-----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, QCFirsHK8108ZBBtOpTDytJ/3I23wzWv8tqw5egzH2YJmltM/oO6GIPFPMgRffPn wstkSLox8wdq+inAGRNcPQ== 0000108312-98-000003.txt : 19980515 0000108312-98-000003.hdr.sgml : 19980515 ACCESSION NUMBER: 0000108312-98-000003 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980514 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: 98619930 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 March 31, 1998 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, 1998, 11,299,325 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 March 31, 1998 INDEX Description Part I. Financial Information Item 1. Financial Statements Statements of Consolidated Earnings for the Three Months Ended March 31, 1998 and 1997 Statements of Consolidated Earnings for the Six Months Ended March 31, 1998 and 1997 Consolidated Balance Sheets as of March 31, 1998 and September 30, 1997 Statements of Consolidated Cash Flows for the Six Months Ended March 31, 1998 and 1997 Notes to Consolidated Financial Statements Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Part II. Other Information Signatures ` WOODWARD GOVERNOR COMPANY AND SUBSIDIARIES STATEMENTS OF CONSOLIDATED EARNINGS for the three months ended March 31, 1998 and 1997 (in thousands except per share amounts) (Unaudited)
1998 1997 Net billings for products and services $113,160 $106,546 Costs and expenses: Cost of goods sold 81,563 79,708 Sales, service and administrative expenses 19,412 18,624 Other: Interest expense $444 $642 Interest income (225) (294) Other expense, net 1,269 1,488 980 1,328 Total costs and expenses 102,463 99,660 Earnings before income taxes and equity in loss of unconsolidated affiliate 10,697 6,886 Income taxes 4,314 2,686 Earnings before equity in loss of unconsolidated affiliate 6,383 4,200 Equity in loss of unconsolidated affiliate, net of tax 968 770 Net earnings $5,415 $3,430 Basic and diluted earnings per share $0.48 $0.30 Average number of shares outstanding 11,315 11,485 Cash dividends per share $0.2325 $0.2325 See accompanying notes to consolidated financial statements.
WOODWARD GOVERNOR COMPANY AND SUBSIDIARIES STATEMENTS OF CONSOLIDATED EARNINGS for the six months ended March 31, 1998 and 1997 (in thousands except per share amounts) (Unaudited)
1998 1997 Net billings for products and services $211,300 $205,575 Costs and expenses: Cost of goods sold 154,622 150,965 Sales, service and administrative expenses 38,131 35,267 Other: Interest expense $785 $1,212 Interest income (424) (390) Other expense, net 2,015 2,376 2,140 2,962 Total costs and expenses 195,129 189,194 Earnings before income taxes and equity in loss of unconsolidated affiliate 16,171 16,381 Income taxes 6,449 6,388 Earnings before equity in loss of unconsolidated affiliate 9,722 9,993 Equity in loss of unconsolidated affiliate, net of tax 1,849 1,425 Net earnings $7,873 $8,568 Basic and diluted earnings per share $0.69 $0.74 Average number of shares outstanding 11,381 11,516 Cash dividends per share $0.465 $0.465 See accompanying notes to consolidated financial statements.
WOODWARD GOVERNOR COMPANY AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in thousands of dollars)
MARCH SEPTEMBER 31, 1998 30, 1997 (Unaudited) Assets Current assets: Cash and cash equivalents $ 7,727 $ 14,999 Accounts receivable, less allowance for losses of $3,279 for March and $2,757 for September 81,454 91,806 Inventories 89,177 83,249 Deferred income taxes 19,651 19,651 Total current assets 198,009 209,705 Property, plant and equipment, at cost: Land 5,607 5,842 Buildings and improvements 119,100 119,997 Machinery and equipment 191,408 188,758 Construction in progress 2,104 2,270 318,219 316,867 Less allowance for depreciation 211,224 205,919 Property, plant and equipment - net 106,995 110,948 Intangibles and other assets 8,688 8,933 Deferred income taxes 18,490 18,524 Total assets $332,182 $348,110 Liabilities and shareholders' equity Current liabilities: Short-term borrowings $ 10,295 $ 7,908 Current portion of long-term debt 4,979 4,979 Accounts payable and accrued expenses 52,466 64,824 Taxes on income 7,753 7,167 Total current liabilities 75,493 84,878 Long-term debt, less current portion 17,679 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 13,297 13,283 Unearned ESOP compensation (12,176) (12,128) Currency translation adjustment 7,599 9,391 Retained earnings 215,356 215,211 224,182 225,863 Less treasury stock, at cost 20,073 15,249 204,109 210,614 Total liabilities and shareholders' equity $332,182 $348,110 See accompanying notes to consolidated financial statements.
