10-Q

UNITED STATES

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 quarterly period ended: June 30, 2010

o 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 0-18083

Williams Controls, Inc.

(Exact name of registrant as specified in its charter)

	Delaware	84-1099587
	(State or other jurisdiction of	(I.R.S. Employer
	incorporation or organization)	Identification No.)
	14100 SW 72nd Avenue,
	Portland, Oregon	97224
	(Address of principal executive office)	(zip code)
(503) 684-8600
(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 o

          Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted to Rule 405 of Regulation S-T (section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

          Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act

Large accelerated filer o	Accelerated filer o
Non-accelerated filer o	Smaller reporting company x

          Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)

Yes o No x

The number of shares outstanding of the registrant’s common stock
as of July 31, 2010: 7,284,412

Williams Controls, Inc.

June 30, 2010

Table of Contents

	Page Number
Part I. Financial Information
Item 1. Financial Statements (unaudited)
Condensed Consolidated Balance Sheets, June 30, 2010 and September 30, 2009	1
Condensed Consolidated Statements of Operations, three and nine months ended June 30, 2010 and 2009	2
Condensed Consolidated Statements of Cash Flows, nine months ended June 30, 2010 and 2009	3
Notes to Unaudited Condensed Consolidated Financial Statements	4
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	13
Item 3. Quantitative and Qualitative Disclosures About Market Risk	22
Item 4. Controls and Procedures	23
Part II. Other Information
Item 1.    Legal Proceedings	24
Item 1A. Risk Factors	24
Item 3.    Defaults Upon Senior Securities	24
Item 4.    Reserved	24
Item 5.    Other Information	24
Item 6.    Exhibits	24
Signature Page	26

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

Williams Controls, Inc.
Condensed Consolidated Balance Sheets
(Dollars in thousands, except share and per share information)
(Unaudited)

	June 30, 2010			September 30, 2009
ASSETS
Current Assets:
Cash and cash equivalents	$	9,841		$	9,245
Short-term investments		—			286
Trade accounts receivable, net		8,480			6,677
Other accounts receivable		1,383			1,509
Inventories		6,520			5,539
Deferred income taxes		668			579
Prepaid expenses and other current assets		472			269
Total current assets		27,364			24,104
Property, plant and equipment, net		8,957			8,893
Deferred income taxes		3,067			3,019
Other assets, net		375			368
Total assets	$	39,763		$	36,384
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$	4,101		$	2,990
Accrued expenses		5,586			4,492
Current portion of employee benefit obligations		225			225
Total current liabilities		9,912			7,707
Long-term Liabilities:
Employee benefit obligations		8,159			8,297
Other long-term liabilities		305			290
Commitments and contingencies
Stockholders’ Equity:
Preferred Stock ($.01 par value, 50,000,000 authorized) Series C (No shares were issued and outstanding at June 30, 2010 and September 30, 2009)		—			—
Common stock ($.01 par value, 12,500,000 authorized; 7,279,078 and 7,270,820 issued and outstanding at June 30, 2010 and September 30, 2009, respectively)		73			73
Additional paid-in capital		37,214			36,643
Accumulated deficit		(5,910	)		(6,776	)
Treasury stock (332,593 shares at June 30, 2010 and September 30, 2009)		(2,734	)		(2,734	)
Accumulated other comprehensive loss		(7,256	)		(7,116	)
Total stockholders’ equity		21,387			20,090
Total liabilities and stockholders’ equity	$	39,763		$	36,384

See accompanying notes to Unaudited Condensed Consolidated Financial Statements.

1

Williams Controls, Inc.
Condensed Consolidated Statements of Operations
(Dollars in thousands, except share and per share information)
(Unaudited)

	Three Months Ended June 30,						Nine Months Ended June 30,
	2010			2009			2010			2009
Net sales	$	13,764		$	8,444		$	38,122		$	28,266
Cost of sales		9,714			6,536			27,131			22,582
Gross profit		4,050			1,908			10,991			5,684
Operating expenses:
Research and development		1,191			844			3,406			3,000
Selling		695			585			2,115			1,866
Administration		1,224			1,112			4,020			4,242
Class action provision		—			—			775			—
Total operating expenses		3,110			2,541			10,316			9,108
Operating income (loss)		940			(633	)		675			(3,424	)
Other (income) expenses:
Interest income		(4	)		(5	)		(11	)		(21	)
Interest expense		4			4			13			14
Loss on impairment of investments		—			—			—			317
Gain on sale of investments		(441	)		—			(441	)		—
Other (income) expense, net		9			(1	)		(48	)		85
Total other expenses		(432	)		(2	)		(487	)		395
Income (loss) before income taxes		1,372			(631	)		1,162			(3,819	)
Income tax expense (benefit)		469			(298	)		296			(1,445	)
Net income (loss)	$	903		$	(333	)	$	866		$	(2,374	)
Net income (loss) per common share – basic	$	0.12		$	(0.05	)	$	0.12		$	(0.32	)
Weighted average shares used in per share calculation – basic		7,275,559			7,268,741			7,273,306			7,330,347
Net income (loss) per common share – diluted	$	0.12		$	(0.05	)	$	0.12		$	(0.32	)
Weighted average shares used in per share calculation – diluted		7,399,032			7,268,741			7,374,225			7,330,347

See accompanying notes to Unaudited Condensed Consolidated Financial Statements.

2

Williams Controls, Inc.
Condensed Consolidated Statements of Cash Flows
(Dollars in thousands)
(Unaudited)

	Nine months ended June 30,
	2010			2009
Cash flows from operating activities:
Net income (loss)	$	866		$	(2,374	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization		1,588			1,483
Deferred income taxes		(48	)		(22	)
Stock-based compensation		547			557
Loss on impairment of investments		—			317
Gain on sale of investments		(441	)		—
(Gain) loss from sale and disposal of property, plant and equipment		(16	)		80
Changes in operating assets and liabilities
Receivables, net		(1,677	)		3,500
Inventories		(981	)		2,285
Prepaid expenses and other current assets		(203	)		(154	)
Accounts payable and accrued expenses		2,119			(3,085	)
Other		(153	)		139
Net cash provided by operating activities		1,601			2,726
Cash flows from investing activities:
Purchases of property, plant and equipment		(1,563	)		(1,607	)
Proceeds from sale of property, plant and equipment		23			15
Proceeds from sale of investments		511			—
Net cash used in investing activities		(1,029	)		(1,592	)
Cash flows from financing activities:
Net proceeds from exercise of stock options		24			165
Repurchase of common stock		—			(2,357	)
Net cash provided by (used in) financing activities		24			(2,192	)
Net increase (decrease) in cash and cash equivalents		596			(1,058	)
Cash and cash equivalents at beginning of period		9,245			9,060
Cash and cash equivalents at end of period	$	9,841		$	8,002
Supplemental disclosure of cash flow information:
Income taxes paid	$	283		$	112
Interest paid	$	—		$	1

See accompanying notes to Unaudited Condensed Consolidated Financial Statements.

