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, 1996 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, 1996, 2,889,482 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 March 31, 1996
INDEX
Description
Part I. Financial Information
Item 1. Financial Statements
Statements of Consolidated Earnings for the
Three Months Ended March 31, 1996 and 1995
Statements of Consolidated Earnings for the Six
Months Ended March 31, 1996 and 1995
Consolidated Balance Sheets as of
March 31, 1996 and September 30, 1995
Statements of Consolidated Cash Flows for the Six
Months Ended March 31, 1996 and 1995
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 31,1996 and 1995
(in thousands except per share amounts)
(Unaudited)
<CAPTION>
1996 1995
<S> <C> <C> <C> <C>
Net billings for products and services $106,785 $89,798
Costs and expenses:
Cost of goods sold 80,343 67,201
Sales, service and administrative expenses 16,419 15,573
Restructuring expense - $1,201
Interest expense $879 968
Interest (income) (206) (84)
Miscellaneous expense, net 1,767 2,440 829 2,914
Total costs and expenses 99,202 85,688
Earnings before income taxes 7,583 4,110
Income taxes 3,033 1,685
Net earnings $4,550 $2,425
Net earnings per share $1.57 $0.84
Average shares outstanding 2,889 2,918
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, 1996 and 1995
(in thousands except per share amounts)
(Unaudited)
<CAPTION>
1996 1995
<S> <C> <C> <C> <C>
Net billings for products and services $194,927 $180,228
Costs and expenses:
Cost of goods sold 145,100 131,725
Sales, service and administrative expenses 31,444 30,975
Restructuring expense - $4,737
Interest expense $1,808 1,826
Interest (income) (341) (206)
Miscellaneous expense, net 2,374 3,841 1,599 7,956
Total costs and expenses 180,385 170,656
Earnings before income taxes 14,542 9,572
Income taxes 5,817 3,924
Net earnings $8,725 $5,648
Net earnings per share $3.01 $1.94
Average shares outstanding 2,889 2,918
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, 1996 30, 1995
(Unaudited)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $13,754 $12,451
Accounts receivable, less allowance
for losses of $4,762 for March
and $4,605 for September 72,042 81,880
Inventories 95,168 92,831
Deferred income taxes 21,853 21,853
Total current assets 202,817 209,015
Property, plant and equipment, at cost:
Land 6,436 6,674
Buildings and improvements 120,999 121,870
Machinery and equipment 180,206 175,455
Construction in progress 1,590 985
309,231 304,984
Less allowance for depreciation 194,267 186,918
Property, plant and equipment - net 114,964 118,066
Intangibles and other assets 5,379 4,741
Deferred income taxes 17,734 17,777
Total assets $340,894 $349,599
Liabilities and Shareholders' Equity
Current liabilities:
Short-term borrowings $25,722 $30,297
Current portion of long-term debt 4,867 4,867
Accounts payable and accrued expenses 46,953 50,765
Taxes on income 5,701 6,722
Total current liabilities 83,243 92,651
Long-term debt, less current portion 27,658 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 13,178 13,560
Unearned stock plan compensation (17,249) (17,333)
Currency translation adjustment 15,035 16,802
Retained earnings 199,106 195,598
210,260 208,817
Less treasury stock, at cost 11,516 10,914
198,744 197,903
Total liabilities and shareholders' equity $340,894 $349,599
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, 1996 AND 1995
(in thousands of dollars)
(Unaudited)
<CAPTION>
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Net earnings $8,725 $5,648
Adjustments to reconcile net earnings to
net cash provided (used) by operating activities:
Depreciation and amortization 11,496 12,291
Deferred income taxes, noncurrent 42 13
Stock plan compensation expense 83 222
Changes in assets and liabilities:
Accounts receivable 9,321 4,722
Inventories (2,718) (10,506)
Current liabilities, other than short-term
borrowings and current portion of
long-term debt (3,854) 16,078
Other, net (601) 235
Total adjustments 13,769 23,055
Net cash provided by operating activities 22,494 28,703
Cash flows from investing activities:
Payments for purchase of property, plant
and equipment (9,614) (8,100)
Other 573 (340)
Net cash (used) in investing activities (9,041) (8,440)
Cash flows from financing activities:
Cash dividends paid (5,401) (5,434)
Proceeds from sale of treasury stock 436 -
Purchase of treasury stock (1,479) (1,872)
Payments of long-term debt (138) (132)
Short-term borrowings proceeds (payments) (4,568) (13,528)
Tax benefit applicable to ESOP dividend 184 196
Net cash (used) in financing activities (10,966) (20,770)
Effect of exchange rate changes on cash (1,184) (191)
Net change in cash and cash equivalents 1,303 (698)
Cash and cash equivalents, beginning of year 12,451 10,272
Cash and cash equivalents, end of quarter $13,754 $9,574
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid (net of amount capitalized) $1,833 $1,837
Income taxes paid $6,652 $3,168
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, 1996, and the statements of
consolidated earnings and cash flows for the three and six month periods ended
March 31, 1996 and 1995, 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 March 31, 1996, and the
results of its operations for the three and six month periods ended March 31,
1996 and 1995, 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 1995
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, 1996 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 during the second
quarter ended March 31, 1996, increased almost 19% to $106,785,000 from
$89,798,000 last year. Costs and expenses for the second quarter increased 16%
from $85,688,000 in fiscal year 1995 to $99,202,000 this year. Net earnings for
the quarter increased more than $2,100,000 or 88% from $2,425,000 last year to
$4,550,000 this year. Earnings per share are $1.57 for the second quarter this
year compared to $.84 last year.
