-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QFurAYrkA4pLeh53FVGRcRFNgRLDJxgbr5cj7QTly83VcZRq1u9waZmSV2nm2dfU Ng5aFZXNKOJHzFFhib0NdA== 0000108312-98-000002.txt : 19980218 0000108312-98-000002.hdr.sgml : 19980218 ACCESSION NUMBER: 0000108312-98-000002 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980213 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: WOODWARD GOVERNOR CO CENTRAL INDEX KEY: 0000108312 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRICAL INDUSTRIAL APPARATUS [3620] IRS NUMBER: 361984010 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-08408 FILM NUMBER: 98536946 BUSINESS ADDRESS: STREET 1: 5001 N SECOND ST STREET 2: P O BOX 7001 CITY: ROCKFORD STATE: IL ZIP: 61125-7001 BUSINESS PHONE: 8158777441 10-Q 1 10Q FILING 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, 1997 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 31,1998, 11,298,422 shares of common stock with a par value of .00875 cents per share were outstanding WOODWARD GOVERNOR COMPANY FORM 10-Q For the Quarter Ended December 31, 1997 INDEX Description Part I. Financial Information Item 1. Financial Statements Statements of Consolidated Earnings for the three months ended December 31, 1997 and 1996 Consolidated Balance Sheets as of December 31, 1997 and September 30, 1997 Statements of Consolidated Cash Flows for the three months ended December 31, 1997 and 1996 Notes to Consolidated Financial Statements Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Part II. Other Information Signatures STATEMENTS OF CONSOLIDATED EARNINGS for the three months ended December 31, 1997 and 1996 (in thousands except per share amounts) (Unaudited)
1997 1996 Net billings for products and services $98,140 $99,029 Costs and expenses: Cost of goods sold 73,059 71,257 Sales, service and administrative expenses 18,719 16,643 Other: Interest expense $341 $569 Interest income (199) (96) Other expense, net 746 888 1,160 1,633 Total costs and expenses 92,666 89,533 Earnings before income taxes and equity in loss of unconsolidated affiliate 5,474 9,496 Income taxes 2,135 3,703 Earnings before equity in loss of unconsolidated affiliate 3,339 5,793 Equity in loss of unconsolidated affiliate, net of tax (881) (655) Net earnings $2,458 $5,138 Basic and diluted earnings per share $ 0.21 $ 0.44 Average number of shares outstanding 11,448 11,548 Cash dividends per share $0.2325 $0.2325 See accompanying notes to consolidated financial statements.
WOODWARD GOVERNOR COMPANY AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in thousands of dollars)
DECEMBER SEPTEMBER 31, 1997 30, 1997 (Unaudited) Assets Current assets: Cash and cash equivalents $12,176 $14,999 Accounts receivable, less allowance for losses of $2,944 for December and $2,757 for September 70,894 91,806 Inventories 86,321 83,249 Deferred income taxes 19,651 19,651 Total current assets 189,042 209,705 Property, plant and equipment, at cost: Land 5,614 5,842 Buildings and improvements 119,260 119,997 Machinery and equipment 191,200 188,758 Construction in progress 1,474 2,270 317,548 316,867 Less allowance for depreciation 208,525 205,919 Property, plant and equipment - net 109,023 110,948 Intangibles and other assets 9,806 8,933 Deferred income taxes 18,492 18,524 Total assets $326,363 $348,110 Liabilities and shareholders' equity Current liabilities: Short-term borrowings $8,378 $7,908 Current portion of long-term debt 4,979 4,979 Accounts payable and accrued expenses 45,488 64,824 Taxes on income 5,219 7,167 Total current liabilities 64,064 84,878 Long-term debt, less current portion 17,698 17,717 Other liabilities 34,901 34,901 Commitments and contingencies - - Shareholders' equity represented by: Preferred stock - - Common stock 106 106 Additional paid-in capital 13,293 13,283 Unearned ESOP compensation (12,152) (12,128) Currency translation adjustment 8,573 9,391 Retained earnings 215,100 215,211 224,920 225,863 Less treasury stock, at cost 15,220 15,249 209,700 210,614 Total liabilities and shareholders' equity $326,363 $348,110 See accompanying notes to consolidated financial statements.
