<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 June 30, 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 July 31, 1996, 2,886,854 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 June 30, 1996
INDEX
Description
Part I. Financial Information
Item 1. Financial Statements
Statements of Consolidated Earnings for the
Three Months Ended June 30, 1996 and 1995
Statements of Consolidated Earnings for the Nine
Months Ended June 30, 1996 and 1995
Consolidated Balance Sheets as of June 30, 1996
and September 30, 1995
Statements of Consolidated Cash Flows for the Nine
Months Ended June 30, 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 June 30, 1996 and 1995
(in thousands except per share amounts)
(Unaudited)
<CAPTION>
1996 1995
<S> <C> <C> <C> <C>
Net billings for products and services $106,034 $90,808
Costs and expenses:
Cost of goods sold 79,312 66,704
Sales, service and administrative
expenses 16,534 18,100
Restructuring expense - $1,172
Interest expense $760 976
Interest (income) (107) (166)
Miscellaneous expense, net 1,259 1,912 1,297 3,279
Total costs and expenses 97,758 88,083
Earnings before income taxes 8,276 2,725
Income taxes 3,311 1,117
Net earnings $4,965 $1,608
Net earnings per share $1.72 $0.55
Average shares outstanding 2,895 2,910
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 nine months ended June 30,1996 and 1995
(in thousands except per share amounts)
(Unaudited)
<CAPTION>
1996 1995
<S> <C> <C> <C> <C>
Net billings for products and services $300,961 $271,036
Costs and expenses:
Cost of goods sold 224,412 198,429
Sales, service and administrative
expenses 47,978 49,075
Restructuring expense - $5,909
Interest expense $2,568 2,802
Interest (income) (448) (372)
Miscellaneous expense, net 3,633 5,753 2,896 11,235
Total costs and expenses 278,143 258,739
Earnings before income taxes 22,818 12,297
Income taxes 9,128 5,041
Net earnings $13,690 $7,256
Net earnings per share $4.73 $2.49
Average shares outstanding 2,889 2,910
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
30,1996 30,1995
(Unaudited)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $5,955 $12,451
Accounts receivable, less allowance
for losses of $2,995 for June
and $4,605 for September 76,779 81,880
Inventories 96,169 92,831
Deferred income taxes 21,853 21,853
Total current assets 200,756 209,015
Property, plant and equipment, at cost:
Land 6,253 6,674
Buildings and improvements 122,140 121,870
Machinery and equipment 183,372 175,455
Construction in progress 613 985
312,378 304,984
Less allowance for depreciation 198,695 186,918
Property, plant and equipment - net 113,683 118,066
Intangibles and other assets 8,678 4,741
Deferred income taxes 17,702 17,777
Total assets $340,819 $349,599
Liabilities and Shareholders' Equity
Current liabilities:
Short-term borrowings $16,580 $30,297
Current portion of long-term debt 4,867 4,867
Accounts payable and accrued expenses 57,586 50,765
Taxes on income 3,309 6,722
Total current liabilities 82,342 92,651
Long-term debt, less current portion 27,588 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 13,168 13,560
Unearned stock plan compensation (17,207) (17,333)
Currency translation adjustment 13,729 16,802
Retained earnings 201,494 195,598
211,374 208,817
Less treasury stock, at cost 11,734 10,914
199,640 197,903
Total liabilities and shareholders' equity $340,819 $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 nine months ended June 30, 1996 and 1995
(in thousands of dollars)
(Unaudited)
<CAPTION>
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Net earnings $13,690 $7,256
Adjustments to reconcile net earnings to
net cash provided (used) by operating activities:
Depreciation and amortization 18,157 18,884
Deferred income taxes, noncurrent 76 (54)
Stock plan compensation expense 126 333
Changes in assets and liabilities:
Accounts receivable 3,746 2,384
Inventories (4,399) (16,023)
Current liabilities, other than short-term
borrowings and current portion of
long-term debt 5,056 13,713
Other, net (4,020) 691
Total adjustments 18,742 19,928
Net cash provided by operating activities 32,432 27,184
Cash flows from investing activities:
Payments for purchase of property, plant
and equipment (16,023) (13,321)
Other 1,007 217
Net cash (used) in investing activities (15,016) (13,104)
Cash flows from financing activities:
Cash dividends paid (8,073) (8,128)
Proceeds from sale of treasury stock 436 -
Purchase of treasury stock (1,731) (2,194)
Payments of long-term debt (209) (200)
Short-term borrowings proceeds (payments) (13,439) (6,098)
Tax benefit applicable to ESOP dividend 276 292
Net cash (used) in financing activities (22,740) (16,328)
Effect of exchange rate changes on cash (1,172) (441)
Net change in cash and cash equivalents (6,496) (2,689)
Cash and cash equivalents, beginning of year 12,451 10,272
Cash and cash equivalents, end of quarter $5,955 $7,583
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid $2,587 $2,235
Income taxes paid $11,562 $6,797
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, 1996, and the statements
of consolidated earnings and cash flows for the three and nine month
periods ended June 30, 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
June 30, 1996, and the results of its operations for the three and nine
month periods ended June 30, 1996 and 1995, 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 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 nine month periods ended June 30, 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
Results for the third quarter of fiscal year 1996 were good, and
continued the improvement trend we have seen throughout this year. Net
billings for products and services delivered to customers in the third
quarter ending June 30, 1996, increased almost 17% from the prior year
and totaled $106,034,000, compared to $90,808,000 last year. During that
same period, costs and expenses increased 11% from $88,083,000 last year
to $97,758,000 this year. Earnings before income taxes increased
substantially from $2,725,000 to $8,276,000. Net earnings were
$4,965,000 or $1.72 per share for the quarter, compared to $1,608,000 or
$.55 per share last year.
