<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, 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 January 31, 1996, 2,893,180 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 December 31, 1995
INDEX
Description
Part I. Financial Information
Item 1. Financial Statements
Statements of Consolidated Earnings for the
Three Months Ended December 31, 1995 and 1994
Consolidated Balance Sheets as of
December 31, 1995 and September 30, 1995
Statements of Consolidated Cash Flows for the Three
Months Ended December 31, 1995 and 1994
Notes 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 DECEMBER 31,1995 AND 1994
(in thousands except per share amounts)
(Unaudited)
<CAPTION>
1995 1994
<S> <C> <C>
Net billings for products and services $88,142 $90,429
Costs and expenses:
Cost of goods sold 64,757 64,524
Sales, service and administrative
expenses 15,025 15,402
Restructuring expense $- $2,359
Interest expense 929 $858
Interest (income) (135) (122)
Miscellaneous expense, net 607 1,401 1,947 5,042
Total costs and expenses 81,183 84,968
Earnings before income taxes 6,959 5,461
Income taxes 2,784 2,239
Net earnings $4,175 $3,222
Net earnings per share $1.44 $1.10
Average shares outstanding 2,903 2,923
Cash dividends per share $0.93 $0.93
See accompanying notes to consolidated financial statements.
</TABLE>
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<TABLE>
WOODWARD GOVERNOR COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands of dollars)
<CAPTION>
DECEMBER SEPTEMBER
31,1995 30,1995
(Unaudited)
<CAPTION>
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $12,146 $12,451
Accounts receivable, less allowance
for losses of $4,615 for December
and $4,605 for September 69,497 81,880
Inventories 95,372 92,831
Deferred income taxes 21,853 21,853
Total current assets 198,868 209,015
Property, plant and equipment, at cost:
Land 6,638 6,674
Buildings and improvements 122,113 121,870
Machinery and equipment 177,836 175,455
Construction in progress 1,344 985
307,931 304,984
Less allowance for depreciation 192,291 186,918
Property, plant and equipment, net 115,640 118,066
Intangibles and other assets 4,297 4,741
Deferred income taxes 17,770 17,777
Total assets $336,575 $349,599
Liabilities and Shareholders' Equity
Current liabilities:
Short-term borrowings $29,031 $30,297
Current portion of long-term debt 4,867 4,867
Accounts payable and accrued expenses 39,622 50,765
Taxes on income 4,565 6,722
Total current liabilities 78,085 92,651
Long-term debt, less current portion 27,728 27,796
Other liabilities 31,249 31,249
Commitments and contingencies - -
Shareholders' equity represented by:
Preferred stock - -
Common stock 190 190
Additional paid-in capital 13,198 13,560
Unearned stock plan compensation (17,291) (17,333)
Currency translation adjustment 16,315 16,802
Retained earnings 197,193 195,598
209,605 208,817
Less treasury stock, at cost 10,092 10,914
199,513 197,903
Total liabilities and shareholder $336,575 $349,599
See accompanying notes to consolidated financial statements.
</TABLE>
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<TABLE>
WOODWARD GOVERNOR COMPANY AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
FOR THE THREE MONTHS ENDED DECEMBER 31, 1995 AND 1994
(in thousands of dollars)
(Unaudited)
<CAPTION>
1995 1994
<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss) $4,175 $3,222
Adjustments to reconcile net earnings to
net cash provided (used) by operating activities:
Depreciation 5,729 6,109
Deferred income taxes, noncurrent 8 5
Stock plan compensation expense 42 129
Changes in assets and liabilities:
Accounts receivable 13,352 (239)
Inventories (2,785) (4,712)
Current liabilities, other than short-term
borrowings and current portion of
long-term debt (10,289) 9,714
Other, net (845) 25
Total adjustments 5,212 11,031
Net cash provided by operating activities 9,387 14,253
Cash flows from investing activities:
Payments for purchase of property, plant
and equipment (3,706) (3,717)
Other 290 (29)
Net cash (used) in investing activities (3,416) (3,746)
Cash flows from financing activities:
Cash dividends paid (2,673) (2,720)
Proceeds from sale of treasury stock 435 -
Purchase of treasury stock - (389)
Payments of long-term debt (69) (82)
Short-term borrowings proceeds (payments) (1,258) (9,046)
Tax benefit applicable to ESOP dividends 92 100
Net cash (used) in financing activities (3,473) (12,137)
Effect of exchange rate changes on cash (2,803) 67
Net change in cash and cash equivalents (305) (1,563)
Cash and cash equivalents, beginning of year 12,451 10,272
Cash and cash equivalents, end of quarter $12,146 $8,709
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid (net of amount capitalized) $602 $322
Income taxes paid $5,183 $1,876
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
WOODWARD GOVERNOR COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The consolidated balance sheet as of December 31, 1995, and the statements
of consolidated earnings and cash flows for the three month periods ended
December 31, 1995 and 1994, have been prepared by the Company, without
audit. The September 30, 1995 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, 1995, and the results of its operations for the
three months ended December 31, 1995 and 1994, 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 1995 annual report on Form 10-K and
should be read in conjunction with the Notes to Consolidated Financial
Statements therein. The statement of consolidated earnings for the three
month period ended December 31, 1995 is not necessarily indicative of the
results to be expected for other interim periods or for the full year.
Shareholder Rights Plan:
On January 17, 1996, the Company adopted a shareholder rights plan and has
made a dividend distribution of one Preferred Share Purchase Right with
respect to each outstanding share of common stock to all common shareholders
of record on February 2, 1996. Separate Rights Certificates will not be
distributed as the Rights will automatically trade with the common stock
currently outstanding. Each Right would entitle the holder to purchase one
one-hundredth of a share of a new series of preferred stock at an exercise
price of $300. The Rights are not currently exercisable but would become
exercisable if certain events occurred relating to a person or group
acquiring or attempting to acquire 15 percent or more of the outstanding
shares of common stock. The Rights expire on January 17, 2006.