Year-to-date shipments for fiscal 1996 of $194,927,000 were $14,699,000 or 8%
more than shipments for the same period of 1995. Total costs and expenses for
the six month period were $180,385,000, an increase of $9,729,000 or almost 6%
from last year's total of $170,656,000. Net earnings were up over 54% from last
year and total $8,725,000, compared to $5,648,000. Earnings per share increased
from $1.94 in 1995 to $3.01 in 1996.
Ongoing Operations
When comparing the six month ongoing operations (excluding Bauer Aerospace) for
both years, it is important to keep in mind certain unique items. Last year
included over $7,000,000 in net billings for reimbursement of nonrecurring
engineering charges that were incurred in previous years. Without this, last
year's shipments would have been $171,040,000, 12% less than this year's total
of $192,315,000. This increase is due principally to additional volume, as
price increases are difficult to achieve in these competitive markets.
Included in costs and expenses for the first six months of fiscal 1995 were
$9,100,000 for an early retirement program at domestic plants, costs related to
the move of the Hydraulic Turbine Controls business unit and the ongoing
restructuring and consolidation of the Aircraft Controls group. Without these
items, costs and expenses for the first six months of 1996 have increased more
than 11% to $177,305,000 from $159,500,000 in 1995. The increase in costs and
expenses is also mainly due to additional volume as was the increase in
shipments.
Shipments from the ongoing operations of the Aircraft Controls group have
increased 14% to $81,701,000 for the first six months of fiscal 1996 compared
to fiscal 1995 shipments of $71,804,000, excluding the nonrecurring engineering
charges. The increase in shipments reflects the stabilization and a slightly
higher level of demand in the commercial aircraft markets, particularly
aftermarket spares and overhauls.
Industrial Controls shipments were up more than 11% from last year, $110,614,000
this year compared to $99,196,000 last year. Domestic shipments have increased
slightly over last year while 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 additional volume.
<PAGE>
Bauer Aerospace Status
As noted in previous reports, attempts continue to divest ourselves of Bauer
Aerospace. Shipments for the first six months of fiscal 1996 were $2,612,000,
compared to $1,588,000 last year. Costs and expenses were $3,080,000 for this
year and $2,064,000 last year. There were 32 members at Bauer on March 31, 1996
compared to 45 on March 31, 1995.
Balance Sheet
Accounts receivable have decreased from $81,880,000 at September 30, 1995 to
$72,042,000 at March 31, 1996 due to the higher level of shipments in the last
two months of last fiscal year. Inventories have increased to $95,168,000 at
March 31, 1996 from $92,831,000 at September 30, 1995. Property, plant and
equipment-net has decreased from September 30, 1995 due to capital expenditures
being less than depreciation. Short term borrowings decreased from $30,297,000
at September 30, 1995 to $25,722,000 at March 31, 1996. Accounts payable and
accrued expenses have decreased to $46,953,000 at March 31, 1996 from
$50,765,000 at September 30, 1995 due in part to accounts payable and payments
for the accrued early retirement programs and member benefit accounts.
The company's effective tax rate for the six months ended March 31, 1996 and
1995 was 40.0% and 41.0%, respectively. The effective tax rate for the fiscal
year ended September 30, 1995 was 40.9%.
Other
On January 17, 1996, the Company adopted a shareholder rights plan and a
dividend distribution of one Preferred Share Right with respect to each
outstanding share of common stock was made to all common shareholders of record
on February 2, 1996. All shareholders received separate notice and information
regarding this action. This step was taken to safeguard the value of the
shareholder investment in the Company.
<PAGE>
PART II - OTHER INFORMATION
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
May 14, 1996 /s/ John A. Halbrook
John A. Halbrook, President
and Chief Executive Officer
May 14, 1996 /s/ Vern H. Cassens
Vern H. Cassens, Senior Vice President,
Treasurer, and Chief Financial Officer
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<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> SEP-30-1996 SEP-30-1996
<PERIOD-END> MAR-31-1996 MAR-31-1996
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<SECURITIES> 6843 6843
<RECEIVABLES> 76804 76804
<ALLOWANCES> 4762 4762
<INVENTORY> 95168 95168
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<CGS> 80343 145100
<TOTAL-COSTS> 99202 180385
<OTHER-EXPENSES> 17980 33477
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<INTEREST-EXPENSE> 879 1808
<INCOME-PRETAX> 7583 14542
<INCOME-TAX> 3033 5817
<INCOME-CONTINUING> 4550 8725
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<EPS-PRIMARY> 1.57 3.01
<EPS-DILUTED> 1.57 3.01
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