-----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, Q8RvQE6f55mExpIMin+oF+txKjbY2gxCp7UQTDm/F6kIZVankd6bwShecb7b7cb0 BRQ/6tE1ILTAisoQ415zzQ== 0000108312-99-000003.txt : 19990518 0000108312-99-000003.hdr.sgml : 19990518 ACCESSION NUMBER: 0000108312-99-000003 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 19990517 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: 99624697 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 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. 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 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)
1999 1998 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.
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)
1999 1998 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.
WOODWARD GOVERNOR COMPANY AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in thousands of dollars) MARCH SEPTEMBER 31, 1999 30, 1998 (Unaudited) 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.
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)
1999 1998 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.
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: Three Six months months ended ended March 31, March 31,
(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
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.
Three months ended March 31, Six months ended March 31, 1999 1998 1999 1998 Options 383,041 367,414 383,041 330,901 Weighted average exercise price $28.76 $29.99 $26.15 $25.76
(4) Currency translation adjustments are included in other comprehensive earnings. The company's total comprehensive earnings were as follows:
Three months ended Six months ended March 31, March 31, (in thousands) 1999 1998 1999 1998 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
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. 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. 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 $553,114,000. Working capital, representing the excess of current assets over current liabilities, increased 9 percent between September 30, 1998 and March 31, 1999. Decreases in accounts receivable were more than offset by reductions in accounts payable and accrued expenses and increases in cash. Accounts receivable decreased primarily due to differences in billing levels immediately preceding the end of the period. Accounts payable and accrued expenses decreased primarily as a result of the payment of expenses associated with member compensation and benefits which were accrued for at September 30, 1998. Cash provided by operating activities exceeded cash used in investing and financing activities during the six months ended March 31, 1999. Property, plant, and equipment - net and intangibles - net both decreased between September 30, 1998 and March 31, 1999 because depreciation and amortization exceeded related investments made during the period. Future cash flows from operations and available revolving lines of credit are expected to be adequate to meet the company's investing and financing cash requirements during the next twelve months. However, it is possible business acquisitions could be made in the future that would require amendments to existing debt agreements and the need to obtain additional financing. On April 28, 1999, the Board of Directors declared a quarterly dividend of twenty-three and one-quarter cents ($.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. 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. 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. 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. 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 EX-3 2 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 EX-27 3
5 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. 1000 3-MOS 6-MOS SEP-30-1999 SEP-30-1999 MAR-31-1999 MAR-31-1999 19217 19217 0 0 102506 102506 3912 3912 106604 106604 244411 244411 357854 357854 231325 231325 553114 553114 114482 114482 177650 177650 0 0 0 0 106 106 220764 220764 553114 553114 144408 289316 144408 289316 107564 217579 137286 268856 (65) 706 0 0 3282 6523 3905 13231 1562 5292 2343 7939 0 0 0 0 0 0 2064 7268 .18 .64 .18 .64
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