3

Williams Controls, Inc.
Notes to Condensed Consolidated Financial Statements
(Dollars in thousands, except share and per share amounts)
(Unaudited)

Note 1. Basis of Presentation

          In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments (which include normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows for the periods presented. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to the rules and regulations of the United States Securities and Exchange Commission (“SEC”). These condensed consolidated financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Williams Controls, Inc. (the “Company”) Annual Report on Form 10-K for the year ended September 30, 2009. The results of operations for the three and nine months ended June 30, 2010 are not necessarily indicative of the results to be expected for the entire fiscal year.

          The consolidated financial statements include the accounts of the Company and its subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.

          Certain reclassifications of amounts reported in the prior period financial statements have been made to conform to classifications used in the current period financial statements. This reclassification was to change the presentation of certain foreign VAT accounts from a gross basis to a net basis. This reclassification did not have any impact on the Company’s results of operations or net cash provided by operating activities for the periods presented.

Note 2. Recently Issued Accounting Pronouncements

          In April 2010, the Financial Accounting Standards Board (“FASB”) issued authoritative guidance which establishes criteria for a milestone to be considered substantive and allows revenue recognition when the milestone is achieved in research and development arrangements. In addition, this guidance requires disclosure of certain information with respect to arrangements that contain milestones. This guidance is effective for the Company prospectively beginning October 1, 2010. The Company has evaluated this guidance and does not expect its adoption will have a significant impact on the Company’s consolidated results of operation, financial position and cash flows.

          In June 2009, the FASB established the FASB Accounting Standards Codification (the “Codification”) as the single source of authoritative U.S. GAAP recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the SEC under authority of federal securities laws are also sources of authoritative U.S. GAAP for SEC registrants. While the Codification did not have a material impact on the Company’s consolidated financial statements upon adoption, our disclosures have been revised to describe accounting concepts and policies rather than cite specific topics of U.S. GAAP.

          In December 2008, the FASB issued authoritative guidance to require employers to provide additional disclosures about plan assets of a defined benefit pension or other post-retirement plan. These disclosures include information detailing investment policies and strategies, the major categories of plan assets, the inputs and valuation techniques used to measure the fair value of plan assets and an understanding of significant concentrations of risk within plan assets. This guidance was effective for the Company beginning in fiscal 2010 (October 1, 2009). This guidance is not required to be applied to earlier periods that are presented for comparative purposes and the adoption of this guidance did not have a material impact on the Company’s consolidated financial statements.

          In December 2007, the FASB issued authoritative guidance to affirm that the acquisition method of accounting (previously referred to as the purchase method) be used for all business combinations and for an acquirer to be identified for each business combination. This guidance requires certain financial statement disclosures to enable users to evaluate and understand the nature and financial effects of the business combination. This guidance must be applied prospectively to business combinations that are consummated on or after October 1, 2009. Accordingly, the Company will record and disclose business combinations under the revised standard for transactions consummated, if any, on or after October 1, 2009. The adoption of this guidance did not have a material impact on the Company’s consolidated financial statements.

4

          In February 2008, the FASB issued guidance which is effective for specified fair value measures of non-financial assets and liabilities for financial statements issued for fiscal years beginning after November 15, 2008. Adoption of this guidance in the first quarter of fiscal 2010 did not have any impact on the Company’s consolidated financial statements.

Note 3. Cash and Cash Equivalents

          Cash and cash equivalents include highly liquid investments with original maturities of three months or less. At June 30, 2010, cash and cash equivalents primarily consisted of cash deposits and an overnight sweep account held in one major U.S. financial institution. At June 30, 2010, approximately 92% of the Company’s cash and cash equivalents were held with one major financial institution in the United States with the remainder held in foreign banks or foreign currency denominated accounts. The Company maintains cash balances in bank accounts that normally exceed FDIC insured limits. As of June 30, 2010, cash and cash equivalents held in the United States exceeded federally insured limits by approximately $8,799. The Company has not experienced any losses related to this cash concentration.

Note 4. Trade Accounts Receivable

          Trade accounts receivable are presented net of an allowance for doubtful accounts of $147 and $246 at June 30, 2010 and September 30, 2009, respectively. Activity related to the allowance for doubtful accounts for the nine months ended June 30, 2010 and the full year ended September 30, 2009 consisted of the following:

	June 30, 2010			September 30, 2009
Beginning balance	$	246		$	47
Charges to bad debt expense		51			233
Write-offs, recoveries and adjustments		(150	)		(34	)
Ending balance	$	147		$	246

Note 5. Inventories

          Inventories, net of reserves, consist of the following:

	June 30, 2010		September 30, 2009
Raw materials	$	4,886	$	4,247
Work in process		32		39
Finished goods		1,602		1,253
	$	6,520	$	5,539

Note 6. Accrued Expenses

          Accrued expenses consist of the following:

	June 30, 2010		September 30, 2009
Environmental liability	$	999	$	1,001
Accrued product warranty		1,294		751
Accrued compensation and benefits		1,782		1,830
Class action provision		775		—
Other		736		910
	$	5,586	$	4,492

          For further discussion related to the Company’s environmental liability, class action provision and product warranty liability, refer to Notes 15 and 7, respectively.

5

Note 7. Product Warranties

          The Company establishes a product warranty liability based on a percentage of product sales. The liability is based on historical return rates of products and amounts for significant and specific warranty issues, and is included in accrued expenses in the accompanying condensed consolidated balance sheets. Warranty is limited to a specified time period, mileage or hours of use, and varies by product, application and customer. The Company has recorded a liability, which in the opinion of management, is adequate to cover such warranty costs. Warranty payments can vary significantly from year to year depending on the timing of the settlement of warranty claims with various customers. Following is a reconciliation of the changes in the Company’s warranty liability for the three months and nine months ended June 30, 2010 and 2009.

	Three Months Ended June 30,						Nine Months Ended June 30,
	2010			2009			2010			2009
Beginning balance	$	1,164		$	738		$	751		$	762
Payments		(92	)		(287	)		(396	)		(888	)
Additional accruals		222			153			939			730
Ending balance	$	1,294		$	604		$	1,294		$	604

          The increase in the ending warranty liability balance between periods is primarily due to accrued yet unpaid warranty claims related to one customer.

Note 8. Debt

          In June 2010, the Company entered into a revolving loan facility with U.S. Bank, which expires on June 30, 2012. As of June 30, 2010, there was no balance outstanding on the revolving loan facility.

