<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, 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 January 31, 1997 after giving effect to the four for one stock split,
11,499,056 shares of common stock with a par value of 1.5625 cents per share
were outstanding.
<PAGE>
WOODWARD GOVERNOR COMPANY
FORM 10-Q
For the Quarter Ended December 31, 1996
INDEX
Description
Part I. Financial Information
Item 1. Financial Statements
Statements of Consolidated Earnings for the
three months ended December 31, 1996 and 1995
Consolidated Balance Sheets as of
December 31, 1996 and September 30, 1996
Statements of Consolidated Cash Flows for the three
months ended December 31, 1996 and 1995
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, 1996 and 1995
(in thousands except per share amounts)
(Unaudited)
<CAPTION>
1996 1995
<S> <C> <C> <C> <C>
Net billings for products and services $99,029 $88,142
Costs and expenses:
Cost of goods sold 71,257 64,757
Sales, service and administrative
expenses 16,643 15,025
Interest expense $569 $929
Interest (income) (96) (135)
Miscellaneous expense, net 1,160 1,633 607 1,401
Total costs and expenses 89,533 81,183
Earnings before income taxes and equity in
loss of unconsolidated affiliate 9,496 6,959
Income taxes 3,703 2,784
Earnings before equity in loss of
unconsolidated affiliate 5,793 4,175
Equity in loss of unconsolidated affiliate,
net of income taxes (655) -
Net earnings $5,138 $4,175
Net earnings per share $0.44 $0.36
Average shares outstanding 11,548 11,612
Cash dividends per share $0.2325 $0.2325
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
WOODWARD GOVERNOR COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands of dollars)
<CAPTION>
DECEMBER SEPTEMBER
31, 1996 30, 1996
(Unaudited)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $9,110 $13,070
Accounts receivable, less allowance
for losses of $3,116 for December
and $2,755 for September 71,345 80,902
Inventories 96,491 92,135
Deferred income taxes 19,991 19,991
Total current assets 196,937 206,098
Property, plant and equipment, at cost:
Land 6,094 6,218
Buildings and improvements 120,319 120,283
Machinery and equipment 186,959 182,680
Construction in progress 7,000 6,971
320,372 316,152
Less allowance for depreciation 207,090 201,939
Property, plant and equipment - net 113,282 114,213
Intangibles and other assets 12,246 9,919
Deferred income taxes 18,556 18,568
Total assets $341,021 $348,798
Liabilities and Shareholders' Equity
Current liabilities:
Short-term borrowings $14,118 $15,310
Current portion of long-term debt 4,862 4,862
Accounts payable and accrued expenses 49,777 61,597
Taxes on income 5,345 3,226
Total current liabilities 74,102 84,995
Long-term debt, less current portion 22,678 22,696
Other liabilities 33,112 33,112
Commitments and contingencies - -
Shareholders' equity represented by:
Preferred stock - -
Common stock 190 190
Additional paid-in capital 13,173 13,165
Unearned stock plan compensation (14,656) (14,665)
Currency translation adjustment 14,466 13,620
Retained earnings 209,776 207,392
222,949 219,702
Less treasury stock, at cost 11,820 11,707
211,129 207,995
Total liabilities and shareholders' equity $341,021 $348,798
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
WOODWARD GOVERNOR COMPANY AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
for the three months ended December 31, 1996 and 1995
(in thousands of dollars)
(Unaudited)
<CAPTION>
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Net earnings $5,138 $4,175
Adjustments to reconcile net earnings to
net cash provided (used) by operating activities:
Depreciation and amortization 6,033 5,729
Deferred income taxes 12 8
Stock plan compensation expense 9 42
Changes in assets and liabilities:
Accounts receivable 9,949 13,352
Inventories (4,155) (2,785)
Current liabilities, other than short-term
borrowings and current portion of
long-term debt (8,745) (10,289)
Equity in loss of unconsolidated affiliate 1,074 -
Other, net (1,214) (845)
Total adjustments 2,963 5,212
Net cash provided by operating activities 8,101 9,387
Cash flows from investing activities:
Payments for purchase of property, plant
and equipment (4,890) (3,706)
Other (137) 290
Investment in unconsolidated affiliate (2,500) -
Net cash (used) in investing activities (7,527) (3,416)
Cash flows from financing activities:
Cash dividends paid (2,685) (2,673)
Proceeds from sale of treasury stock - 435
Purchase of treasury stock (136) -
Payments of long-term debt (18) (69)
Short-term borrowings (payments) (1,204) (1,258)
Tax benefit applicable to ESOP dividend 91 92
Net cash (used) in financing activities (3,952) (3,473)
Effect of exchange rate changes on cash (582) (2,803)
Net change in cash and cash equivalents (3,960) (305)
Cash and cash equivalents, beginning of year 13,070 12,451
Cash and cash equivalents, end of quarter $9,110 $12,146
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid $ 388 $ 602
Income taxes paid $ 834 $ 5,183
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, 1996, and the statements
of consolidated earnings and cash flows for the three month period ended
December 31, 1996 and 1995, have been prepared by the Company, without
audit. The September 30, 1996 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, 1996, and the results of its operations for the
three months ended December 31, 1996 and 1995, 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 1996 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, 1996 is not necessarily indicative of the
results to be expected for other interim periods or for the full year.
