UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
{ X } QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
OR
{ } TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from.............to...............
Commission file number 0-8408
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)
(815) 877-7441
(Registrant's telephone number, including area code)
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...
APPLICABLE ONLY TO ISSUERS INVOLVED
IN BANKRUPTCY PROCEEDINGS DURING
THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all
documents and reports required to be filed by Sections 12, 13 or
15(d) of the Securities Exchange Act of 1934 subsequent to the
distribution of securities under a plan confirmed by a court.
Yes... No...
As of April 30, 1999, 11,259,941 shares of common stock with a
par value of $.00875 cents per share were outstanding.
<PAGE>
WOODWARD GOVERNOR COMPANY
FORM 10-Q
For the Quarter Ended March 31, 1999
INDEX
Description
Part I. Financial Information
Item 1. Financial Statements
Statements of Consolidated Earnings for the
Three Months Ended March 31, 1999 and 1998
Statements of Consolidated Earnings for the Six
Months Ended March 31, 1999 and 1998
Consolidated Balance Sheets as of
March 31, 1999 and September 30, 1998
Statements of Consolidated Cash Flows for the Six
Months Ended March 31, 1999 and 1998
Notes to Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K
Signatures
<PAGE>
<TABLE>
WOODWARD GOVERNOR COMPANY AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED EARNINGS
for the three months ended March 31, 1999 and 1998
(in thousands except per share amounts)
<CAPTION>
1999 1998
<S> <C> <C>
Net billings for products and services $144,408 $113,160
Costs and expenses:
Cost of goods sold 107,564 81,563
Sales, service, and administrative
expenses 19,847 19,412
Amortization of intangible assets 1,701 295
Restructuring expense 8,174 -
Interest expense 3,282 444
Interest income (307) (225)
Other expense--net 242 974
Total costs and expenses 140,503 102,463
Earnings before income taxes and
equity in loss of unconsolidated affiliate 3,905 10,697
Income taxes 1,562 4,314
Earnings before equity in loss of
unconsolidated affiliate 2,343 6,383
Equity in loss of unconsolidated affiliate,
net of tax 279 968
Net earnings $2,064 $5,415
Basic and diluted earnings per share $ 0.18 $ 0.48
Average number of basic shares outstanding 11,267 11,315
Average number of diluted shares outstanding 11,280 11,356
Cash dividends per share $0.2325 $0.2325
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
WOODWARD GOVERNOR COMPANY AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED EARNINGS
for the six months ended March 31, 1999 and 1998
(in thousands except per share amounts)
(Unaudited)
<CAPTION>
1999 1998
<S> <C> <C>
Net billings for products and services $289,316 $211,300
Costs and expenses:
Cost of goods sold 217,579 154,622
Sales, service, and administrative
expenses 39,697 38,131
Amortization of intangible assets 3,406 554
Restructuring expense 8,174 -
Interest expense 6,523 785
Interest income (475) (424)
Other expense, net 1,181 1,461
Total costs and expenses 276,085 195,129
Earnings before income taxes and
equity in loss of unconsolidated affiliate 13,231 16,171
Income taxes 5,292 6,449
Earnings before equity in loss of
unconsolidated affiliate 7,939 9,722
Equity in loss of unconsolidated affiliate,
net of tax 671 1,849
Net earnings $ 7,268 $ 7,873
Basic and diluted earnings per share $0.64 $0.69
Average number of basic shares outstanding 11,283 11,381
Average number of diluted shares outstanding 11,295 11,427
Cash dividends per share $0.4650 $0.4650
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
WOODWARD GOVERNOR COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands of dollars)
MARCH SEPTEMBER
31, 1999 30, 1998
(Unaudited)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $19,217 $12,426
Accounts receivable, less allowance
for losses of $3,912 for March
and $4,451 for September 98,594 108,212
Inventories 106,604 106,404
Deferred income taxes 19,996 20,001
Total current assets 244,411 247,043
Property, plant and equipment, at cost:
Land 6,002 6,127
Buildings and improvements 127,512 127,054
Machinery and equipment 220,748 215,358
Construction in progress 3,592 2,855
357,854 351,394
Less allowance for depreciation 231,325 221,342
Property, plant and equipment - net 126,529 130,052
Intangibles - net 158,615 162,229
Other assets 3,887 4,540
Deferred income taxes 19,672 19,571
Total assets $553,114 $563,435
Liabilities and shareholders' equity
Current liabilities:
Short-term borrowings $10,604 $12,927
Current portion of long-term debt 24,950 25,033
Accounts payable and accrued expenses 72,871 82,916