          The revolving loan facility provides for $8,000 in borrowing capacity and is secured by substantially all the assets of the Company. Borrowings under the revolving loan facility are subject to a borrowing base equal to 75% of eligible accounts receivables and 50% of eligible inventories. Interest rates under the new agreement are based on the election of the Company of either a LIBOR rate or at Prime rate. Under the LIBOR rate option, the revolving loan facility will bear interest at the LIBOR rate plus 2.25% per annum for borrowings under the revolving loan facility. Fees under the loan agreement include an unused line fee of .15% per annum on the unused portion of the revolving loan facility.

          The Company had available under its revolving credit facility $5,746 at June 30, 2010.

Note 9. Comprehensive Income (Loss)

          The following table summarizes the components of comprehensive income (loss):

	Three Months Ended June 30,						Nine Months Ended June 30,
	2010			2009			2010			2009
Net income (loss)	$	903		$	(333	)	$	866		$	(2,374	)
Translation adjustment		8			—			8			3
Unrealized gain or (loss)		(275	)		23			(148	)		102
Comprehensive income (loss)	$	636		$	(310	)	$	726		$	(2,269	)

Note 10. Earnings (Loss) Per Share

          Basic EPS is based on the weighted-average number of common shares outstanding during the period. Diluted EPS is based on the weighted-average number of common shares outstanding and the dilutive impact of common equivalent shares outstanding.

          Following is a reconciliation of basic EPS and diluted EPS:

6

	Three Months Ended June 30, 2010						Three Months Ended June 30, 2009
	Income		Shares		Per Share Amount		Loss			Shares		Per Share Amount
Basic EPS –	$	903		7,275,559	$	0.12	$	(333	)		7,268,741	$	(0.05	)
Effect of dilutive securities – Stock options				123,473							—
Diluted EPS –	$	903		7,399,032	$	0.12	$	(333	)		7,268,741	$	(0.05	)
	Nine Months Ended June 30, 2010						Nine Months Ended June 30, 2009
	Income		Shares		Per Share Amount		Loss			Shares		Per Share Amount
Basic EPS –	$	866		7,273,306	$	0.12	$	(2,374	)		7,330,347	$	(0.32	)
Effect of dilutive securities – Stock options				100,919							—
Diluted EPS –	$	866		7,374,225	$	0.12	$	(2,374	)		7,330,347	$	(0.32	)

          For the three and nine months ended June 30, 2010, the Company had options covering 215,122 and 364,952 shares, respectively, that were not considered in the dilutive EPS calculation since they would have been antidilutive. For the three and nine months ended June 30, 2009, the Company had options covering 598,769 shares not considered in the dilutive EPS calculation since they would have been antidilutive.

Note 11. Fair Value Measurement

          Financial assets and liabilities recorded at fair value in the consolidated balance sheet are categorized based upon a fair value hierarchy established by U.S. GAAP, which prioritizes the inputs used to measure fair value into the following levels:

Level 1 –	observable inputs such as quoted prices in active markets for identical assets or liabilities;
Level 2 –	inputs, other than the quoted market prices in active markets, which are observable, either directly or indirectly; and
Level 3 –	unobservable inputs for which there is little or no market data available, which require the reporting entity to develop its own assumptions.

          The following table presents information about financial assets and liabilities measured at fair value on a recurring basis as of June 30, 2010:

	Fair Value as of June 30, 2010		Level 1		Level 2		Level 3
Cash and cash equivalents	$	9,841	$	9,841	$	—	$	—
Total financial assets and liabilities	$	9,841	$	9,841	$	—	$	—

          We use a market approach to determine the fair value of cash and cash equivalents, which include highly liquid investments with original maturities of three months or less. There were no assets and liabilities measured at fair value on a nonrecurring basis as of June 30, 2010.

7

          During the third quarter of fiscal 2010, the Company sold its short-term investments for cash proceeds of $511 and recorded a $441 net gain related to the sale. The majority of the shares sold related to the Company’s investment in Dana Holding CP (“Dana”) as part of the environmental settlement discussed in Note 16.

          Before the sale of short-term investments, all changes in market value of the Company’s short-term investments had been recorded net of tax in other comprehensive income (loss), except that in the first quarter of fiscal 2009, the Company recorded a non-cash, mark-to-market impairment charge of approximately $317 relating to its investment in Dana. The decision to record the impairment charge was based on the continued decline in the market value of the Dana stock, as well as the contraction of the market in which Dana operated.

Note 12. Employee Benefit Plans

Pension Plans

          Disclosures regarding the components of net periodic benefit cost and contributions of pension plans are required for interim financial statement purposes and are included below:

Components of Net Periodic Benefit Cost:

	Salaried Employees Plan
	Three Months Ended June 30,						Nine Months Ended June 30,
	2010			2009			2010			2009
Service cost	$	—		$	—		$	—		$	—
Interest cost		70			79			210			237
Expected return on plan assets		(55	)		(70	)		(165	)		(210	)
Amortization of prior service cost		—			—			—			—
Amortization of loss		33			26			99			78
Net periodic benefit cost	$	48		$	35		$	144		$	105
	Hourly Employees Plan
	Three Months Ended June 30,						Nine Months Ended June 30,
	2010			2009			2010			2009
Service cost	$	12		$	14		$	36		$	42
Interest cost		122			128			366			384
Expected return on plan assets		(87	)		(107	)		(261	)		(321	)
Amortization of prior service cost		3			4			9			12
Amortization of loss		45			79			135			237
Net periodic benefit cost	$	95		$	118		$	285		$	354

          During the nine months ended June 30, 2010 and 2009, the Company contributed $425 and $92, respectively, to the pension plans. The Company expects total contributions to its pension plans for the remainder of fiscal 2010 to be $146.

Post Retirement Plan

          Disclosures regarding the components of net periodic benefit cost and contributions of the Company’s post-retirement plan are required for interim financial statements and are included below. The Company did not make any contributions to the post-retirement plan for the three and nine months ended June 30, 2010 and 2009.

8

Components of Net Periodic Benefit Cost:

	Post-Retirement Plan
	Three Months Ended June 30,						Nine Months Ended June 30,
	2010			2009			2010			2009
Service cost	$	—		$	1		$	—		$	3
Interest cost		37			51			111			153
Amortization		(25	)		(22	)		(75	)		(66	)
Net periodic benefit cost	$	12		$	30		$	36		$	90

Note 13. Stock Repurchase Program

          The Company purchased no shares under the share repurchase program in the first three quarters of fiscal 2010. As of June 30, 2009, the Company had repurchased 310,893 shares of common stock at a total acquisition cost of $2,357.

