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, 1995 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, 1995, 2,890,886 shares of common stock with a
par value of 6.25 cents per share were outstanding.
<PAGE>
WOODWARD GOVERNOR COMPANY
FORM 10-Q
For the Quarter Ended June 30, 1995
INDEX
Description
Part I. Financial Information
Item 1. Financial Statements
Statements of Consolidated Earnings for the
Three Months Ended June 30, 1995 and 1994
Statements of Consolidated Earnings for the Nine
Months Ended June 30, 1995 and 1994
Consolidated Balance Sheets as of June 30, 1995
and September 30, 1994
Statements of Consolidated Cash Flows for the Nine
Months Ended June 30, 1995 and 1994
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 June 30, 1995 and 1994
(in thousands except per share amounts)
(Unaudited)
<CAPTION>
1995 1994
<S> <C> <C> <C> <C>
Net billings for products and services $90,808 $83,771
Costs and expenses:
Cost of goods sold 66,704 62,292
Sales, service and administrative
expenses 18,100 13,843
Restructuring expense $1,172 -
Interest expense 976 $846
Interest (income) (166) (283)
Miscellaneous expense, net 1,297 3,279 1,077 1,640
Total costs and expenses 88,083 77,775
Earnings before income taxes 2,725 5,996
Income taxes 1,117 2,579
Net earnings $1,608 $3,417
Net earnings per share $.55 $1.16
Average shares outstanding 2,910 2,946
Cash dividends per share $.93 $.93
See accompanying note to consolidated financial statements.
</TABLE>
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<TABLE>
WOODWARD GOVERNOR COMPANY AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED EARNINGS
for the nine months ended June 30, 1995 and 1994
(in thousands except per share amounts)
(Unaudited)
<CAPTION>
1995 1994
<S> <C> <C> <C> <C>
Net billings for products and services $271,036 $239,584
Costs and expenses:
Cost of goods sold 198,429 177,519
Sales, service and administrative
expenses 49,075 40,033
Restructuring expense $5,909 -
Interest expense 2,802 $2,962
Interest (income) (372) (595)
Miscellaneous expense, net 2,896 11,235 3,010 5,377
Total costs and expenses 258,739 222,929
Earnings before income taxes 12,297 16,655
Income taxes 5,041 7,162
Net earnings $7,256 $9,493
Net earnings per share $2.49 $3.22
Average shares outstanding 2,910 2,946
Cash dividends per share $2.79 $2.79
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>
JUNE SEPTEMBER
30, 1995 30, 1994
(Unaudited)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $7,583 $10,272
Accounts receivable, less allowance
for losses of $4,234 for June
and $3,021 for September 69,464 69,778
Inventories 98,117 80,272
Deferred income taxes 20,957 20,957
Total current assets 196,121 181,279
Property, plant and equipment, at cost:
Land 7,357 6,648
Buildings and improvements 123,331 120,503
Machinery and equipment 170,234 156,476
Construction in progress 2,007 2,475
302,929 286,102
Less allowance for depreciation 183,842 163,191
Property, plant and equipment - net 119,087 122,911
Intangibles and other assets 4,205 4,757
Deferred income taxes 14,425 14,371
Total assets $333,838 $323,318
Liabilities and Shareholders' Equity
Current liabilities:
Short-term borrowings $19,029 $24,674
Current portion of long-term debt 4,252 4,252
Accounts payable and accrued expenses 51,387 37,972
Taxes on income 1,069 630
Total current liabilities 75,737 67,528
Long-term debt, less current portion 32,431 32,665
Other liabilities 29,279 29,279
Commitments and contingencies - -
Shareholders' equity represented by:
Preferred stock - -
Common stock 190 190
Additional paid-in capital 13,974 13,891
Unearned stock plan compensation (19,444) (19,777)
Currency translation adjustment 20,113 15,210
Retained earnings 193,508 194,088
208,341 203,602
Less treasury stock, at cost 11,950 9,756
196,391 193,846
Total liabilities and shareholders' equity $333,838 $323,318
See accompanying note to consolidated financial statements.