WOODWARD GOVERNOR COMPANY AND SUBSIDIARIES STATEMENTS OF CONSOLIDATED CASH FLOWS for the three months ended December 31, 1997 and 1996 (in thousands of dollars) (Unaudited)
1997 1996 Cash flows from operating activities: Net earnings $2,458 $5,138 Adjustments to reconcile net earnings to net cash provided (used) by operating activities: Depreciation and amortization 6,404 6,033 Equity in loss of unconsolidated affiliate 1,445 1,074 Changes in assets and liabilities: Accounts receivable 20,741 9,949 Inventories (2,586) (4,155) Current liabilities, other than short-term borrowings and current portion of long-term debt (20,349) (8,745) Other, net (1,308) (1,193) Total adjustments 4,347 2,963 Net cash provided by operating activitie 6,805 8,101 Cash flows from investing activities: Payments for purchase of property, plant and equipment (4,677) (4,890) Investment in unconsolidated affiliate (1,300) (2,500) Other 67 (137) Net cash used in investing activities (5,910) (7,527) Cash flows from financing activities: Cash dividends paid (2,662) (2,685) Proceeds from sales of treasury stock 24 - Purchases of treasury stock - (136) Payments of long-term debt (19) (18) Short-term borrowings net proceeds (payments) 531 (1,204) Tax benefit applicable to ESOP dividend 93 91 Net cash used in financing activities (2,033) (3,952) Effect of exchange rate changes on cash (1,685) (582) Net change in cash and cash equivalents (2,823) (3,960) Cash and cash equivalents, beginning of year 14,999 13,070 Cash and cash equivalents, end of period 12,176 9,110 Supplemental cash flow information: Interest expense paid $235 $388 Income taxes paid $3,629 $834 See accompanying notes to consolidated financial statements.
WOODWARD GOVERNOR COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (1) The consolidated balance sheet as of December 31, 1997, and the statements of consolidated earnings and cash flows for the three month periods ended December 31, 1997 and 1996, have been prepared by Woodward Governor Company (the Company), without audit. The September 30, 1997 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, 1997, and the results of its operations for the three months ended December 31, 1997 and 1996, 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 1997 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, 1997 is not necessarily indicative of the results to be expected for other interim periods or for the full year. (2) The following is a reconciliation of the numerators and denominators for the computation of basic and diluted earnings per share:
Three Months Ended December 31, (in 000's except per share amounts) 1997 1996 Net earnings (numerator) $ 2,458 $ 5,138 Basic Earnings per Share: Weighted average number of common shares (denominator) 11,448 11,548 Basic per share amount $ .21 $ .44 Diluted Earnings per Share: Weighted average number of common shares 11,448 11,548 Effect of dilutive securities: Stock options 52 28 Diluted weighted average number of common shares (denominator) 11,500 11,576 Diluted per share amount $ .21 $ .44
Options to purchase 20,000 shares of common stock at $34.875 per share and 1,000 shares of common stock at $33.75 per share were outstanding during the quarter ended December 31, 1997 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. PART I - ITEM 2 WOODWARD GOVERNOR COMPANY AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The Company's financial performance for the first quarter of fiscal 1998 was below the strong results reported for the same period a year ago. Lower than anticipated shipments, coupled with costs that do not vary with shipment levels, were the principal reasons for the less than favorable results. The Company's quarterly results are not necessarily indicative of underlying trends or of results to be expected for future quarters or the full fiscal year. Management believes that bookings, production and shipment patterns are best viewed over longer time periods rather than in a single quarter. Results of Operations Net billings for products and services in the quarter ended December 31, 1997 were $98,140,000, slightly below the $99,029,000 reported a year ago. Aircraft Controls' shipments of $42,104,000 rose 5 percent from a year ago. Shipments by the Industrial Controls group fell 5 percent to $56,036,000, as shipments were particularly strong in last year's first quarter. Temporary production delays, short-term customer demand fluctuations, and the impact of a strong U.S. dollar were the primary reasons for the lower than expected shipment