Note 14. Income Taxes

          The Company’s unrecognized tax benefits remained unchanged during the nine months ended June 30, 2010. The Company believes that it is reasonably possible that unrecognized tax benefits could decrease by $12 within the 12 months of this reporting date.

          The Company’s subsidiary in China is entitled to a five-year tax holiday, pursuant to which it was exempted from paying the enterprise income tax for calendar year 2007, the year in which it first had positive earnings, and calendar year 2008. Additionally, the Company is eligible for reduced enterprise income tax rates of 10%, 11% and 12% for the calendar years 2009, 2010 and 2011, respectively. The income tax benefit of the tax holiday for the nine months ended June 30, 2010 and June 30, 2009 were $125 and $65, respectively. The per share effect of the tax holiday on a fully diluted basis for the same period were $0.02 and $0.01, respectively.

Note 15. Commitments and Contingencies

          The Company and its subsidiaries are parties to various pending judicial and administrative proceedings arising in the ordinary course of business. The Company’s management and legal counsel have reviewed the probable outcome of these proceedings, the costs and expenses reasonably expected to be incurred, the availability and limits of the Company’s insurance coverage, and the Company’s established liabilities. While the outcome of the pending proceedings cannot be predicted with certainty, based on its review, other than the Cuesta class action lawsuit discussed below, the Company believes that any unrecorded liability that may result is not more than likely to have a material effect on the Company’s liquidity, financial condition or results of operations.

          The soil and groundwater at the Company’s Portland, Oregon facility contains certain contaminants, which were deposited from approximately 1968 through 1995. Some of this contamination has migrated offsite to neighboring properties. The Company has retained an environmental consulting firm to investigate the extent of the contamination and to determine what remediation will be required and the associated costs. During fiscal 2004, the Company entered into the Oregon Department of Environmental Quality’s voluntary clean-up program. As of June 30, 2010, the total liability recorded is $999 and is recorded in accrued expenses in the accompanying condensed consolidated balance sheet. The Company asserted and settled a contractual indemnity claim against Dana, from which it acquired the property, and contribution claims against the other prior owner of the property as well as businesses previously located on the property (including Blount, Inc. (“Blount”) and Rosan, Inc. (“Rosan”)) under the Federal Superfund Act and the Oregon Cleanup Law. During 2008, the Company entered into a settlement agreement with Dana, Blount and Rosan under which it received total cash payments from Dana, Blount and Rosan of $735, and shares of Dana stock equal to approximately $356 at the time of settlement, and assumed the full obligation to, and risks associated with, completing the remediation.

          On October 1, 2004, the Company was named as a co-defendant in a product liability case (Cuesta v. Ford, et al), brought in the Oklahoma State District Court in Bryant, Oklahoma. The complaint seeks an unspecified amount of damages on behalf of the class based on allegations that certain of our products, as incorporated into certain models of Ford motor vehicles, are in some way defective. Management continues to believe the claim to be without merit; however, the Company has entered into a settlement agreement between and among Ford and the plaintiff group. During the second quarter of fiscal 2010, the Company recorded a $775 provision for a full settlement and release of all

9

claims. The settlement agreement involves settlements with both Ford and the Company, with the Company’s settlement costs to be $775. Such settlement will require court approval, which the Company believes is probable.

Note 16. Share-Based Compensation

          The Company currently has two qualified stock option plans. At the February 24, 2010 Annual Meeting, our stockholders approved the adoption of the 2010 Restated Stock Option Plan (the “Employee Plan”), which amends, restates and renames the Company’s 1993 Restated Stock Option Plan. The Employee Plan reserves an aggregate of 1,170,000 shares of the Company’s common stock for the issuance of stock options, which includes a 300,000 share increase in authorized shares approved by the stockholders at the 2010 Annual Meeting. These shares may be granted to employees, officers and directors of and consultants to the Company. Under the terms of the Employee Plan, the Company may grant “incentive stock options” or “non-qualified options” with an exercise price of not less than the fair market value on the date of grant. Options granted under the Employee Plan have a vesting schedule, which is typically five years, determined by the Compensation Committee of the Board of Directors and expire ten years after the date of grant. The Employee Plan also permits the Compensation Committee to establish the terms of each award made under the plan and allows the committee to vary from the plan’s standard terms under circumstances the committee deems appropriate. Our stockholders also approved the adoption of the 2010 Restated Formula Stock Option Plan for non-employee Directors (the “Formula Plan”), which amends, restates and renames the Company’s 1995 Formula Stock Option Plan. The Formula Plan reserves an aggregate of 106,666 shares of the Company’s common stock for the issuance of stock options, which includes a 20,000 share increase in authorized shares approved by the stockholders at the 2010 Annual Meeting. These shares may be granted to non-employee directors of the Company. Under this plan the non-employee directors are each automatically granted 1,666 options at a price equal to the market value on the date of grant which is the date of the Annual Meeting of Stockholders each year, exercisable for 10 years after the date of the grant. These options are exercisable as to 25% of the shares thereby on the date of grant and as to an additional 25%, cumulatively on the first, second and third anniversaries of the date of grant.

          As of June 30, 2010, there was $1,655 of total unrecognized compensation costs related to nonvested stock options. That cost is expected to be recognized over a weighted average period of 3.3 years.

          The Company’s share-based compensation expenses were recorded in the following expense categories for the three and nine months ended June 30, 2010 and 2009:

	Three Months Ended June 30,				Nine Months Ended June 30,
	2010		2009		2010		2009
Cost of sales	$	45	$	24	$	102	$	99
Research and development		38		20		88		60
Selling		29		16		62		61
Administration		141		123		295		337
Total share-based compensation expense	$	253	$	183	$	547	$	557
Total share-based compensation expense (net of tax)	$	236	$	131	$	501	$	449

          In the third quarter of fiscal 2010, the Company elected to pay 7% of Patrick W. Cavanagh’s, President and Chief Executive Officer, fiscal 2010 salary in common stock of the Company and issued 2,196 shares of restricted common stock at $8.92 per share. Also during the third quarter of fiscal 2010, the Company paid $5 of Dennis E. Bunday’s, Executive Vice President and Chief Financial Officer, and $3 of Mark S. Koenen’s, Vice President of Sales and Marketing, salary in common stock of the Company and issued 560 and 336 shares, respectively, of restricted common stock at $8.92 per share. In the third quarter of fiscal 2009, the Company elected to pay 7% of Mr. Cavanagh’s fiscal 2009 salary in common stock of the Company and issued 3,839 shares of restricted common stock at $5.10 per share. Also during the third quarter of fiscal 2009, the Company paid $5 of Mr. Bunday’s and $3 of Mr. Koenen’s salary in common stock of the Company and issued 979 and 587 shares, respectively, of restricted common stock at $5.10 per share.