</TABLE>
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<TABLE>
WOODWARD GOVERNOR COMPANY AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
for the nine months ended June 30, 1995 and 1994
(in thousands of dollars)
(Unaudited)
<CAPTION>
1995 1994
<S> <C> <C>
Cash flows from operating activities:
Net earnings $7,256 $9,493
Adjustments to reconcile net earnings to
net cash provided (used) by operating activities:
Depreciation 18,884 20,602
Deferred income taxes, noncurrent (54) -
Stock plan compensation expense 333 412
Changes in assets and liabilities:
Accounts receivable 2,384 9,019
Inventories (16,023) 2,899
Current liabilities, other than short-term
borrowings and current portion of
long-term debt 13,713 (5,013)
Other, net 691 (1,770)
Total adjustments 19,928 26,149
Net cash provided by operating activities 27,184 35,642
Cash flows from investing activities:
Payments for purchase of property, plant
and equipment (13,321) (13,219)
Other 217 209
Acquisitions, net of cash - (8,014)
Net cash (used) in investing activities (13,104) (21,024)
Cash flows from financing activities:
Cash dividends paid (8,128) (8,234)
Purchase of treasury stock (2,194) (3,349)
Payments of long-term debt (200) (172)
Short-term borrowings, by original maturity:
More than three months - proceeds - -
More than three months - payments - -
Three months or less, net (6,098) (1,374)
Tax benefit applicable to ESOP dividend 292 309
Net cash (used) in financing activities (16,328) (12,820)
Effect of exchange rate changes on cash (441) (844)
Net change in cash and cash equivalents (2,689) 954
Cash and cash equivalents, beginning of year 10,272 10,497
Cash and cash equivalents, end of quarter $7,583 $11,451
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid (net of amount capitalized) $2,235 $2,518
Income taxes paid $6,797 $8,897
See accompanying note to consolidated financial statements.
</TABLE>
<PAGE>
WOODWARD GOVERNOR COMPANY AND SUBSIDIARIES
NOTE TO CONSOLIDATED FINANCIAL STATEMENTS
The consolidated balance sheet as of June 30, 1995, and the
statements of consolidated earnings and cash flows for the
three and nine month periods ended June 30, 1995 and 1994,
have been prepared by the Company without audit. The
September 30, 1994 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, 1995, and
the results of its operations for the three and nine month
periods ended June 30, 1995 and 1994, 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 1994 annual report on Form 10-K and should be
read in conjunction with the Notes to Consolidated Financial
Statements therein. The statements of consolidated earnings
for the three and nine month periods ended June 30, 1995 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 continued to increase in the third quarter of
fiscal year 1995. These billings totaled $90,808,000
compared to $83,771,000 in 1994, an 8% increase. Costs and
expenses for the same period were $88,083,000 in 1995 and
$77,775,000 in 1994, a 13% increase. As a result, earnings
before income taxes decreased from $5,996,000 in 1994 to
$2,725,000 this year. Third quarter net earnings were
$1,608,000 for 1995 and $3,417,000 in 1994.
Year-to-date net billings of $271,036,000 were up
$31,452,000 or 13% from 1994. Nine month total costs and
expenses were $258,739,000, a 16% increase from last year's
total of $222,929,000. Net earnings totaled $7,256,000
compared to $9,493,000 for last year, down 24%. Earnings
per share decreased from $3.22 last year to $2.49 this year.
ONGOING OPERATIONS
Shipments from ongoing operations for the first nine months
of the fiscal year increased almost 6% from $230,784,000
last year to $243,408,000 this year. For the first nine
months, costs and expenses increased 6% from $211,363,000 to
$224,452,000. Ongoing operations are all operations except
those included in the Acquisitions and Divestiture and
Unusual Items sections below. Aircraft Controls shipments
from ongoing operations were down 3% from last year and
Industrial Controls shipments were up 12%. The weakened U.S.
dollar had an impact on both shipments and costs as the
overseas financial results translated into more U.S.
dollars. Ongoing price pressures, especially in the Aircraft Controls group,
have had an adverse effect on sales volume, and the benefits
from restructuring have not yet been reflected in costs and
expenses. Worker membership at June 30, 1995 for ongoing
operations was 2854 compared to 3142 at June 30, 1994.