Taxes on income 6,057 6,661
Total current liabilities 114,482 127,537
Long-term debt, less current portion 177,650 175,685
Other liabilities 40,112 40,111
Commitments and contingencies - -
Shareholders' equity represented by:
Preferred stock - -
Common stock 106 106
Additional paid-in capital 13,302 13,304
Unearned ESOP compensation (9,837) (9,723)
Accumulated other comprehensive earnings9,476 9,849
Retained earnings 228,940 226,736
241,987 240,272
Less treasury stock, at cost 21,117 20,170
Total shareholders' equity 220,870 220,102
Total liabilities and shareholders' equity $553,114 $563,435
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
WOODWARD GOVERNOR COMPANY AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
for the six months ended March 31, 1999 and 1998
(in thousands of dollars)
(Unaudited)
<CAPTION>
1999 1998
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 7,268 $ 7,873
Adjustments to reconcile net earnings to
net cash provided (used) by operating activities:
Depreciation and amortization 16,997 12,643
Net gain on sale of property,
plant, and equipment (1,015) -
Deferred income taxes (97) -
Equity in loss of unconsolidated affiliate 1,100 3,082
Changes in assets and liabilities:
Accounts receivable 9,302 9,417
Inventories (236) (6,520)
Current liabilities, other than short-term
borrowings and current portion of long-term
debt (11,852) (12,760)
Other-net 334 (541)
Total adjustments 14,533 5,321
Net cash provided by operating activities 21,801 13,194
Cash flows from investing activities:
Payments for purchase of property, plant,
and equipment (12,832) (9,077)
Investment in unconsolidated affiliate (725) (2,975)
Business acquisitions, net of cash - -
Proceeds from sale of property, plant,
and equipment 4,119 -
Other - 269
Net cash used in investing activities (9,438) (11,783)
Cash flows from financing activities:
Cash dividends paid (5,254) (5,289)
Proceeds from sales of treasury stock - 39
Purchases of treasury stock (1,029) (4,866)
Net proceeds from borrowings under revolving
lines 2,000 -
Payments of long-term debt (118) (38)
Net proceeds from (payments on) short-term
borrowings (2,079) 2,643
Tax benefit applicable to ESOP dividend 190 186
Net cash used in financing activities (6,290) (7,325)
Effect of exchange rate changes on cash 718 (1,358)
Net change in cash and cash equivalents 6,791 (7,272)
Cash and cash equivalents, beginning of year 12,426 14,999
Cash and cash equivalents, end of period $19,217 $7,727
Supplemental cash flow information:
Interest expense paid $ 6,441 $ 889
Income taxes paid $ 8,460 $4,383
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
WOODWARD GOVERNOR COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) The consolidated balance sheet as of March 31, 1999, and the statements
of consolidated earnings and cash flows for the three and six month periods
ended March 31, 1999 and 1998, have been prepared by the company without
audit. The September 30, 1998 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, 1999, and the results of its operations for the
three and six month periods ended March 31, 1999 and 1998, 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 1998 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, 1999 are not necessarily
indicative of the results to be expected for other interim periods or for
the full year.
(2) Accounts payable and accrued expenses:
Included in accounts payable and accrued expenses are accrued salaries and
other member benefits which decreased from $24,656 at September 30, 1998 to
$15,371 at March 31, 1999 due to timing of payments.
(3) The following is a reconciliation of the numerators and denominators
for the computation of basic and diluted earnings per share:
<TABLE>
Three Six
months months
ended ended
March 31, March 31,
<CAPTION>
<S> <C> <C> <C> <C>
(in 000's except per share 1999 1998 1999 1998
amounts)
Basic Earnings
Net earnings $ 2,064 $ 5,415 $ 7,268 $ 7,873
Shares
Weighted average common shares 11,267 11,315 11,283 11,381
Basic Earnings per Share $ 0.18 $ 0.48 $ 0.64 $ 0.69
Diluted Earnings
Net earnings $ 2,064 $ 5,415 $ 7,268 $ 7,873
Shares
Weighted average shares from above11,267 11,315 11,283 11,381
Add: Additional dilutive
effect of outstanding
stock options 13 41 12 46
Weighted average shares, as
adjusted for dilution 11,280 11,356 11,295 11,427
Diluted Earnings per Share $ 0.18 $ 0.48 $ 0.64 $ 0.69
</TABLE>
<PAGE>
The following options to purchase common stock were outstanding during the
three months and six months ended March 31, 1999 and 1998 but were not
included in the computation of diluted earnings per share because the
options' exercise prices were greater than the average market price of the
common shares during the quarter.