Year-to-date results are also encouraging. Net billings through the
third quarter were $300,961,000 or 11% ahead of last year's
$271,036,000. During the same time period, expenses were up less than 8%
from $258,739,000 last year to $278,143,000 this year. As a result,
earnings before income taxes were up over 85% and totaled $22,818,000
this year. Net earnings were $13,690,000 or $4.73 per share, compared to
$7,256,000 or $2.49 per share last year.
ONGOING OPERATIONS
Shipments from ongoing operations (excluding Bauer Aerospace) for the
nine month period ending June 30, increased 11% to $297,253,000 from
$267,770,000. As noted in prior reports to shareholders, last year
included over $7,000,000 in nonrecurring engineering charges incurred in
previous years. Taking this into account, shipments are up 14% from last
year.
In looking at the change in costs and expenses, it is also important to
remember that last year included over $11,600,000 for an early
retirement program at domestic plants, costs related to the move of the
Hydraulic Turbine Controls business unit, a large provision for an
accounts receivable write-off, and the ongoing restructuring and
consolidation of the Aircraft Controls group. Without these items, costs
and expenses have increased almost 13% from approximately $243,400,000
last year to $274,000,000 this year. The increase was due principally to
the additional shipment volume.
Shipments from on-going operations of the Aircraft Controls group have
increased 21% to $129,488,000 for the first nine months of fiscal 1996,
compared to $106,987,000 last year, excluding the nonrecurring
engineering charges. The increase reflects improved demand for our
products in the commercial aircraft markets, particularly in aftermarket
spares and overhauls.
Industrial Controls shipments were up over 9% from last year and totaled
$167,765,000, compared to $153,782,000. The trend of domestic shipments
being up slightly and overseas up substantially continued during the
third quarter.
ACQUISITION AND DIVESTITURE
In late June we completed the acquisition of Deltec Fuel Systems Holding
B.V., located in Rotterdam, The Netherlands. Deltec supplies fuel
systems and fuel system components for heavy-duty gas engines and has
acquired considerable know-how in gas flow and combustion,
<PAGE>
microelectronics, software, and precision mechanical technology. Deltec
will add 30 people and fits well into the Engine Controls organization.
Subsequent to the end of the third quarter, negotiations were completed
to sell Bauer Aerospace. Efforts to sell Bauer have been ongoing since
the intent to divest was announced in September 1994. The sale will not
have a significant effect on year end results and will allow us to focus
our resources on our core businesses.
BALANCE SHEET
Cash and cash equivalents decreased to $5,955,000 at June 30, 1996 from
$12,451,000 at September 30, 1995. Accounts receivable decreased from
$81,880,000 at September 30, 1995 to $76,779,000 at June 30, 1996.
Inventories increased from $92,831,000 at September 30, 1995 to
$96,169,000 at June 30, 1996 due to the increased sales volume and a
higher level of past due shipments. Property, plant and equipment - net
decreased to $113,683,000 at June 30, 1996 from $118,066,000 at
September 30, 1995, due to capital expenditures being less than
depreciation. Intangibles and other assets increased from $4,741,000 at
September 30, 1995 to $8,678,000 at June 30, 1996 due to the impact of
the Deltec acquisition. During this same period, short-term borrowings
were reduced from $30,297,000 at September 30, 1995 to $16,580,000 at
June 30, 1996, Accounts payable and accrued expenses increased to
$57,586,000 at June 30, 1996 from $50,765,000 at September 30, 1995 due
in part to accounts payable and accruals for early retirement programs
and member benefits.
The company's effective tax rate for the nine months ended June 30, 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%.
<PAGE>
PART II - OTHER INFORMATION
Item 6(b)
No Form 8-K was filed for the quarter ended June 30, 1996.
<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, 1996 /s/ John A. Halbrook
John A. Halbrook, President
and Chief Executive Officer
August 14, 1996 /s/ Vern H. Cassens
Vern H. Cassens, Senior Vice President,
Treasurer, and Chief Financial Officer
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<S> <C> <C>
<PERIOD-TYPE> 3-MOS 9-MOS
<FISCAL-YEAR-END> SEP-30-1996 SEP-30-1996
<PERIOD-END> JUN-30-1996 JUN-30-1996
<CASH> 3932 3932
<SECURITIES> 2023 2023
<RECEIVABLES> 79774 79774
<ALLOWANCES> 2995 2995
<INVENTORY> 96169 96169
<CURRENT-ASSETS> 200756 200756
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0 0
<COMMON> 190 190
<OTHER-SE> 199450 199450
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<SALES> 106034 300961
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<CGS> 79312 224412
<TOTAL-COSTS> 95846 272390
<OTHER-EXPENSES> 1152 3185
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<INTEREST-EXPENSE> 760 2568
<INCOME-PRETAX> 8276 22818
<INCOME-TAX> 3311 9128
<INCOME-CONTINUING> 4965 13690
<DISCONTINUED> 0 0
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<EPS-PRIMARY> 1.72 4.73
<EPS-DILUTED> 1.72 4.73
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