<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, 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 April 30, 1995, 2,914,706 shares of common stock with a par
value of 6.25 cents per share were outstanding.
<PAGE>
<PAGE>
WOODWARD GOVERNOR COMPANY
FORM 10-Q
For the Quarter Ended March 31, 1995
INDEX
Description
Part I. Financial Information
Item 1. Financial Statements
Statements of Consolidated Earnings for the
Three Months Ended March 31, 1995 and 1994
Statements of Consolidated Earnings for the Six
Months Ended March 31, 1995 and 1994
Consolidated Balance Sheets as of
March 31, 1995 and September 30, 1994
Statements of Consolidated Cash Flows for the Six
Months Ended March 31, 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 March 31, 1995 and 1994
(in thousands except per share amounts)
(Unaudited)
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C> <C> <C>
Net billings for products and services $89,798 $81,873
---------- ----------
Costs and expenses:
Cost of goods sold 67,201 60,691
Sales, service and administrative
expenses 15,573 13,433
Restructuring expense $1,201 -
Interest expense 968 $1,378
Interest income (84) (130)
Miscellaneous expense, net 829 2,914 730 1,978
--------- ---------- -------- ------
Total costs and expenses 85,688 76,102
---------- -------
Earnings before income taxes 4,110 5,771
Income taxes 1,685 2,481
---------- -------
Net earnings $2,425 $3,290
---------- -------
Net earnings per share $ .84 $1.12
---------- -------
Average shares outstanding 2,918 2,956
---------- -------
Cash dividends per share $0.93 $0.93
---------- -------
See accompanying note to consolidated financial statements.
</TABLE>
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<TABLE>
WOODWARD GOVERNOR COMPANY AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED EARNINGS
for the six months ended March 31, 1995 and 1994
(in thousands except per share amounts)
(Unaudited)
<CAPTION>
1995 1994
---------- ---------
<S> <C> <C> <C> <C>
Net billings for products and services $180,228 $155,813
---------- ----------
Costs and expenses:
Cost of goods sold 131,725 115,227
Sales, service and administrative
expenses 30,975 26,190
Restructuring expense $4,737 -
Interest expense 1,826 $2,116
Interest (income) (206) (312)
Miscellaneous expense, net 1,599 7,956 1,933 3,737
--------- ---------- --------- -------
Total costs and expenses 170,656 145,154
---------- -------
Earnings before income taxes 9,572 10,659
Income taxes 3,924 4,583
---------- ---------
Net earnings $5,648 $6,076
---------- ---------
Net earnings per share $1.94 $2.06
---------- ---------
Average shares outstanding 2,918 2,956
---------- ---------
Cash dividends per share $1.86 $1.86
---------- ---------
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, 1995 30, 1994
----------- ---------
(Unaudited)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $9,574 $10,272
Accounts receivable, less allowance
for losses of $3,209 for March
and $3,021 for September 65,480 69,778
Inventories 91,211 80,272
Deferred income taxes 20,957 20,957
----------- ---------
Total current assets 187,222 181,279
----------- ---------
Property, plant and equipment, at cost:
Land 6,627 6,648
Buildings and improvements 121,039 120,503
Machinery and equipment 164,418 156,476
Construction in progress 1,758 2,475
----------- ---------
293,842 286,102
Less allowance for depreciation 174,502 163,191
----------- ---------
Property, plant and equipment - net 119,340 122,911
Intangibles and other assets 4,685 4,757
Deferred income taxes 14,358 14,371
----------- ---------
Total assets $325,605 $323,318
----------- ---------
Liabilities and Shareholders' Equity
Current liabilities:
Short-term borrowings $11,402 $24,674
Current portion of long-term debt 4,252 4,252
Accounts payable and accrued expenses 51,082 37,972
Taxes on income 3,531 630
----------- ---------
Total current liabilities 70,267 67,528
----------- ---------
Long-term debt, less current portion 32,533 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 (19,555) (19,777)
Currency translation adjustment 15,983 15,210
Retained earnings 194,644 194,088
----------- ---------
205,154 203,602
Less treasury stock, at cost 11,628 9,756
----------- ---------
193,526 193,846
----------- ---------
Total liabilities and shareholders' equity $325,605 $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 six months ended March 31, 1995 and 1994
(in thousands of dollars)
(Unaudited)
<CAPTION>
1995 1994
----------- ----------
(restated)
<S> <C> <C>
Cash flows from operating activities:
Net earnings $5,648 $6,076
----------- ----------
Adjustments to reconcile net earnings to
net cash provided (used) by operating activities:
Depreciation 12,291 13,228
Deferred income taxes, noncurrent 13 (5)
Stock plan compensation expense 222 275
Changes in assets and liabilities:
Accounts receivable 4,722 10,248
Inventories (10,506) 500
Current liabilities, other than short-term
borrowings and current portion of
long-term debt 16,078 (3,613)
Other, net 235 (2,065)
----------- -----------
Total adjustments 23,055 18,568
----------- -----------
Net cash provided by operating activities 28,703 24,644
----------- -----------
Cash flows from investing activities:
Payments for purchase of property, plant
and equipment (8,100) (8,946)
Other (340) 124
Acquisitions, net of cash - (1,094)
----------- -----------
Net cash (used) in investing activities (8,440) (9,916)
----------- -----------
Cash flows from financing activities:
Cash dividends paid (5,434) (5,517)
Purchase of treasury stock (1,872) (3,310)
Payments of long-term debt (132) (94)
Short-term borrowings, by original maturity:
More than three months - proceeds - -
More than three months - payments - -
Three months or less, net (13,528) (7,557)
Tax benefit applicable to ESOP dividend 196 206
----------- -----------
Net cash (used) in financing activities (20,770) (16,272)
----------- -----------
Effect of exchange rate changes on cash (191) 277
----------- -----------
Net change in cash and cash equivalents (698) (1,267)
Cash and cash equivalents, beginning of year 10,272 10,497
----------- -----------
Cash and cash equivalents, end of quarter $9,574 $9,230
----------- -----------
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid (net of amount capitalized) $1,837 $2,301
Income taxes paid $3,168 $5,959
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 March 31, 1995, and the
statements of consolidated earnings and cash flows for the three and
six month periods ended March 31, 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 March 31, 1995, and the results of its operations for
the three and six month periods ended March 31, 1995 and 1994, 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 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 six month periods ended March
31, 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 second quarter of fiscal year 1995 and
totaled $89,798,000 compared to $81,873,000 in 1994, a 10% increase.