          The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions used for grants issued during the three and nine months ended June 30, 2010 and 2009:

10

	Three Months Ended June 30,					Nine months ended June 30,
	2010			2009 (1)		2010			2009
Expected term		6.5 years			—		6.5 years			5.8 years
Expected volatility		43	%		—		46	%		46	%
Risk-free interest rate		2.51	%		—		2.85	%		2.03	%
Expected dividend yield		0	%		—		0	%		0	%
Estimated average fair value per option granted	$	4.04			—	$	4.10		$	2.32

          (1) There were no stock options granted during the three months ended June 30, 2009.

          The following table summarizes stock options outstanding as of June 30, 2010 as well as activity during the nine months then ended:

	Number of Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value
Outstanding at September 30, 2009		598,769		$	9.40		5.9 years	$	1,184
Granted		216,996			8.31
Exercised		(5,166	)		4.65
Expired		(2,999	)		13.08
Forfeited		(2,166	)		11.18
Outstanding at June 30, 2010		805,434		$	9.12		6.3 years	$	1,312
Exercisable at June 30, 2010		475,860		$	8.12		4.6 years	$	1,144

          The aggregate intrinsic value in the table above represents pre-tax intrinsic value that would have been realized if all options had been exercised on the last business day of the period indicated, based on the Company’s closing stock price on that day. The intrinsic value of all stock options exercised during the three and nine months ended June 30, 2010 was $11 and $19, respectively. The intrinsic value of all stock options exercised during the three and nine months ended June 30, 2009 was $138. Cash received from the exercise of stock options for the three and nine months ended June 30, 2010 was $12 and $24, respectively. Cash received from the exercise of stock options for the three and nine months ended June 30, 2009 was $165.

Note 17. Enterprise-wide Information

          During the three and nine months ended June 30, 2010 and 2009, the Company operated in two geographic reportable regions as shown in the table below.

	Three Months Ended June 30,						Nine Months Ended June 30,
	2010			2009			2010			2009
Revenue – External Customers:
United States	$	12,748		$	7,734		$	35,781		$	26,797
China		1,016			710			2,341			1,469
	$	13,764		$	8,444		$	38,122		$	28,266
Revenue – Intercompany:
United States	$	434		$	85		$	939		$	310
China		3,399			1,487			8,699			5,102
Other		178			151			576			455
Eliminations		(4,011	)		(1,723	)		(10,214	)		(5,867	)
	$	—		$	—		$	—		$	—
Loss before income taxes:
United States	$	1,050		$	(876	)	$	283		$	(4,477	)
China		340			235			889			653
Other		(18	)		10			(10	)		5
	$	1,372		$	(631	)	$	1,162		$	(3,819	)

11

Note 18. Subsequent Events

On July 28, 2010, the Company paid a cash dividend of $1.00 per share on the Company’s outstanding common shares to shareholders of record as of the close of business on July 14, 2010. The total dividend payment is $7,284.

12

Williams Controls, Inc.

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations
	(Dollars in thousands, except share and per share amounts)

Forward-Looking Statements

          This quarterly report on Form 10-Q contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements include all statements other than those that expressly connote an assertion of historical fact. Among others, this report includes forward looking statements that describe our plans and intentions regarding future courses of action and the possible outcomes of those intentions, and that set forth our expectations regarding our prospective financial condition, results of operations, and cash flows. Forward-looking statements can sometimes be identified by the use of forward-looking terminology, such as “may “, “will”, “should “, “expect”, “anticipate”, “estimate”, “continue,” “plans” and “intends”. Although we believe that the expectations reflected in such forward-looking statements are reasonable, such forward-looking statements are subject to risks and uncertainties that could cause us to deviate from our current plans, and could cause our actual results to differ materially from those indicated by the forward-looking statements. Some of the known factors that could cause us to deviate from current plans or could cause our results to fall short of expectations include: our ability to maintain positive relationships with key customers; the concentration of our sales revenues among a limited number of large customers; our status as a component manufacturer and the resulting impact on our revenues of demand for vehicles in which our products are installed; the effect of product liability lawsuits that directly affect us and that indirectly impact us because of their effect on the automotive and equipment industries generally; the impact of foreign currency exchange rates on our gross income; the impact of federal monetary and trade policies that impact the market for our products; and the status of our relationships with our employees and organized labor force. These risks and uncertainties are beyond our control and, in many cases; we cannot predict the risks and uncertainties that could cause our actual results to differ materially from those indicated by the forward-looking statements. Some of the factors that may cause our actual results in future periods to differ materially from those currently expected or desired because of a number of risks and uncertainties include, but are not limited to, those risks discussed in the section entitled “Risk Factors” in our annual report on Form 10-K for the fiscal year ended September 30, 2009.

          The forward-looking statements are made as of the date hereof, and, except as otherwise required by law, we cannot undertake to update or revise these statements.

Overview

          We design, manufacture and sell electronic throttle controls, pneumatic controls and electronic hand controls, and we have begun selling electronic sensors for heavy trucks, transit busses and off-road equipment. Electronic throttle controls send a signal proportional to throttle position to adjust the speed of electronically controlled engines. The use of electronically controlled engines is influenced primarily by emissions regulations, because these engines generally produce lower emissions. The original applications of electronic engines and electronic throttle controls were in heavy trucks and transit busses in the United States and Europe in the late 1980’s. As a result of the continuing implementation of more stringent emissions standards in many countries around the world, demand for electronically controlled engines and electronic throttle control systems is expanding both geographically and into lower horsepower engines. China, India and Russia are in the process of implementing more stringent emissions standards for heavy trucks and transit busses. Additionally, worldwide emissions regulations have been enacted that continue to increase the use of electronic throttle controls in off-road equipment. We also produce pneumatic controls and electronic hand controls, which are sold to the same customer base as our electronic throttle controls. These products are used for vehicle control system applications such as power take-off’s and air-control applications. We believe that the demand for our products will be driven primarily by worldwide emissions legislation and the economic cycles for heavy trucks, transit busses and off-road equipment.

          As we move forward in fiscal 2010 and beyond, we plan to continue to work closely with our existing and potential customers to design and develop new products and adapt existing products to new applications, and to improve the performance, reliability and cost-effectiveness of our products.

13

Critical Accounting Policies and Estimates

          Management’s discussion and analysis of our financial condition and results of operations are based on our condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these condensed consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, sales, cost of sales and expenses and related disclosure of contingent assets and liabilities. We evaluate our estimates on an on-going basis. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. We believe the following critical accounting policies and the related judgments and estimates affect the preparation of our condensed consolidated financial statements.