ACQUISITIONS AND DIVESTITURE
The three companies acquired in 1994 had shipments in the
third quarter of $6,148,000 in 1995 compared to $4,951,000
in 1994. Year-to-date shipments were $16,762,000 this year
and $5,940,000 last year. The shipment results have been
good and we are encouraged by the future opportunities.
Costs and expenses have been higher than anticipated and
totaled $18,399,000 for the first nine months of fiscal year
1995, compared to $4,854,000 last year. The costs of some
necessary reorganization and increased staffing
requirements, as well as additional development costs, have
resulted in the acquisitions not yet attaining
profitability. We expect improvement in this situation.
Our attempt to divest ourselves of Bauer Aerospace
continues. Shipments at Bauer were $3,266,000 for the first
nine months of 1995 compared to $2,860,000 in 1994. Due to
restructuring charges taken last year as well as cost
savings measures, costs and expenses this year are
$4,227,000 compared to $6,047,000 last year. As of June 30,
1995 there were 43 members at Bauer; last year there were
62.
<PAGE>
UNUSUAL ITEMS
As was discussed in previous quarterly reports, several
unusual items have occurred in 1995 and have had an effect
on operating results. Over $7,000,000 of revenue was
recognized in the first quarter for reimbursement of non-
recurring engineering charges. Additional expenses were
incurred relating to several items announced in the first
quarter report: these included severance and relocation
costs related to our decision to move the Hydro business
unit to Colorado and integrate it into our Turbomachinery
Controls business, plus an early retirement program made
available to domestic members. There were also some
additional costs related to the ongoing restructuring and
consolidation of the Aircraft Controls group. In the third
quarter, an additional provision of $1,100,000 was made for
an accounts receivable write-off. This provision was
unusual in that it related to a customer we had dealt with
for 25 years. The total of all these unusual costs is over
$11,600,000 for the first nine months of fiscal 1995. Last
year $665,000 for unusual items was included in costs and
expenses through the nine months.
BALANCE SHEET
Cash and cash equivalents have decreased to $7,583,000 at
June 30, 1995 from $10,272,000 at September 30, 1994.
Accounts receivable have decreased from $69,778,000 at
September 30, 1994 to $69,464,000 at June 30, 1995.
Inventories have increased from $80,272,000 at September 30,
1994 to $98,117,000 at June 30, 1995. This is due to an
increase in sales volume and a higher level of past due
shipments. Property, plant and equipment net has decreased
to $119,087,000 at June 30, 1995 from $122,911,000 at
September 30, 1994, due to capital expenditures being less
than depreciation. Short-term borrowings and long-term debt
totalled $55,712,000 at June 30, 1995, down from $61,591,000
at September 30, 1994. Accounts payable and accrued expenses
have increased to $51,387,000 at June 30, 1995 from
$37,972,000 at September 30, 1994 due in part to accruals
for trade payables,early retirement program and costs
related to the Hydro relocation. Treasury stock has
increased from $9,756,000 at September 30, 1994 to
$11,950,000 due to the net purchase of 31,894 shares.
The company's effective tax rate for the nine months ended
June 30, 1995 and 1994 was 41.0% and 43.0%, respectively.
The effective tax rate for the fiscal year ended September 30, 1994 was 37.0%.
<PAGE>
PART II - OTHER INFORMATION
Item 6(b)
No Form 8-K was filed for the quarter ended June 30, 1995.
<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 14, 1995 /s/ John A. Halbrook
John A. Halbrook, President
and Chief Executive Officer
August 14, 1995 /s/ Vern H. Cassens
Vern H. Cassens,Senior Vice President,
Treasurer, and Chief Financial Officer
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