Costs and expenses increased 13% from last year's second quarter and
total $85,688,000 compared to $76,102,000. Earnings before income
taxes for the three months decreased from $5,771,000 last year to
$4,110,000 this year. Second quarter net earnings were $2,425,000 for
1995 compared to $3,290,000 in 1994.
As a result of the 10% increase in second quarter shipments and the
22% increase in the first quarter, year-to-date shipments of
$180,228,000 were up $24,415,000 or 16% from last year. Total costs
and expenses for the six month period were $170,656,000, an increase
of $25,502,000 or almost 18% from last year. Net earnings are down 7%
from last year and total $5,648,000, compared to $6,076,000. Earnings
per share through the second quarter decreased from $2.06 last year to
$1.94 this year.
Ongoing Operations
Shipments from ongoing operations for the first six months of the
fiscal year increased 5% from $152,594,000 in 1994 to $160,426,000 in
1995. Ongoing operations are all operations except those included in
the Acquisitions and Divestiture and Unusual Items sections below.
Shipments from ongoing operations in the Aircraft Controls Group were
up over 1% from last year for the first six months, while Industrial
Control shipments were up 8%. During the same period, expenses for
ongoing operations increased from $139,640,000 to $147,771,000, a 6%
increase. The weakened U.S. dollar had an impact on both of these
areas as the overseas shipments and costs and expenses translated into
more U.S. dollars. The higher shipment level also resulted in
increased costs to produce our products. Worker membership at March
31, 1995 for ongoing operations totaled 3,036 compared to 3,240 at
March 31, 1994.
Acquisitions and Divestiture
During fiscal year 1994, the company acquired three companies.
Shipments from these companies were $5,766,000 in the second quarter
of 1995, compared to $989,000 in 1994. Year-to-date shipments were
$10,614,000 this year and $989,000 last year. Last year's
acquisitions also added $11,738,000 of costs and expenses for the
first six months of fiscal 1995 compared to $784,000 last year. As a
result of reorganization and additional development costs, the
acquisitions have not yet been profitable. Acquisitions also added
174 new members since last year.
<PAGE>
In the 1994 annual report, we discussed the intent to divest ourselves
of Bauer Aerospace. Shipments for Bauer were $1,588,000 in the first
six months of 1995, compared to $2,230,000 last year. Costs and
expenses were $2,064,000 for this year and $4,065,000 last year.
There were 45 members at Bauer on March 31, 1995 and 65 on March 31,
1994.
Unusual Items
Several items occurred during fiscal year 1995 which have greatly
impacted the operating results for the first six months. As mentioned
in the first quarter, over $7,000,000 of revenue was recognized for
reimbursement of non-recurring engineering charges. Additional
expenses were incurred relating to several items announced in the
first quarter report - severance and relocation costs related to our
decision to move the Hydro business unit to Colorado and integrate it
into our Turbomachinery Controls business, and an early retirement
program made available to domestic members. There were also costs
related to the ongoing restructuring and consolidation of the Aircraft
Controls Group. In total, these types of costs add up to almost
$9,100,000 in the first six months of fiscal year 1995. Last year
$665,000 was included in costs and expenses for the first six months
due to unusual items.
Balance Sheet
Accounts receivable have decreased from $69,778,000 at September 30,
1994 to $65,480,000 at March 31, 1995 due to the higher level of
shipments in the last two months of last fiscal year. Inventories have
increased to $91,211,000 at March 31, 1995 from $80,272,000 at
September 30, 1994. This is due to an increase in sales volume and a
higher level of past due shipments. Property, plant and equipment-net
has decreased from September 30, 1994 due to capital expenditures
being less than depreciation. Short term borrowings decreased from
$24,674,000 at September 30, 1994 to $11,402,000. Accounts payable
and accrued expenses have increased to $51,082,000 at March 31, 1995
from $37,972,000 at September 30, 1994 due in part to accruals for the
early retirement program and costs related to the Hydro relocation.
The company's effective tax rate for the six months ended March 31,
1995 and 1994 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 6(b)
No Form 8-K was filed for the quarter ended March 31, 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
/s/ John A. Halbrook
John A. Halbrook, President
and Chief Executive Officer
/s/ Vern H. Cassens
Vern H. Cassens, Senior Vice President,
Treasurer, and Chief Financial Officer
<TABLE> <S> <C>
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<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> SEP-30-1995 SEP-30-1995
<PERIOD-END> MAR-31-1995 MAR-31-1995
<CASH> 2568 2568
<SECURITIES> 7006 7006
<RECEIVABLES> 68689 68689
<ALLOWANCES> 3209 3209
<INVENTORY> 91211 91211
<CURRENT-ASSETS> 187222 187222
<PP&E> 293842 293842
<DEPRECIATION> 174502 174502
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0 0
0 0
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<SALES> 89798 180228
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<INTEREST-EXPENSE> 968 1826
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<EPS-PRIMARY> .84 1.94
<EPS-DILUTED> .84 1.94
</TABLE>