Long-Term Incentive Compensation Plan:
At the annual meeting on January 10, 1996, a long-term compensation plan was
approved. The Company has not yet determined what method of accounting it
will adopt for the option plan.
<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 first
quarter ending December 31, 1995, decreased slightly to $88,142,000 from
$90,429,000 last year. Costs and expenses for the first quarter decreased
over 4% from $84,968,000 in fiscal year 1995 to $81,183,000 this year. Net
earnings increased almost $1,000,000 or 30% from $3,222,000 last year to
$4,175,000. Earnings per share are $1.44 for the first quarter this year
compared to $1.10 last year.
Ongoing Operations
When comparing ongoing operations (excluding Bauer Aerospace) for the two
years, it is important to keep in mind certain unique items. Last year
included over $7,000,000 in net billings for reimbursement of non-recurring
engineering charges that were incurred in previous years. Without this,
last year's shipments would have been over $81,000,000, 6% less than this
year's total of almost $86,000,000. Included in costs and expenses for the
first quarter last year were $2,800,000 for an early retirement program at
domestic plants and costs related to the move of the Hydraulic Turbine
Controls business unit. Without these items, costs and expenses last year
would have been almost $81,000,000, compared to this year's costs and
expenses from ongoing operations of almost $79,000,000. The effort to
control costs and improve profitability is continuous and results are being
reflected in the first quarter. Worker membership at December 31, 1995 for
ongoing operations was 3,073 compared to 3,278 at December 31, 1994.
Shipments from the ongoing operations of the Aircraft Controls group were
$35,096,000 for the first quarter of fiscal 1996. Last year's shipments
were also just over $35,000,000 after excluding the non-recurring
engineering charges. This reflects what we expected to see in the
aircraft market, a flat to slight growth scenario.
Industrial Controls' shipments were up almost 10% from last year,
$50,865,000 this year compared to $46,364,000 last year. The trend of last
year has continued into the first quarter of this year as shipments at the
domestic locations are down slightly and overseas shipments are up
substantially. While there is some positive impact on shipments due to
foreign currency exchange rate fluctuations, the bulk of the increase is
due to volume increases.
Balance Sheet
Cash and cash equivalents decreased to $12,146,000 at December 31, 1995 from
$12,451,000 at September 30, 1995. Accounts receivable decreased from
$81,880,000 at September 30, 1995 to $69,497,000 at December 31, 1995, due
to the high shipment level in the last two months of the fiscal year.
Inventories increased from $92,831,000 at September 30, 1995 to $95,372,000
at December 31, 1995. Property, plant and equipment-net has decreased due
to depreciation being greater than capital expenditures. Short-term
borrowings have been reduced from $30,297,000 at September 30, 1995 to
$29,031,000 at December 31, 1995.
<PAGE>
Accounts payable and accrued expenses decreased from $50,765,000 at
September 30, 1995 to $39,622,000 due in part to reductions in accounts
payable, payments for accrued early retirement programs and member benefit
accounts. Currency translation adjustment decreased from September 30, 1995
as a result of fluctuations in exchange rates.
The Company's effective tax rate for the three months ended December 31,
1995 and 1994 was 40.0% and 41.0% respectively. The effective tax rate for
the fiscal year ended September 30, 1995 was 40.9%.
On January 17, 1996 the Company adopted a shareholder rights plan. No
changes in shareholder equity have occurred.
At the annual meeting on January 10, 1996, a long-term incentive
compensation plan was approved for certain managers and officers. The
Company has not yet determined what method of accounting it will adopt for
the option plan.
<PAGE>
PART II - OTHER INFORMATION
Item 4
At the January 10, 1996 annual meeting of the shareholders, two items were
submitted to a vote. (1) was the re-election of three directors whose terms
expired this year. The results of the voting were as follows:
Number of Number of Shares Number of
Director Shares For Against/Withheld Abstentions
John A. Halbrook 2,615,973 45,038 None
Mark Leum 2,595,906 65,105 None
Michael T. Yonker 2,613,868 47,143 None
In addition, broker non-votes totaled 129,000.
(2) Long-Term Incentive Compensation Plan. The results of the voting on
this item were as follows:
For Against Abstain
1,875,053 160,589 358,277
Item 6(b)
Form 8-K was electronically filed on January 19, 1996, with respect to
Woodward Governor Company's press release dated January 17, 1996 announcing
adoption of a shareholder rights plan.
<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 14, 1995 /s/ John A. Halbrook
John A. Halbrook, Chairman,
Chief Executive Officer and
President
February 14, 1995 /s/ Vern H. Cassens
Vern H. Cassens, Senior Vice
President, Treasurer, and Chief
Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> DEC-31-1995
<CASH> 9046
<SECURITIES> 3100
<RECEIVABLES> 74112
<ALLOWANCES> 4615
<INVENTORY> 95372
<CURRENT-ASSETS> 198868
<PP&E> 307931
<DEPRECIATION> 192291
<TOTAL-ASSETS> 336575
<CURRENT-LIABILITIES> 78085
<BONDS> 0
0
0
<COMMON> 190
<OTHER-SE> 199323
<TOTAL-LIABILITY-AND-EQUITY> 336575
<SALES> 88142
<TOTAL-REVENUES> 88142
<CGS> 64757
<TOTAL-COSTS> 79782
<OTHER-EXPENSES> 472
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 929
<INCOME-PRETAX> 6959
<INCOME-TAX> 2784
<INCOME-CONTINUING> 4175
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4175
<EPS-PRIMARY> 1.44
<EPS-DILUTED> 1.44
</TABLE>
