<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 December 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 January 31, 1995, 2,918,712 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 December 31, 1994
INDEX
Description Pages
Part I. Financial Information
Item 1. Financial Statements
Statements of Consolidated Earnings for the
Three Months Ended December 31, 1994 and 1993
Consolidated Balance Sheets as of
December 31, 1994 and September 30, 1994
Statements of Consolidated Cash Flows for the Three
Months Ended December 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
<PAGE>
<TABLE>
WOODWARD GOVERNOR COMPANY AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED EARNINGS
for the three months ended December 31, 1994 and 1993
(in thousands except per share)
(Unaudited)
<CAPTION>
1994 1993
---------- ----------
<S> <C> <C> <C> <C>
Net billings for products and services $90,429 $73,940
---------- ----------
Costs and expenses:
Cost of goods sold 64,524 54,536
Sales, service and administrative
expenses 15,402 12,757
Restructuring expense $2,359 $0
Interest expense 858 738
Interest income (122) (182)
Miscellaneous expense, net 1,947 5,042 1,203 1,759
--------- ---------- -------- ----------
Total costs and expenses 84,968 69,052
---------- ----------
Earnings before income taxes 5,461 4,888
Income taxes 2,239 2,102
---------- ----------
Net earnings $3,222 $2,786
---------- ----------
Net earnings per share $1.10 $0.94
---------- ----------
Average shares outstanding 2,923 2,970
---------- ----------
Cash dividends per share $0.93 $0.93
---------- ----------
See accompanying note to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
WOODWARD GOVERNOR COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
<CAPTION>
December September
31, 1994 30, 1994
------------- -------------
<S> <C> <C>
Assets (Unaudited)
Current assets:
Cash and cash equivalents $8,709 $10,272
Accounts receivable, less allowance
for losses of $3,110 for December
and $3,021 for September 69,848 69,778
Inventories 84,913 80,272
Deferred income taxes 20,957 20,957
------------- -------------
Total current assets 184,427 181,279
------------- -------------
Property, plant and equipment, at cost:
Land 6,608 6,648
Buildings and improvements 120,636 120,503
Machinery and equipment 160,206 156,476
Construction in progress 1,834 2,475
------------- -------------
289,284 286,102
Less allowance for depreciation 168,864 163,191
------------- -------------
Property, plant and equipment - net 120,420 122,911
Intangibles and other assets 4,722 4,757
Deferred income taxes 14,366 14,371
------------- -------------
Total assets $323,935 $323,318
------------- -------------
Liabilities and Shareholders' Equity
Current liabilities:
Short-term borrowings $15,732 $24,674
Current portion of long-term debt 4,252 4,252
Accounts payable and accrued expenses 47,513 37,972
Taxes on income 763 630
------------- -------------
Total current liabilities 68,260 67,528
------------- -------------
Long-term debt, less current portion 32,583 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 13,892 13,891
Unearned stock plan compensation (19,648) (19,777)
Currency translation adjustment 14,833 15,210
Retained earnings 194,691 194,088
------------- -------------
203,958 203,602
Less treasury stock, at cost 10,145 9,756
------------- -------------
193,813 193,846
------------- -------------
Total liabilities and shareholders' equity $323,935 $323,318
------------- -------------
See accompanying note to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
WOODWARD GOVERNOR COMPANY AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
For the three months ended December 31, 1994 and 1993
(in thousands of dollars)
(Unaudited)
<CAPTION>
1994 1993
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss) $3,222 $2,786
----------- -----------
Adjustments to reconcile net earnings to
net cash provided (used) by operating activities:
Depreciation 6,109 6,682
Deferred income taxes, noncurrent 5 24
Stock plan compensation expense 129 138
Changes in assets and liabilities:
Accounts receivable (239) 5,837
Inventories (4,712) 65
Current liabilities, other than short-term
borrowings and current portion of
long-term debt 9,714 (7,511)
Other, net 25 (701)
----------- -----------
Total adjustments 11,031 4,534
----------- -----------
Net cash provided by operating activities 14,253 7,320
----------- -----------
Cash flows from investing activities:
Payments for purchase of property, plant
and equipment (3,717) (4,935)
Other (29) 25
----------- -----------
Net cash (used) in investing activities (3,746) (4,910)
----------- -----------
Cash flows from financing activities:
Cash dividends paid (2,720) (2,760)
Purchase of treasury stock (389) (450)
Payments of long-term debt (82) (46)
Short-term borrowings, by original maturity:
More than three months - proceeds - -
More than three months - payments - -
Three months or less, net (9,046) (5,900)
Tax benefit applicable to ESOP dividend 100 103
----------- -----------
Net cash (used) in financing activities (12,137) (9,053)
----------- -----------
Effect of exchange rate changes on cash 67 26
----------- -----------
Net change in cash and cash equivalents (1,563) (6,617)
Cash and cash equivalents, beginning of year 10,272 10,497
----------- -----------
Cash and cash equivalents, end of quarter $8,709 $3,880
----------- -----------
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid (net of amount capitalized) $322 $435
Income taxes paid $1,876 $2,560
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 December 31, 1994, and the statements of
consolidated earnings and cash flows for the three month periods ended
December 31, 1994 and 1993, 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 December 31, 1994, and the results of its operations for the three
months ended December 31, 1994 and 1993, and cash flows for the three 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 month period ended
December 31, 1994 is 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
The first quarter of fiscal year 1995 has been a very active time for the
company. Net billings for products and services delivered to customers
increased $16,489,000 from $73,940,000 to $90,429,000, a 22% increase. Costs
and expenses increased $15,916,000, or 23% from $69,052,000 in 1994 to
$84,968,000 this year. Net earnings increased 16% from $2,786,000 in the
first quarter of last year to $3,222,000 this year. Earnings per share are
$1.10 for the first quarter this year compared to $0.94 last year.