Revenue Recognition

          Revenue is recognized at the time of product shipment, which is when title and risk of loss transfers to customers, and when all of the following have occurred: a firm sales agreement is in place, pricing is fixed or determinable, and collection is reasonably assured. Revenues are reported net of estimated returns, rebates and customer discounts. Discounts and rebates are recorded during the period they are earned by the customer.

Product Warranty

          We provide a warranty covering defects arising from products sold. The product warranty liability is based on historical return rates of products and amounts for significant and specific warranty issues. The warranty is limited to a specified time period, mileage or hours of use, and varies by product, application and customer. The Company has recorded a warranty liability, which in the opinion of management, is adequate to cover such costs. While we believe our estimates are reasonable, they are subject to change and such change could be material.

Legal

          We are involved in various claims, lawsuits and other proceedings from time to time. Such litigation involves uncertainty as to possible losses we may ultimately realize when one or more future events occur or fail to occur. In connection with such claims and lawsuits, we estimate the probability of losses based on advice of legal counsel, the outcomes of similar litigation, legislative development and other factors. Due to the numerous variables associated with these judgments and assumptions, both the precision and reliability of the resulting estimates of the related loss contingencies are subject to substantial uncertainties. We regularly monitor our estimated exposure to these contingencies and, as additional information becomes known, may change our estimates significantly. We expense legal expenses related to claims in the period incurred, including, in the case of expenses subject to contingencies, in the period in which we determine that it is probable that all remaining contingencies will be satisfied and the amount of such expenses have been established with reasonable certainty. A significant change in our estimates, or a result that materially differs from our estimates, could have a significant impact on our financial position, results of operations and cash flows.

Environmental Costs

          We estimate the costs of investigation and remediation for certain soil and groundwater contaminants at our Portland, Oregon facility. The ultimate costs to the Company for the investigation, remediation and monitoring of this site cannot be predicted with certainty due to the often unknown magnitude of the pollution or the necessary cleanup, the varying costs of alternative cleanup methods, the amount of time necessary to accomplish such cleanups and the evolving nature of cleanup technologies and governmental regulations. The Company has recognized a liability for environmental remediation costs for this site in an amount that management believes is probable and reasonably estimable. When the estimate of a probable loss is within a range, the minimum amount in the range is accrued when no estimate within the range is better than another. In making these judgments and assumptions, the Company considers, among other things, the activity to-date at the site and information obtained through consultation with applicable regulatory authorities and third party consultants and contractors. The Company regularly monitors its exposure to environmental loss contingencies. As additional information becomes known, it is at least reasonably possible that a change in the estimated liability accrual will occur in the near future.

14

Pensions and Post-Retirement Benefit Obligations

          Pension and post-retirement benefit obligations and net period benefit cost are calculated using actuarial models. The most important assumptions that affect these computations are the discount rate, expected long-term rate of return on plan assets, and healthcare cost trend rates. We evaluate these assumptions at least annually. Other assumptions involve demographic factors such as retirement, mortality and turnover. These assumptions are evaluated at least annually and are updated to reflect our experience. Actual results in any given year will often differ from actuarial assumptions because of economic and other factors.

          Our discount rate assumption is intended to reflect the rate at which retirement benefits could be effectively settled based upon the assumed timing of the benefit payments. To determine our discount rate, we discount the expected benefit payments using the Citigroup Pension Discount Liability Index yield curve. The equivalent level interest rate that produces the same present value of benefits is then determined. Our assumed rate does not differ significantly from this benchmark rate. To determine the expected long-term rate of return on pension plan assets, we consider the current asset allocations and the historical and expected returns on various categories of plan assets obtained from our investment portfolio manager. Our post-retirement plan does not contain any plan assets.

Share Based Compensation Expense

          We measure compensation cost for all outstanding unvested share-based awards, and awards we grant, modify, repurchase or cancel in the future, at fair value and recognize compensation over the requisite service period for awards expected to vest. The estimation of stock awards that will ultimately vest requires judgment, and to the extent actual results differ from our estimates, such amounts will be recorded as a cumulative adjustment in the period estimates are revised. We consider many factors when calculating fair value including estimated stock price volatility, expected term and expected forfeitures. Factors considered in estimating forfeitures include the types of awards, employee class, and historical experience. Actual results may differ substantially from these estimates.

Income Taxes

          For each jurisdiction that we operate in, we are required to estimate our annual effective tax rate together with assessing temporary differences resulting from differing treatment of items for tax and accounting purposes. These differences result in deferred tax assets and liabilities, which are included in our consolidated balance sheet. We must also assess the likelihood that our deferred tax assets will be recovered from future taxable income and unless we believe that recovery is more likely than not, a valuation allowance is established. Our income tax provision on the consolidated statement of operations would be impacted by changes in the valuation allowance. This process is complex and involves significant management judgment in determining our provision for income taxes, deferred tax assets and liabilities and any valuation allowances recorded against our net deferred tax assets.

15

Results of Operations

Financial Summary
(Dollars in Thousands)

	Three Months Ended June 30,									Nine Months Ended June 30,
	2010			2009			Percent Change			2010			2009			Percent Change
Net sales	$	13,764		$	8,444			63.0	%	$	38,122		$	28,266			34.9	%
Cost of sales		9,714			6,536			48.6	%		27,131			22,582			20.1	%
Gross profit		4,050			1,908			112.3	%		10,991			5,684			93.4	%
Research and development		1,191			844			41.1	%		3,406			3,000			13.5	%
Selling		695			585			18.8	%		2,115			1,866			13.3	%
Administration		1,224			1,112			10.1	%		4,020			4,242			(5.2	)%
Class action provision		—			—			NM			775			—			NM
Operating income (loss)	$	940		$	(633	)		248.5	%	$	675		$	(3,424	)		119.7	%
As a percentage of net sales:
Cost of sales		70.6	%		77.4	%					71.2	%		79.9	%
Gross margin		29.4	%		22.6	%					28.8	%		20.1	%
Research and development		8.7	%		10.0	%					8.9	%		10.6	%
Selling		5.0	%		6.9	%					5.5	%		6.6	%
Administration		8.9	%		13.2	%					10.5	%		15.0	%
Class action provision		—			—						2.0	%		—
Operating income (loss)		6.8	%		(7.5	)%					1.8	%		(12.1	)%

          Net sales increased to $13,764 for the third quarter of fiscal 2010, up 18% and 9% when compared to the first quarter and second quarter of fiscal 2010, respectively. The low point of the economic cycle relevant to our operations appears to have occurred during our third fiscal quarter of 2009 and sales have steadily increased since that time with third quarter 2010 sales being 63% higher than the third quarter of fiscal 2009. Although we have seen improvement from our low point in fiscal 2009, the heavy truck industry is still significantly below levels prior to the economic downturn with our third quarter sales run rate being approximately 16% below fiscal 2008 sales levels. While we continue to closely monitor all of our costs, we remain committed to spending on new product development and technology for existing and new customers. At the end of the third quarter, the Company announced a cash dividend of $1.00 per share of the Company’s outstanding common shares as of July 14, 2010. Although no assurances can be given, management believes that it is likely that our estimated $2,557 in cash (after such dividend payment) plus available borrowing of $5,746 under our revolving loan facility will be adequate to sustain the Company through the foreseeable future.