levels. Total costs and expenses were $92,666,000, an increase of $3,133,000, or 3 percent from a year ago. Costs of goods sold totaled $73,059,000 in the first quarter of fiscal 1998, an increase of $1,802,000 or 2.5 percent from the prior year quarter. As a percent of shipments, cost of goods sold was 74 percent versus 72 percent a year earlier. These higher product costs were mainly due to increased product development efforts, on-going process improvement programs and higher labor costs. Sales, service and administrative expenses increased $2,076,000 or 12 percent over the prior year quarter primarily due to higher labor costs, new business development efforts and start-up costs related to the Aircraft Controls' Prestwick, Scotland service facility. Earnings before the effect of the GENXON(tm) Power Systems, LLC joint venture were $3,339,000 compared with $5,793,000 a year earlier. Including Woodward's share of GENXON's losses in both periods, net earnings were $2,458,000, or $0.21 per share, in the current year quarter compared with $5,138,000, or $0.44 per share, a year ago. With direct sales from Asia accounting for only 10 percent of total net shipments, the Asian economic weakness, so far, has had only a limited effect on Woodward. In Japan, where the Company has its largest Asian presence, shipments in the first quarter were well ahead of the prior year quarter. While these shipment levels are encouraging, it is still too early to understand the full impact the Asian crisis may have on Woodward's business as a whole. In addition to direct sales, the Company also indirectly sells many products to Asian customers through U.S. and European equipment manufacturers. Management will continue to monitor these relationships and the Asian marketplace. The Company's effective tax rate for the three months ended December 31, 1997 and 1996 was the same at 39 percent. The effective tax rate for the fiscal year ended September 30, 1997 was 38.6 percent. Quarterly financial variability notwithstanding, management is encouraged by the marketplace demands for many of the Company's products. Aircraft Controls' strategy is to move beyond its core fuel metering product line to components and systems that make up the broader engine fuel delivery system. Industrial Controls is focusing resources on engine and turbine control markets in which there has been the greatest success, and de-emphasizing markets that do not meet its financial objectives. Management continues to view GENXON as an investment which, over time, should provide a competitive advantage for Woodward in supplying controls to the turbine retrofit market. Financial Condition The financial condition of the Company remained strong as of December 31, 1997, with total shareholders' equity of $209,700,000 and long- term debt of $17,698,000, which was less than 8 percent of total capital. Cash balances decreased $2,823,000 to $12,176,000 at December 31, 1997 when compared to September 30, 1997. Accounts receivable totaled $70,894,000 at December 31, 1997 as compared to $91,806,000 at September 30, 1997. This balance reduction was caused by higher shipment levels in September, resulting in a greater level of receivables as of the last fiscal year-end. Total inventories were $86,321,000 at December 31, 1997 as compared to $83,249,000 at September 30, 1997, an increase of $3,072,000 due partially to customer demand fluctuations and temporary production delays. Property, plant and equipment - net has decreased $1,925,000 since September 30, 1997 due to capital expenditures being less than depreciation. Accounts payable and accrued expenses decreased to $45,488,000 at December 31, 1997 from $64,824,000 as of September 30, 1997, due mainly to higher business levels in September and the payment of annual member benefit balances. On January 14, 1998 the Board of Directors declared a quarterly dividend of twenty-three and one quarter cents ($.2325) per share. The dividend is payable on March 2, 1998 to shareholders of record at the close of business on February 2, 1998. Year 2000 Project The Company has formed a Year 2000 Task Force with representatives from each business unit and location. This task force is charged with the responsibility of determining and coordinating the action necessary to provide uninterrupted, normal operation of business-critical systems before, during, and after Year 2000. The Company is also encouraging similar compliance from customers, suppliers, and partners, as appropriate, and will work with them to help achieve this