<TABLE>
<CAPTION>
Three months ended March 31, Six months ended March 31,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Options 383,041 367,414 383,041 330,901
Weighted
average
exercise price $28.76 $29.99 $26.15 $25.76
</TABLE>
(4) Currency translation adjustments are included in other comprehensive
earnings. The company's total comprehensive earnings were as follows:
<TABLE>
<CAPTION>
Three months ended Six months ended
March 31, March 31,
(in thousands) 1999 1998 1999 1998
<S> <C> <C> <C> <C>
Net earnings $2,064 $5,415 $7,268 $7,873
Other comprehensive
earnings (loss) (1,373) (974) (373) (1,792)
Total comprehensive $691 $4,441 $6,895 $6,081
earnings
</TABLE>
5) The company incurred restructuring expense of $8,174,000 in the three
month period ended March 31, 1999, in connection with a reorganization to
separate the units serving industrial engine and turbine manufacturers from
those that serve the industrial retrofit market, and the consolidation of
two of its facilities. Restructuring expense consists of member
termination benefits of $7,533,000, other member related costs of $123,000,
facility exit costs of $412,000, and other costs of $106,000.
Member termination benefits were accrued and charged to restructuring
expense for the termination of 197 members. All job functions were
impacted to varying degrees, though the largest number of members (148)
were terminated in Fort Collins and Loveland, Colorado. Of the 197
members, 188 had actually been terminated on or before March 31, 1999, and
by that date the company had plans to terminate 9 additional members. By
March 31, 1999, $5,466,000 of employee termination benefits had been paid.
The remaining $2,067,000 was included in accounts payable and accrued
expenses in the consolidated balance sheet.
Other member related costs, consisting of required regulatory fees in
foreign countries which are directly related to the terminations, were also
accrued and charged to restructuring expense. By March 31, 1999, $3,000 of
these other member related costs had been paid. The remaining $120,000 was
included in accounts payable and accrued expenses in the consolidated
balance sheet.
Facility exit costs that were accrued and charged to restructuring expense
consist of certain costs associated with the exit from a leased facility in
Germany, including the disposal of certain equipment, returning the
facility to its original condition and the repayment of investment
subsidies. The move was substantially completed by March 31, 1999 and
$115,000 of these facility exit costs had been paid. The remaining $297,000
was included in accounts payable and accrued expenses in the consolidated
balance sheet. Other costs included in restructuring expense related to the
move from the closed leased facility to an owned facility.
<PAGE>
PART I - ITEM 2
WOODWARD GOVERNOR COMPANY AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The company made significant financial and strategic progress during
the quarter. Strength in our aircraft business more than offset both
the challenging conditions in some of our industrial engine markets
and the costs incurred to develop new products. We also reorganized
Industrial Controls to improve customer service and productivity.
Results of Operations
Net billings for products and services for the three months ended
March 31, 1999, were up 28 percent from a year ago. This increase
primarily reflected the contributions from Woodward FST, Inc. and
Baker Electrical Products, Inc., both of which were acquired during
the third quarter of fiscal 1998. Aircraft Engine Systems' billings
increased 67 percent to $82,017,000 for the three months ended March
31, 1999, driven by the addition of FST and strong revenue gains in
Woodward's existing aircraft business. Industrial Controls' net
billings for the three months were $56,056,000, off 12 percent from
the corresponding period last year. Continued strength in Industrial
Controls' engineered systems and turbine markets was offset by
softness in Asian markets and in oil and gas-related industries.
Towards the end of March, Woodward began to see encouraging signs of
gradually improving demand in selected engine markets. Automotive
Products, formed at the time of the Baker acquisition, generated net
billings of $6,335,000 for the three months.
Industrial Controls was reorganized to separate the units serving
engine and turbine manufacturers from those that serve the retrofit
market. This change will enable Woodward to better focus on the
precise needs of its customers. In addition, we aligned staffing
levels with expected demand, which is expected to have a positive
impact over the balance of the year and on future profitability.