Comparative – Three months ended June 30, 2010 and 2009

NM = Not Meaningful

			Percent Change
For the Three Months Ended June 30:	2010	2009	2009 to 2010
Net sales	$13,764	$8,444	63.0%

          Net sales increased $5,320 in the third quarter of fiscal 2010 compared to the third quarter of fiscal 2009. The increase in sales results from volume increases in all markets worldwide as the low point of the economic cycle relevant to our operations appears to have occurred during the quarter of fiscal 2009. NAFTA truck sales were up 51% when compared to the third quarter of fiscal 2009 due to continued improvements in the economic environment and freight hauling industry. It is possible NAFTA truck sales will slightly improve over the next few quarters as the economic environment continues to improve. Asian truck sales increased 47% over the prior year quarter primarily due to increased sales volumes of heavy trucks in Korea and heavy trucks and off-road vehicles in China. Increases in off-road volumes in China primarily results from adoption of more stringent emissions standards in China which require the types of products sold by the Company. European truck sales were up 113% over the same period in fiscal 2009 due to

16

our European customers increasing their heavy truck build rates. In the third quarter of fiscal 2009, most of our large truck OEM customers in Europe had reduced their build rates due to the slowing economy resulting in significantly higher than normal inventory levels. Worldwide off-road sales were up 101% for the quarter ended June 30, 2010. The largest contributor to this increase in off-road sales was attributable to the NAFTA market, where off-road sales were up 106% primarily due to continued increases in sales related to United States military vehicle applications.

			Percent Change
For the Three Months Ended June 30:	2010	2009	2009 to 2010
Cost of sales	$9,714	$6,536	48.6%

          The types of expenses included in cost of sales include raw materials consumption; freight and duty; warranty; wages and benefits; depreciation and amortization; production utilities; shipping and production supplies; repairs and maintenance; production facility property insurance; and other production overhead. As a percent of sales, cost of sales decreased primarily due to higher sales volumes across which we can distribute fixed overhead costs. Wage related expenses increased slightly in fiscal 2010 as the third quarter of fiscal 2009 included temporary salary reductions as part of the cost reductions put into place during the latter part of fiscal 2009. Warranty costs were up slightly quarter over quarter as the Company increased its warranty accrual related to warranty claims with one customer. Additionally, freight and duty costs were up on a quarter over quarter basis.

			Percent Change
For the Three Months Ended June 30:	2010	2009	2009 to 2010
Gross profit	$4,050	$1,908	112.3%

          Gross profit was $4,050, or 29.4% of net sales in the third quarter of fiscal 2010, an increase of $2,142 compared to the gross profit of $1,908, or 22.6% of net sales, in the comparable fiscal 2009 period.

          The increase in gross profit in the third quarter of fiscal 2010 is primarily driven by the 63% net increase in sales of electronic throttle systems to our heavy truck and off-road customers. When comparing the third quarter of fiscal 2010 with the comparable period in fiscal 2009, manufacturing overhead costs were up in actual dollar value for the three months ended June 30, 2010, but because of the aforementioned increase in sales volume, were 10% lower as a percentage of sales than the third quarter of fiscal 2009.

			Percent Change
For the Three Months Ended June 30:	2010	2009	2009 to 2010
Research and development	$1,191	$844	41.1%

          Research and development expenses increased $347 for the third quarter of fiscal 2010 compared to the comparable period in fiscal 2009. This increase is primarily due to increased resources, including additional headcounts, being committed to new project development for sensors and joysticks. In addition, the third quarter of fiscal 2009 included temporary wage reductions for all employees as part of the Company’s cost reduction program in fiscal 2009. The Company’s research and development expenditures generally will fluctuate based on the programs and products under development at any given point in time, and that fluctuation often does not coincide with sales cycles. Overall, we expect research and development expenses to increase slightly over fiscal 2009 levels due to the continued efforts related to additional new product design projects.

			Percent Change
For the Three Months Ended June 30:	2010	2009	2009 to 2010
Selling	$695	$585	18.8%

          Selling expenses increased $110 when compared with the same period in fiscal 2009. The increase in selling expenses is primarily driven by increases in wage expenses, travel costs and sales commissions in relation with the increase in net sales worldwide.

17

			Percent Change
For the Three Months Ended June 30:	2010	2009	2009 to 2010
Administration	$1,224	$1,112	10.1%

          Administration expenses increased $112 for the third quarter of fiscal 2010 compared to the same period in fiscal 2009. On a quarter over quarter basis, wage expenses increased due to the third quarter of fiscal 2009 including temporary wage reductions. In addition, expenses associated with the start-up of our India operations increased, bad debt expense slightly increased, however; legal fees remained consistent between periods.

			Percent Change
For the Three Months Ended June 30:	2010	2009	2009 to 2010
Gain on sale of investments	$ (441)	$—	NM

          During the third quarter of fiscal 2010, the Company sold its short-term investments and recorded a $441 gain related to the sale. The majority of the shares sold related to the Company’s investment in Dana as part of the environmental settlement discussed in Note 15 to our unaudited condensed consolidated financial statements.

			Percent Change
For the Three Months Ended June 30:	2010	2009	2009 to 2010
Income tax expense (benefit)	$469	$ (298)	257.4%

          Income tax expense (benefit) reflects an effective tax rate of 34.2% for the quarter ended June 30, 2010 compared to an effective tax rate of 47.2% for the quarter ended June 30, 2009. The effective tax rate fluctuations are primarily due to the jurisdictions in which pretax income (loss) is being earned and income tax rate differences between the domestic and foreign jurisdictions. The decrease in the tax rate from 2009 to 2010 is also partially due to a discrete tax benefit recognized during the three months ended June 30, 2010 associated with the sale of short-term investments.