First quarter results this year include almost $5,000,000 of additional sales
from companies acquired last year as well as the operating costs and expenses
of these companies. Over $7,000,000 of net billings were recognized in the
first quarter of this year for reimbursement of non-recurring engineering
charges. Costs and expenses include $2,800,000 for an early retirement
program offered at domestic plants and severance costs related to the
move of the Hydraulic Turbine Controls business unit.
As noted earlier, much has happened in the first quarter. The restructuring
discussed in the annual report is proceeding as planned. The acquisitions
from last year have been fully integrated within the company's operations.
On November 23, the company announced its intent to move the Hydraulic
Turbine Controls business unit from Stevens Point, Wisconsin, to the Colorado
plants. When we initially announced our decision to close the Stevens Point
plant, the Hydro operations were to remain in Stevens Point. After
additional analysis and comparison of operating costs, the decision was made to
relocate the business unit to utilize services and facilities already in
place in the Turbomachinery Controls business unit in Colorado. The company
anticipates it will incur costs of approximately $2,500,000 throughout this
year for the Hydro move. This expense includes relocating members and moving
equipment relating to the Hydro business to Colorado. In the annual report,
we mentioned a claim that had been initiated with a major customer. This
dispute was resolved in the first quarter.
Shipments of the Aircraft Controls group were $44,065,000 in the first quarter
of this year, compared to $31,924,000 last year. Shipments from the
newly-acquired HSC Controls Inc. and the non-recurring engineering charges
represented $10,000,000 of the increase. Without these items, aircraft
control shipments increased over 6% from last year. Industrial Controls
group shipments were up over 10% from last year, with total shipments of
$46,364,000 compared to $42,016,000 last year. Half of this increase is due
to the acquisitions in Germany. Domestic shipments of Industrial Controls are
up over 2% from last year. Shipments from the overseas business units, other
than the acquisitions, are up almost $1,500,000, or over 8% from last year.
Cash and cash equivalents decreased to $8,709,000 at December 31, 1994 from
$10,272,000 at September 30, 1994. Inventories increased from $80,272,000 at
September 30, 1994 to $84,913,000 at December 31, 1994. Property, plant and
equipment-net has decreased due to depreciation being greater than the
capital expenditures. Short-term borrowings have been reduced from
$24,674,000 at September 30, 1994 to $14,764,000 at December 31, 1994.
<PAGE>
Accounts payable and accrued expenses increased from $37,972,000 at September
30, 1994 to $47,513,000 due in part to accruals for the early retirement
program and severance costs for the Hydro relocation. Currency translation
adjustment decreased from September 30, 1994 as a result of fluctuations in
exchange rates.
On a sad note, Cal Covert, Chairman of the Board, passed away on December 1,
1994. Cal had been part of this company since 1942 and Chairman since 1976.
Under Cal's leadership, the company expanded both domestically and
internationally. Cal was active in local, state and national issues and was
the only Chairman that many members had known. At a special meeting
on January 10, 1995, the Board of Directors elected John Halbrook to the
position of Chairman of the Board.
The company's effective tax rate for the three months ended December 31, 1994
and 1993 was 41.0% and 43.0% respectively. The effective tax benefit for
the fiscal year ended September 30, 1994 was 37.0%.
<PAGE>
PART II - OTHER INFORMATION
Item 4(c)
At the January 11, 1995 annual meeting of the shareholders, the only item
submitted to a vote was the re-election of three directors whose terms
expired this year. The results of the voting were as follows:
<TABLE>
<CAPTION>
Number of Number of Shares Number of
Director Shares For Against/Withheld Abstentions
<S> <C> <C> <C>
Vern Cassens 2,648,220 77,586 None
Carl J. Dargene 2,651,576 74,230 None
Thomas W. Heenan 2,650,377 75,429 None
In addition, broker non-votes totalled 128,034.
</TABLE>
Item 6(b)
No Form 8-K was filed for the quarter ended December 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
February 13, 1995 /s/ John A. Halbrook
John A. Halbrook, Chairman,
Chief Executive Officer and President
February 13, 1995 /s/ Vern H. Cassens
Vern H. Cassens, Senior Vice President,
Treasurer, and Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> DEC-31-1994
<CASH> 4711
<SECURITIES> 3998
<RECEIVABLES> 72958
<ALLOWANCES> 3110
<INVENTORY> 84913
<CURRENT-ASSETS> 184427
<PP&E> 289284
<DEPRECIATION> 168864
<TOTAL-ASSETS> 323935
<CURRENT-LIABILITIES> 68260
<BONDS> 32583
<COMMON> 190
0
0
<OTHER-SE> 193623
<TOTAL-LIABILITY-AND-EQUITY> 323935
<SALES> 90429
<TOTAL-REVENUES> 90429
<CGS> 64524
<TOTAL-COSTS> 82285
<OTHER-EXPENSES> 1825
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 858
<INCOME-PRETAX> 5461
<INCOME-TAX> 2239
<INCOME-CONTINUING> 3222
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3222
<EPS-PRIMARY> 1.10
<EPS-DILUTED> 1.10
</TABLE>