Stock Split
Net earnings per share, average shares outstanding and cash dividends per
share have been restated to reflect the four for one stock split effective
January 23, 1997.
<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 ended December 31, 1996 increased over 12% from last year to total
$99,029,000 compared to $88,142,000 in the prior year. During the same
time period, costs and expenses increased less than shipments from
$81,183,000 last year to $89,533,000 in fiscal 1997. The equity in loss of
unconsolidated affiliate represents the company's interest in the loss of
the GENXON Power Systems joint venture. As a result, net earnings
increased over 23% from $4,175,000 in fiscal 1996 to $5,138,000 this year.
Earnings per share were $.44 for the first quarter this year compared to
$.36 last year.
Operational Results
Industrial Controls' shipments were up over 15% from the first quarter of
last year and totaled $58,776,000 this year compared to $50,865,000 in
fiscal 1996. The first quarter last year was prior to the Deltec
acquisition, but even without the effect of this addition, shipments were
up over 13%. This year the domestic locations had a strong first quarter
and the international business units continue to see their shipment volume
increase from the prior year.
Aircraft Controls' shipments were up almost 8% from the prior year and
totaled $40,253,000, compared to $37,277,000 last year. If first quarter
1996 shipments by Bauer Aerospace, which was divested in July 1996, were
excluded, shipments of aircraft controls were up over 14% from last year.
The increase in costs and expenses is due principally to the increase in
shipment volume. The number of worker members has increased from 3,118
last year to 3,246 this year, or over 4%. The efforts to control costs and
leverage current resources continue and were reflected in the positive
first quarter results.
Balance Sheet
Cash and cash equivalents decreased to $9,110,000 at December 31, 1996 from
$13,070,000 at September 30, 1996. Accounts receivable decreased from
$80,902,000 at September 30, 1996 to $71,345,000 at December 31, 1996, due
to the high shipment level in the last two months of the fiscal year.
Inventories increased from $92,135,000 at September 30, 1996 to $96,491,000
at December 31, 1996. Property, plant and equipment-net has decreased due
to depreciation being greater than capital expenditures. Intangibles and
other assets increased from $9,919,000 at September 30, 1996 to $12,246,000
due to the investment in the GENXON Power Systems joint venture recorded
during the first quarter of fiscal 1997. Short-term borrowings have been
reduced from $15,310,000 at September 30, 1996 to $14,118,000 at December
31, 1996.
Accounts payable and accrued expenses decreased from $61,597,000 at
September 30, 1996 to $49,777,000 due in part to reductions in accounts
payable and member benefit accounts. Currency translation adjustment
increased from September 30, 1996 as a result of fluctuations in exchange
rates.
<PAGE>
The Company's effective tax rate for the three months ended December 31,
1996 and 1995 was 39.0% and 40.0% respectively. The effective tax rate for
the fiscal year ended September 30, 1996 was 37.0%.
This quarterly report may contain forward looking statements reflecting
Woodward's current expectations. These statements involve risk and
uncertainty. Actual future results may differ materially from expectations.
<PAGE>
PART II - OTHER INFORMATION
Item 4
At the January 8, 1997 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
J. Grant Beadle 2,652,231 38,807 None
Lawrence E. Gloyd 2,651,856 39,182 None
J. Peter Jeffrey 2,649,981 41,057 None
(2) Amendment to Certificate of Incorporation to increase the number of
authorized shares of Common Stock from 7,000,000 to 50,000,000, to increase
the number of authorized shares of Preferred Stock from 3,000,000 to
10,000,000 and to effect a four for one stock split of the Common Stock.
The results of the voting on this item were as follows:
For Against Abstain
2,316,903 87,556 26,652
In addition, broker non-votes totaled 263,987.
<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, Chairman and
Chief Executive Officer
/s/ Stephen P. Carter
Stephen P. Carter, Vice President,
Chief Financial Officer and
Treasurer
<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 7, 1997
John A. Halbrook, Chairman and
Chief Executive Officer
February 7, 1997
Stephen P. Carter, Vice President,
Chief Financial Officer and
Treasurer
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> DEC-31-1996
<CASH> 3795
<SECURITIES> 5315
<RECEIVABLES> 74461
<ALLOWANCES> 3116
<INVENTORY> 96491
<CURRENT-ASSETS> 196937
<PP&E> 320372
<DEPRECIATION> 207090
<TOTAL-ASSETS> 341021
<CURRENT-LIABILITIES> 74102
<BONDS> 22678
0
0
<COMMON> 190
<OTHER-SE> 222949
<TOTAL-LIABILITY-AND-EQUITY> 341021
<SALES> 99029
<TOTAL-REVENUES> 99029
<CGS> 71257
<TOTAL-COSTS> 89533
<OTHER-EXPENSES> 1064
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 569
<INCOME-PRETAX> 9496
<INCOME-TAX> 3703
<INCOME-CONTINUING> 5793
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5138
<EPS-PRIMARY> .44
<EPS-DILUTED> .44
</TABLE>