WOODWARD GOVERNOR COMPANY AND SUBSIDIARIES STATEMENTS OF CONSOLIDATED CASH FLOWS for the six months ended March 31, 1998 and 1997 (in thousands of dollars) (Unaudited)
1998 1997 Cash flows from operating activities: Net earnings $ 7,873 $ 8,568 Adjustments to reconcile net earnings to net cash provided (used) by operating activities: Depreciation and amortization 12,643 11,877 Equity in loss of unconsolidated affiliate 3,082 2,336 Changes in assets and liabilities: Accounts receivable 9,417 3,658 Inventories (6,520) (4,071) Current liabilities, other than short-term borrowings and current portion of long-term debt (12,760) (6,591) Other, net (541) (513) Total adjustments 5,321 6,696 Net cash provided by operating activities 13,194 15,264 Cash flows from investing activities: Payments for purchase of property, plant and equipment (9,077) (8,015) Investment in unconsolidated affiliate (2,975) (3,500) Other 269 (243) Net cash used in investing activities (11,783) (11,758) Cash flows from financing activities: Cash dividends paid (5,289) (5,359) Proceeds from sales of treasury stock 39 184 Purchases of treasury stock (4,866) (3,761) Payments of long-term debt (38) (24) Net proceeds from short-term borrowings 2,643 6,553 Tax benefit applicable to ESOP dividend 186 182 Net cash used in financing activities (7,325) (2,225) Effect of exchange rate changes on cash (1,358) (346) Net change in cash and cash equivalents (7,272) 935 Cash and cash equivalents, beginning of year 14,999 13,070 Cash and cash equivalents, end of period $7,727 $14,005 Supplemental cash flow information: Interest expense paid $889 $1,262 Income taxes paid $4,383 $2,369 See accompanying notes to consolidated financial statements.
WOODWARD GOVERNOR COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1: The consolidated balance sheet as of March 31, 1998, and the statements of consolidated earnings and cash flows for the three and six month periods ended March 31, 1998 and 1997, have been prepared by 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 March 31, 1998, and the results of its operations for the three and six month periods ended March 31, 1998 and 1997, 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 1997 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, 1998 are not necessarily indicative of the results to be expected for other interim periods or for the full year. Note 2: The following is a reconciliation of the numerators and denominators for the computation of basic and diluted earnings per share: Three Months Six Months Ended Ended March 31, March 31, (in 000's except per share amounts) 1998 1997 1998 1997 Basic Earnings per Share: Net earnings $ 5,415 $ 3,430 $ 7,873 $ 8,568 Shares Weighted average common shares 11,315 11,485 11,381 11,516 Basic Earnings per Share $ 0.48 $ 0.30 $ 0.69 $ 0.74 Diluted Earnings per Share: Net earnings $ 5,415 $ 3,430 $ 7,873 $ 8,568 Shares Weighted average shares from above 11,315 11,485 11,381 11,516 Add: Additional dilutive effect of outstanding stock options 41 50 46 38 Weighted average shares, as adjusted for dilution 11,356 11,535 11,427 11,554 Diluted Earnings per Share $ 0.48 $ 0.30 $ 0.69 $ 0.74 The following options were not included in the computation of diluted earnings per share as the options' exercise prices were greater than the average market price of the common shares during the respective quarter and year-to-date periods: WEIGHTED AVERAGE EXERCISE DATE OPTIONS PRICE 6/25/97 1,000 $33.75 10/1/97 20,000 34.88 11/17/97 138,340 32.25 1/14/98 55,701 32.00 PART I - ITEM 2 WOODWARD GOVERNOR COMPANY AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Woodward's financial results for the second quarter of fiscal 1998 were significantly stronger than the first-quarter performance, boosting earnings for the first half of fiscal 1998 near the prior year level. The results also provide encouragement that performance targets for the full fiscal year are within reach. Results of Operations For the quarter ended March 31, 1998, net billings for products and services were $113,160,000, up 6 percent from $106,546,000 a year ago. Industrial Controls' shipments rose 7 percent to $64,046,000, benefiting from strength in engineered systems, particularly in international markets. In the Aircraft Controls group, growth in aftermarket business contributed to a 6 percent shipment increase over the prior year quarter, to $49,114,000. Total costs and expenses for the quarter rose 3 percent over the same quarter in fiscal 1997, significantly less than the 6% growth in net billings. Improved profitability reflects the productivity gains as a result of quality and efficiency initiatives implemented over the last two years. In addition, margins were also enhanced by the relatively higher proportion of aftermarket shipments, which are at more favorable margins than shipments to original equipment manufacturers. Overall, earnings before the effect of the GENXON(tm) Power Systems, LLC, joint venture were $6,383,000, or $0.56 per