Accounts receivable, less allowance
for losses of $2,389 for June
and $1,989 for September 58,970 64,024
Inventories 84,687 83,128
Deferred income taxes 14,549 12,519
------------- -------------
Total current assets 169,657 170,168
------------- -------------
Property, plant and equipment, at cost:
Land 6,377 6,156
Buildings and improvements 142,328 140,780
Machinery and equipment 173,275 158,043
Construction in progress 2,834 3,792
------------- -------------
324,814 308,771
Less allowance for depreciation 185,383 164,755
------------- -------------
Property, plant and equipment - net 139,431 144,016
Intangibles and other assets 8,510 5,887
Deferred income taxes 12,391 12,390
------------- -------------
Total assets $329,989 $332,461
------------- -------------
Liabilities and Shareholders' Equity
Current liabilities:
Short-term borrowings $16,795 $18,123
Current portion of long-term debt 4,046 3,889
Accounts payable and accrued expenses 35,173 35,915
Taxes on income 5,009 4,432
------------- -------------
Total current liabilities 61,023 62,359
------------- -------------
Long-term debt, less current portion 36,711 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 (21,915) (22,327)
Currency translation adjustment 12,540 12,786
Retained earnings 209,490 207,924
------------- -------------
214,192 212,457
Less treasury stock, at cost 9,571 6,235
------------- -------------
204,621 206,222
------------- -------------
Total liabilities and shareholders' equity $329,989 $332,461
------------- -------------
See accompanying note to consolidated financial statements.
</TABLE>
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<CAPTION>
WOODWARD GOVERNOR COMPANY AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
FOR THE NINE MONTHS ENDED JUNE 30, 1994 AND 1993
(in thousands of dollars)
(Unaudited)
1994 1993
----------- -----------
(restated)
<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss) $9,493 ($7,595)
----------- -----------
Adjustments to reconcile net earnings to
net cash provided (used) by operating activities:
Cumulative effect of accounting changes,
net of tax - 17,417
Depreciation 20,602 19,756
Deferred income taxes, noncurrent 0 (42)
Stock plan compensation expense 412 605
Changes in assets and liabilities:
Accounts receivable 9,019 18,443
Inventories 2,899 (5,403)
Current liabilities, other than short-term
borrowings and current portion of
long-term debt (5,013) (9,563)
Other, net (1,770) 317
----------- -----------
Total adjustments 26,149 41,530
----------- -----------
Net cash provided by operating activities 35,642 33,935
----------- -----------
Cash flows from investing activities:
Payments for purchase of property, plant
and equipment (13,219) (14,806)
Other 209 0
Acquisitions, net of cash (8,014) 0
----------- -----------
Net cash (used) in investing activities (21,024) (14,806)
----------- -----------
Cash flows from financing activities:
Cash dividends paid (8,234) (8,294)
Purchase of treasury stock (3,349) (154)
Payments of long-term debt (172) (58)
Short-term borrowings, by original maturity:
More than three months - proceeds - -
More than three months - payments - -
Three months or less, net (1,374) (12,501)
Tax benefit applicable to ESOP dividend 309 272
----------- -----------
Net cash (used) in financing activities (12,820) (20,735)
----------- -----------
Effect of exchange rate changes on cash (844) (178)
----------- -----------
Net change in cash and cash equivalents 954 (1,784)
Cash and cash equivalents, beginning of year 10,497 7,633
----------- -----------
Cash and cash equivalents, end of quarter $11,451 $5,849
----------- -----------
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid (net of amount capitalized) $2,518 $1,754
Income taxes paid $8,897 $8,215
See accompanying note to consolidated financial statements.
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WOODWARD GOVERNOR COMPANY AND SUBSIDIARIES
NOTE TO CONSOLIDATED FINANCIAL STATEMENTS
The consolidated balance sheet as of June 30, 1994, and the statements of
consolidated earnings and cash flows for the three and nine month periods ended
June 30, 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 June 30, 1994, and the
results of its operations for the three and nine month periods ended June 30,
1994 and 1993, and cash flows for the nine 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 prior 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 nine month periods ended June 30, 1994 are not
necessarily indicative of the results to be expected for other interim periods
or for the full year.
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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 were $83,771,000 for the third quarter of
the fiscal year, up 2% from the $81,959,000 for the same period in 1993. Costs
and expenses in the third quarter were down slightly, and totaled $77,775,000 in
1994, compared to $77,965,000 in 1993. As a result, earnings before income
taxes and cumulative effect of accounting changes increased from $3,994,000 to
$5,996,000. Net earnings for the three months were $3,417,000 in 1994, and
$2,436,000 last year. Third quarter earnings per share were $1.16 in 1994,
compared to $.81 in 1993.