goal. Management believes that total costs associated with Year 2000 issues will not have a material effect on the consolidated earnings of the Company. New Accounting Pronouncements On October 1, 1997, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings per Share". This new standard simplifies the calculations of earnings per share and requires presentation of both basic and diluted earnings per share on the Statements of Consolidated Earnings. Diluted earnings per share reflects the impact of outstanding stock options, if exercised. The Company's basic and diluted earnings per share were the same for the first fiscal quarters of both 1998 and 1997. In June 1997, the Financial Accounting Standards Board issued SFAS No. 130, "Reporting Comprehensive Income" and SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information", both of which become effective in fiscal year 1999. The Company has not yet determined the impact these new statements will have on the consolidated financial statements and related disclosures. Forward-looking Statements This quarterly report may contain forward-looking statements reflecting management's current expectations concerning shipment levels, business performance, joint venture outlook and growth prospects. These statements involve risks and uncertainties including changes in product demand, competition, effectiveness of process improvement programs, impact of currency exchange rate changes, and other factors discussed in the Company's 1997 Annual Report on Form 10-K filed with the Securities and Exchange Commission. Actual future results and trends may differ materially from these expectations. PART II - OTHER INFORMATION Item 4 At the January 14, 1998 annual meeting of the shareholders, two items were submitted to a vote. (1) The re-election of three directors whose terms had expired. The results of the voting were as follows: Number of Number of Shares Number of Director Shares For Against/Withheld Abstentions Vern H. Cassens 10,607,549 288,380 None Carl J. Dargene 10,658,763 237,166 None Thomas W. Heenan 10,639,411 256,518 None (2) Amendment to the Woodward Governor Company 1996 Long-Term Incentive Compensation Plan to provide a competitive level of stock options for the Company's senior managers and increase the level of participation in the stock option plan, including broadening the base of stock option participants in current business units as well as for additional management of future new businesses and ventures. The results of the voting on this item were as follows: For Against Abstain 7,533,644 2,026,314 576,383 In addition, broker non-votes totaled 770,148. Item 6 (a) Exhibits 3. Change in the By-laws 27. Financial data schedule (b) No Form 8-K was filed for the quarter ended December 31, 1997. 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 10, 1998 /s/ John A. Halbrook John A. Halbrook, Chairman and Chief Executive Officer February 10, 1998 /s/ Stephen P. Carter Stephen P. Carter, Vice President, Chief Financial Officer and Treasurer EX-3 2 CHANGE IN BY-LAWS RESOLUTION WOODWARD GOVERNOR COMPANY BOARD OF DIRECTORS WHEREAS, the number of directors of the Company constituting the whole Board of Directors of the Company presently is nine, consisting of three Class I directors, three Class II directors, and three Class III directors; WHEREAS, the retirement of Mark E. Leum has reduced the number of Class III directors presently holding office from three to two, and the Board of Directors of the Company desires to reduce the total number of authorized directors from nine to eight until such time as a qualified candidate has been selected to fill the vacancy caused by the retirement of Mark E. Leum; NOW, THEREFORE, BE IT AND IT IS HEREBY RESOLVED, that the second sentence of Section 3.2 of Article III of the Bylaws of the Company is amended to read as follows: "The number of directors which shall constitute the whole Board of Directors shall be eight, consisting of three Class I directors, three Class II directors, and two Class III directors." EX-27 3 FIANACIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from the Consolidated Financial Statements for the first quarter ended December 31, 1997, included herein in Exhibit 13, and is qualified in its entirety by reference to such financial statments. 1000 3-MOS SEP-30-1998 DEC-31-1997 12176 0 73838 2944 86321 189042 317548 208525 326363 64064 17698 0 0 106 209594 326363 98140 98140 73059 91778 547 0 341 5474 2135 2458 0 0 0 2458 .21 .21
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