In connection with this reorganization and the consolidation of two of
Woodward's facilities, the company incurred restructuring expense in the
three month period ended March 31, 1999. The company terminated 188
members by March 31, 1999, and at that time had plans in place to terminate
an additional 9 members. All job functions were impacted to varying
degrees, though the largest number of members (148) were terminated in Fort
Collins and Loveland, Colorado. The company also moved from a leased
facility in Germany to another facility in Germany which the company owns.
The move was substantially completed by March 31, 1999.
Increases in cost of goods sold, sales, service, and administrative
expenses, amortization of intangible assets, and interest expense for the
three months ended March 31, 1999, as compared to one year ago are
primarily the result of Woodward FST, Inc. and Baker Electrical Products,
Inc., both of which were acquired during the third quarter of fiscal 1998.
<PAGE>
Other expense--net for the three months ended March 31, 1999 decreased from
a year ago primarily as a result of a gain on the sale of the Stevens
Point, Wisconsin facility. The facility has not been used in the company's
operations for several years.
The company's equity in the loss of its unconsolidated affiliate, GENXON(tm)
Power Systems, LLC for the three months ended March 31, 1999, decreased
from a year ago as a result of reduced expenses within GENXON(tm).
The company's effective tax rate for the three months ended March 31, 1999
and 1998 was 40.0% and 40.3%, respectively. The effective tax rate for the
fiscal year ended September 30, 1998 was 40.5%. Differences among the
rates relate primarily to effects of foreign losses and foreign tax rate
differences, and involve estimates.
Net earnings for the three months ended March 31, 1999, were $2,064,000, or
$0.18 per diluted share, compared with $5,415,000, or $0.48 per diluted
share, a year ago. Without the restructuring expense and gain on the sale
of real estate, discussed above, net earnings would have been $6,360,000
for the three months ended March 31, 1999, or $0.56 per share.
For the six months ended March 31, 1999, net billings rose 37 percent
from a year ago. Aircraft Engine Systems' billings for the six months
increased 78 percent to $162,530,000, driven by the addition of
Woodward FST, Inc. and strong revenue gains in Woodward's existing
aircraft business. Industrial Controls' net billings for the six
months were $114,345,000, off 5 percent from the corresponding period
last year primarily due to softness in Asian markets and in oil and
gas-related industries. Automotive Products generated net billings of
$12,441,000 for the six months.
Reasons for changes among costs and expenses, the company's equity in the
loss of its unconsolidated affiliate, and the effective tax rate during the
six months ended March 31, 1999, are similar to those discussed above for
the three months ended March 31, 1999.
Net earnings for the six months ended March 31, 1999, were $7,268,000, or
$0.64 per diluted share, compared with $7,873,000, or $0.69 per diluted
share, a year ago. Without the restructuring expense and gain on the sale
of real estate, discussed above, net earnings would have been $11,564,000
for the six months ended March 31, 1999, or $1.02 per share.
Financial Condition
The financial condition of the company remained strong as of March 31,
1999, with total shareholders' equity of $220,870,000, long-term debt of
$177,650,000, and total assets of $553,114,000.
Working capital, representing the excess of current assets over current
liabilities, increased 9 percent between September 30, 1998 and March 31,
1999. Decreases in accounts receivable were more than offset by reductions
in accounts payable and accrued expenses and increases in cash. Accounts
receivable decreased primarily due to differences in billing levels
immediately preceding the end of the period. Accounts payable and accrued
expenses decreased primarily as a result of the payment of expenses
associated with member compensation and benefits which were accrued for at
September 30, 1998. Cash provided by operating activities exceeded cash
used in investing and financing activities during the six months ended
March 31, 1999.
<PAGE>
Property, plant, and equipment - net and intangibles - net both decreased
between September 30, 1998 and March 31, 1999 because depreciation and
amortization exceeded related investments made during the period.
Future cash flows from operations and available revolving lines of credit
are expected to be adequate to meet the company's investing and financing
cash requirements during the next twelve months. However, it is possible
business acquisitions could be made in the future that would require
amendments to existing debt agreements and the need to obtain additional
financing.
On April 28, 1999, the Board of Directors declared a quarterly dividend of
twenty-three and one-quarter cents ($.2325) per share. The dividend is
payable on June 2, 1999 to shareholders of record at the close of business
on May 17, 1999.