Net billings for the first nine months of the fiscal year were $239,584,000,
1% less than last year's $242,441,000. Total costs and expenses for the nine
months were $222,929,000, over 1% less than the $226,339,000 in 1993. Earnings
before income taxes and cumulative effect of accounting changes increased 3%
from $16,102,000 last year to $16,655,000 this year. Due to the increase in
the effective tax rate from 39% last year to 43% this year, earnings before
cumulative effect of accounting changes decreased from $9,822,000 to
$9,493,000. Earnings per share before cumulative effect of accounting changes
were $3.22 this year compared to $3.30 last year.
On May 16, 1994, the company acquired HSC Controls, Inc. of Buffalo, New York.
HSC designs and manufactures torque motors and servovalves primarily for
aerospace and industrial applications. Sales for 1993 were $9,000,000. This
acquisition supports and enhances our commitment to provide increased
electromechanical content and complete systems for controls and related
accessories. The effect on third quarter results was insignificant.
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." The
company adopted these accounting changes in the fourth quarter of fiscal 1993,
but for reporting purposes they must be presented as if adopted at the beginning
of the year. The cumulative effect of these changes in fiscal 1993 was a charge
of $17,417,000, net of the tax benefit of $11,360,000. The effect on earnings
through the third quarter last year before income taxes and cumulative effect of
accounting changes was a decrease of $906,000.
For the first time in a long time, the quarterly shipments of Aircraft Controls
were up from the same period last year. Third quarter shipments of the Aircraft
Controls group were $37,170,000, compared to $34,904,000 in 1993. This is a
result of an increase in repair and overhaul work at our Aircraft Product
Service Centers, as well as $1,112,000 in shipments by HSC. Year-to-date
shipments of aircraft products are $104,992,000, or 10% less than last year's
total of $116,761,000. The repair and overhaul business is up over 8% while
control sales are down over 18% from 1993.
Shipments of Industrial Controls dropped off slightly in the third quarter, from
$47,055,000 last year to $46,601,000 this year. In the third quarter, we
successfully implemented our new management information system in the Colorado
facilities of the Industrial Controls group. While the
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information system changeover was better than expected, disruptions did occur
which delayed some shipments from the third quarter to the fourth quarter. For
the nine months, worldwide Industrial Control shipments were up 7% to
$134,592,000 from $125,680,000 with shipments from the overseas business
units up 16% from $52,400,000 last year to $60,586,000 this year. Shipments
in 1994 included $4,828,000 of shipments from the German company acquired in
the current year.
Costs and expenses for the three and nine months have decreased from last year.
Third quarter expenses for this year include $4,070,000 of additional operating
costs for businesses acquired this year. Last year's third quarter results
included $3,487,000 of restructuring expenses. Taking these two items into
account would result in $73,705,000 of expenses this year compared to
$74,478,000 last year.
Costs and expenses for the nine months have decreased from $226,339,000 to
$222,929,000. As we noted in the second quarter report, there have been several
unusual expenditures which we do not anticipate will be repeated in the future.
In addition, almost $5,000,000 of additional expenses are included in 1994
due to current year acquisitions. We continue to work on cost containment
measures and improving profitability.
While the results of the third quarter are much improved from the same period of
the prior year, they may not be indicative of the remainder of the year. Last
year's fourth quarter was a very good one, and it will be a challenge to achieve
comparable results.
Cash and cash equivalents have increased to $11,451,000 at June 30, 1994 from
$10,497,000 at September 30, 1993. Accounts receivable have decreased from
$64,024,000 at September 30, 1993 to $58,970,000 at June 30, 1994 due to the
higher level of shipments in the last two months of last fiscal year.
Inventories have increased from $83,128,000 at September 30, 1993 to $84,687,000
at June 30, 1994. Property, plant and equipment - net has decreased to
$139,431,000 at June 30, 1994 from $144,016,000 at September 30, 1993, due to
holding capital expenditures to a reduced level. Short-term borrowings and
long-term debt totalled $57,522,000 at June 30, 1994, down from $58,258,000 at
September 30, 1993. Accounts payable and accrued expenses have decreased
slightly from $35,915,000 at September 30, 1993 to $35,173,000 at June 30,
1994. The June 30, 1994 balances reflect acquisitions made in the current
year. Cumulative currency translation adjustment has decreased from
September 30, 1993 as a result of fluctuations in exchange rates. Treasury
stock has increased from $6,235,000 at September 30, 1993 to $9,571,000 due to
the purchase of 44,830 shares.
The company's effective tax rate for the nine months ended June 30, 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%.
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PART II - OTHER INFORMATION
Item 6(b)
No Form 8-K was filed for the quarter ended June 30, 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
August 11, 1994 /s/ John A. Halbrook
John A. Halbrook, President
and Chief Executive Officer
August 11, 1994 /s/ Vern H. Cassens
Vern H. Cassens,Senior Vice President,
Treasurer, and Chief Financial Officer