share, up 52 percent from $4,200,000, or $0.37 per share, a year ago. Net earnings advanced 58 percent to $5,415,000, or $0.48 per share, from $3,430,000, or $0.30 per share a year earlier. For the first half of fiscal 1998, net billings for products and services increased 3 percent to $211,300,000 from $205,575,000 in the same period last year. Aircraft Controls' shipments were up 5 percent for the six-month period, while net billings by the Industrial Controls group rose 1 percent. Total costs and expenses grew at a slightly faster rate than shipments, primarily due to increased sales, service and administrative expenses. A portion of this increase is attributable to intensified new business development efforts, as well as start-up costs related to Aircraft Controls' new aftermarket support facility in Prestwick, Scotland, which opened during the second quarter. Earnings for the first half of the fiscal year, before Woodward's share of GENXON's loss, were $9,722,000, or $0.85 per share, slightly below last year's $9,993,000, or $0.87 per share. Including the effect of GENXON, net earnings for the six months were $7,873,000, or $0.69 per share, compared with $8,568,000, or $0.74 per share last year. Although the principal markets are expected to remain highly competitive, management is cautiously optimistic about the outlook for the balance of fiscal 1998. While the company's Asian business has not yet been significantly affected by the economic weakness in the Pacific Rim region, it expects the impact may become more noticeable in the second half of the fiscal year. Financial Condition Cash and cash equivalents decreased to $7,727,000 at March 31, 1998 from $14,999,000 at September 30, 1997 due to additional inventory purchases and payment of accounts payable and member benefits. Working capital totaled $122,516,000 at March 31, 1998, a decline of $2,311,000 since September 30, 1997. The current ratio, however, increased to a strong 2.62 at March 31, 1998 compared to 2.47 as of the prior fiscal year-end. Accounts receivable totaled $81,454,000 at March 31, 1998 compared to $91,806,000 at September 30, 1997. The higher level of receivables as of last fiscal year end was caused by higher level of shipments in September. Inventories increased from $83,249,000 at September 30, 1997 to $89,177,000 at March 31, 1998 due partly to the additional inventory needed to meet anticipated product demand over the next several months. Property, plant and equipment - net decreased to $106,995,000 at March 31, 1998 from $110,948,000 at September 30, 1997, due to capital expenditures being less than depreciation. Accounts payable and accrued expenses decreased to $52,466,000 at March 31, 1998 from $64,824,000 at September 30, 1997 due in part to reductions in accounts payable and member benefit accruals. On March 26, 1998, the Board of Directors declared a quarterly dividend of twenty-three and one-quarter cents ($.2325) per share. The dividend is payable on June 1, 1998 to shareholders of record at the close of business on May 8, 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. Currently, the Task Force is in the latter parts of the Assessment/Discovery phase of the project and will be moving into the Delivery/Execution phase, which is currently scheduled to be completed well in advance of December 31, 1999. 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 calculation of diluted earnings per share did not differ from basic earnings per share in each of the quarterly and year-to-date periods ended March 31, 1998 and 1997. In June 1997, the Financial Accounting Standards Board ("FASB") 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. In February 1998, FASB issued SFAS No. 132, "Employers' Disclosure about Pensions and Other Postretirement Benefits." The Company does not expect the adoption of this pronouncement to have a material effect on results of operations or financial condition. 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 6(b) a) Exhibits 27. Financial data schedule b) No form 8-K was filed for the quarter ended March 31, 1998. 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 13, 1998 /s/ John A. Halbrook John A. Halbrook, President and Chief Executive Officer May 13, 1998 /s/ Stephen P. Carter Stephen P. Carter, Vice President, Chief Financial Officer and Treasurer EX-27 2
5 This schedule contains summary financial information extracted from the registrant's Form 10-Q for the quarterly period ended March 31, 1998 and is qualified in its entirety by reference to such financial statements. 1000 3-MOS 6-MOS SEP-30-1998 SEP-30-1998 MAR-31-1998 MAR-31-1998 7727 7727 0 0 84733 84733 3279 3279 89177 89177 198009 198009 318219 318219 211224 211224 332182 332182 75493 75493 17679 17679 0 0 0 0 106 106 204003 204003 332182 332182 113160 211300 113160 211300 81563 154622 100975 192753 1044 1591 0 0 444 785 10697 16171 4314 6449 5415 7873 0 0 0 0 0 0 5415 7873 .48 .69 .48 .69
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