Year 2000 Readiness
Woodward recognizes the potential problems associated with the year 2000.
In May 1997, the company formed a task force, with representation from each
business unit and location, to address this risk. The mission statement
adopted by the task force is: We will provide year 2000 compliant
products, work with customers who have existing products to validate year
2000 compliance, and provide other year 2000 services. We intend to
provide uninterrupted, normal operation of business-critical systems at all
Woodward locations before, during, and after the turn of the century and we
will manage the problems associated with non-critical systems. In
addition, we will encourage similar compliance from customers, suppliers,
and partners as appropriate and we will work with them to achieve this
goal.
The company has identified its year 2000 risks in three categories:
products, internal systems, and external noncompliance by partners and
suppliers.
The company has evaluated its manufactured products, has determined the
year 2000 compliance of such products, and informed its customers and end-
users through the company's internet website and by other appropriate
means. As a stand-alone product and operating system, Woodward will
continue to determine year 2000 compliance, by testing and other means, to
validate our product's compliance. However, products with time-date
function(s) have the capability of being programmed, configured or
otherwise modified for their particular applications, prior to or following
installation. Woodward may or may not have had any involvement in, or
responsibility for, these modifications. Additionally, in certain cases,
our systems have included auxiliary hardware and software (providing time-
date functions) not manufactured by the company, but provided by third
party suppliers. While Woodward remains committed to supporting and
assisting its customers and end-users as they assess such systems,
limitations imposed by license agreement restrictions, in some cases, and
non-access to source code, in other cases, make it generally impossible for
the company to determine (except by testing individual systems) the year
2000 compliance of third party supplied hardware and software not
manufactured by the company.
<PAGE>
Regarding internal systems, inclusive of information systems,
manufacturing equipment and facilities, the company has completed its
awareness, assessment, inventory, and prioritization tasks. Mission-
critical system tasks have been completed. This includes upgrade or
remediation, validation of compliance, and contingency plan development.
The only exception is the business system for locations in Michigan and
South Carolina that are associated with Woodward FST, Inc., which was
acquired during the third quarter of fiscal 1998. As a result of this
acquisition, it was decided to migrate these facilities to the business
system used in all other Aircraft Engine Systems' facilities. This will
also resolve any year 2000 problems with FST's existing business system.
This migration is planned for completion in June 1999 and is on schedule.
Non-critical internal systems are being addressed now. Each non-critical
system has been assigned a priority rating. The company intends to address
the higher priority systems by July 1999; medium priority by September 1999
and low priority by December 1999.
We have contacted partners and suppliers with requests for their year 2000
project status to determine if they will be adversely affected by the year
2000 and consequently cause disruption to our operations. We are using
phone audits for follow-up and are currently developing contingency plans
for our high-risk critical suppliers.
The company has applied the newly available and beneficial provisions of
the federal "Year 2000 Information and Readiness Disclosure Act" (the
"Act"). Statements such as the mission statement and other comments above,
should be regarded as being "Year 2000 Statements" and "Year 2000 Readiness
Disclosures," as applicable, within the meaning of, and subject to, the
exclusions prescribed by the Act.
External costs of corrective efforts, principally system reprogramming and
upgrades, are not anticipated to be material and are currently estimated to
be less than $650,000. Total external costs incurred for corrective efforts
through December 31, 1998 were $136,000, with remaining budgeted year 2000
costs anticipated to be incurred in 1999. Even though management feels
that planned corrective efforts should adequately address year 2000 issues,
there can be no assurance that unforeseen difficulties will not arise.
There is no assurance that the failure of any external party to resolve its
year 2000 issues would not have an adverse effect on the company.
Euro Introduction
The company does not expect the recent introduction of the Euro by the
European Monetary Union to have any significant impact on our competitive
position or operations.
New Accounting Pronouncements
In June 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 130, "Reporting
Comprehensive Income" and SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information." Both are effective in fiscal year
1999. SFAS No. 130, which establishes standards for reporting and display
of comprehensive income and its components (revenues, expenses, gains, and
losses) in the financial statements, has been adopted on October 1, 1998
and related disclosures have been included in the Notes to the Consolidated
Financial Statements as of and for the three months and six months ended
March 31, 1999. SFAS No. 131 revises standards for public companies to
report information about segments of their business and also requires
disclosure of selected segment information in quarterly financial reports.
SFAS No. 131 also establishes standards for related disclosures about
products and services, geographic areas, and major customers. The company
is in the process of evaluating the impact SFAS No. 131 may have on
disclosures in the consolidated financial statements.
<PAGE>
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which is effective in fiscal year
2000. This statement establishes accounting and reporting standards for
derivative instruments and for hedging activities. Among other
requirements, it requires that an entity recognize all derivatives as
either assets or liabilities in the balance sheet and measure those
instruments at fair value. The accounting for changes in the fair value of
a derivative depends on the intended use of the derivative. The company
has not yet determined the impact this new statement may have on
disclosures in the consolidated financial statements.
There have been no material changes in the quantitative and qualitative
disclosures about market risk from the end of the preceding fiscal year as
reported in Form 10-K for the fiscal year ended September 30, 1998.
Forward-looking Statements
This quarterly report contains forward-looking statements, including
financial projections, management plans and objectives for future
operations, expectation of future economic performance, and various other
assumptions relating to the future. While such statements reflect
management's current expectations, all such statements involve risks and
uncertainties. Actual results could differ materially from projections or
any other forward-looking statement. Important factors that could cause
results to differ materially from those projected or otherwise stated
include the following: unanticipated global or regional economic
developments, particularly in, but not limited to, Asia; changes in
business cycles of particular industries served by our company;
fluctuations in currency exchange rates of U.S. and foreign countries,
primarily those located in Europe and Asia; fluctuations in interest rates,
primarily LIBOR, which affect the cost of borrowing under the company's
lines of credit facilities; timing and acceptance of new products and
product enhancements; competitor actions that adversely impact company
orders or pricing; adverse changes in the business acquisition climate;
effects of any business acquisitions or divestitures; changes in U.S. and
other country laws and regulations involving acquisitions, the environment,
and taxes; relative success of quality and productivity initiatives, such
as the Six Sigma initiative; business interruptions caused by incomplete or
ineffective remediation of computer problems associated with the year 2000
throughout the company's supply chain; the outlook for GENXON products and
markets and its funding requirements; unusual or extraordinary events or
developments involving litigation or other potential liabilities.
<PAGE>
PART II - OTHER INFORMATION
Item 6(b)
a) Exhibits
3. Section 3.2 of the Bylaws, as amended
27. Financial data schedule
b) No form 8-K was filed for the quarter ended March 31, 1999.
<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, 1999 /s/ John A. Halbrook
John A. Halbrook, President
and Chief Executive Officer
May 14, 1999 /s/ Stephen P. Carter
Stephen P. Carter, Vice President,
Chief Financial Officer and Treasurer
Exhibit 3
Section 3.2 of the Bylaws, as amended
The number of
directors which shall constitute the
whole Board of Directors shall be nine, consisting
of three Class I directors, three Class II directors,
and three Class III directors.
bod\1999\04bylaw.doc
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Financial Statements for the three and six months ended March
31, 1999, included herein and is qualified in its entirety by reference
to such financial statements.
</LEGEND>
<MULTIPLIER> 1000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> SEP-30-1999 SEP-30-1999
<PERIOD-END> MAR-31-1999 MAR-31-1999
<CASH> 19217 19217
<SECURITIES> 0 0
<RECEIVABLES> 102506 102506
<ALLOWANCES> 3912 3912
<INVENTORY> 106604 106604
<CURRENT-ASSETS> 244411 244411
<PP&E> 357854 357854
<DEPRECIATION> 231325 231325
<TOTAL-ASSETS> 553114 553114
<CURRENT-LIABILITIES> 114482 114482
<BONDS> 177650 177650
0 0
0 0
<COMMON> 106 106
<OTHER-SE> 220764 220764
<TOTAL-LIABILITY-AND-EQUITY> 553114 553114
<SALES> 144408 289316
<TOTAL-REVENUES> 144408 289316
<CGS> 107564 217579
<TOTAL-COSTS> 137286 268856
<OTHER-EXPENSES> (65) 706
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 3282 6523
<INCOME-PRETAX> 3905 13231
<INCOME-TAX> 1562 5292
<INCOME-CONTINUING> 2343 7939
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 2064 7268
<EPS-PRIMARY> .18 .64
<EPS-DILUTED> .18 .64
</TABLE>