Comparative – Nine months ended June 30, 2010 and 2009

NM = Not Meaningful

			Percent Change
For the Nine Months Ended June 30:	2010	2009	2009 to 2010
Net sales	$38,122	$28,266	34.9%

          Net sales increased $9,856 in the first nine months of fiscal 2010 compared to the first nine months of fiscal 2009. As was the case in the third quarter of fiscal 2010, the overall increase in sales in 2010 was due to volume increases in essentially all of the Company’s principal markets. In fiscal 2009, we saw significant reductions in the number of units of trucks, busses and off-road vehicles built world-wide due to the significant recessionary pressures in the United States and many parts of the rest of the world and as a result, essentially all of our large truck OEM customers had reductions in build rates and took extensive down-time throughout the year. As the economic climate has improved worldwide in fiscal 2010 and as our truck OEM customers have increased build rates, the result has been an overall increase in sales volumes in all worldwide markets.

          Net sales to customers in Asia increased 73% over the prior year period primarily due to increased sales volumes of heavy trucks in Korea and heavy trucks and off-road vehicles in China. Increases in off-road volumes in China primarily results from adoption of more stringent emissions standards in China, which mandate the inclusion of electronic throttle controls on new vehicles, thus allowing us to expand our customer base in this market. Korean sales have increased due to improvements in the economic climate in Korea and an increase in the number of truck sales. European truck sales were up 70% over the same period in fiscal 2009 due to our European customers increasing their heavy truck build rates and working through the build up of inventory levels experienced in fiscal 2009. Net sales to NAFTA truck customers were up 17% when compared to the first nine months of fiscal 2009 due to continued improvements in the economic environment and freight hauling, which more than offset the expected declines associated with the emission standards enacted in North America in calendar 2010 which would drive higher truck costs to comply with these new emission standards. We anticipate that NAFTA truck sales may slightly improve over the next few quarters as the economic environment continues to improve. Worldwide off-road sales were up 60% for the first nine months ended June 30, 2010. The largest contributor to this increase in off-road sales was seen in the NAFTA

18

market, where off-road sales were up 50% primarily due to continued increases in sales related to United States military vehicle applications.

			Percent Change
For the Nine Months Ended June 30:	2010	2009	2009 to 2010
Cost of sales	$27,131	$22,582	20.1%

          The types of expenses included in cost of sales include raw materials consumption; freight and duty; warranty; wages and benefits; depreciation and amortization; production utilities; shipping and production supplies; repairs and maintenance; production facility property insurance; and other production overhead. As a percent of sales, cost of sales decreased primarily due to higher sales volumes to distribute fixed overhead. Additionally, the first nine months of fiscal 2009 included settlement of outstanding labor issues and severance costs totaling $320 and a $116 write-down to our capitalized license fee related to adjustable pedal technology due to the significant decline in business in the recreational vehicle industry. Repairs and maintenance costs and pension costs decreased $141 and $86, respectively, in first nine months of fiscal 2010 from the comparable period in fiscal 2009. Slightly offsetting some of these decreases was an increase in warranty costs of $211 during the first nine months of fiscal 2010 when compared to the same period in fiscal 2009 and primarily relates to warranty claims with one customer. In addition, freight and duty costs increased $491 for the first nine months of fiscal 2010 when compared to the same period in fiscal 2009.

			Percent Change
For the Nine Months Ended June 30:	2010	2009	2009 to 2010
Gross profit	$10,991	$5,684	93.4%

          Gross profit was $10,991, or 28.8% of net sales in the first nine months of 2010, an increase of $5,307 compared to gross profit of $5,684, or 20.1% of net sales, in the comparable fiscal 2009 period.

          The increase in gross profit in the first nine months of fiscal 2010 is primarily driven by the 34.9% net increase in sales of electronic throttle systems to our heavy truck, bus and off-road customers. When comparing the first nine months of fiscal 2010 with the comparable period in fiscal 2009, manufacturing overhead costs were 9% lower as a percent of sales than the first nine months of fiscal 2009, primarily due to the factors described above under cost of sales.

			Percent Change
For the Nine Months Ended June 30:	2010	2009	2009 to 2010
Research and development	$3,406	$3,000	13.5%

          Research and development expenses increased $406 during the first nine months of fiscal 2010 when compared to the first nine months of fiscal 2009. This increase is primarily due to increased resources, including additional headcounts, being committed to new project development for sensors and joysticks. The Company’s research and development expenditures will fluctuate based on the products under development at any given point in time, and that fluctuation often does not coincide with sales cycles. Overall, we expect research and development expenses to increase slightly over fiscal 2009 levels due to additional new product design projects.

			Percent Change
For the Nine Months Ended June 30:	2010	2009	2009 to 2010
Selling	$2,115	$1,866	13.3%

          Selling expenses increased $249 during the nine months ended June 30, 2010 as compared with the nine months ended June 30, 2009 mainly due to an increase in travel expenses and sales commissions, which tend to correlate with relatively higher sales volumes.

			Percent Change
For the Nine Months Ended June 30:	2010	2009	2009 to 2010
Administration	$4,020	$4,242	(5.2)%

19

          Administration expenses for the first nine months of fiscal 2010 decreased $222 when compared with the same period in fiscal 2009. The decrease in administration expenses is primarily due to the a $275 non-cash compensation expense recognized in conjunction with the Company’s unfunded deferred compensation plan during the first quarter of fiscal 2009, a decrease of $129 in bad debt expenses, reduced stock option expense of $42 and a decrease in professional and consulting costs of $84. Offsetting some of these decreases was a $264 increase in legal fees primarily associated with the Cuesta class action lawsuit.

			Percent Change
For the Nine Months Ended June 30:	2010	2009	2009 to 2010
Class action provision	$775	$—	NM

          During the second quarter of fiscal 2010, the Company recorded a $775 liability which represents the agreed upon amount for the Company per the settlement agreement related to the Cuesta class action lawsuit discussed in Note 15 to our unaudited condensed consolidated financial statements. During the third quarter of fiscal 2010, the settlement agreement was signed by all parties and the class has been notified of the proposed settlement and we believe it is probable the court will consider approval of this settlement after the notice period has elapsed.

			Percent Change
For the Nine Months Ended June 30:	2010	2009	2009 to 2010
Loss on impairment of investments	$—	$317	NM

          Loss on impairment of investments is a non-cash, other-than-temporary impairment charge relating to the Company’s investment in Dana Holding CP (“Dana”) during the first quarter of fiscal 2009. Prior to the Company recording the impairment charge, the decline in market value was carried net of tax in other comprehensive loss.

			Percent Change
For the Nine Months Ended June 30:	2010	2009	2009 to 2010
Gain on sale of investments	$ (441)	$—	NM

          During the third quarter of fiscal 2010, the Company sold its short-term investments and recorded a $441 gain related to the sale. The majority of the shares sold related to the Company’s investment in Dana as part of the environmental settlement discussed in Note 15 to our unaudited condensed consolidated financial statements.

			Percent Change
For the Nine Months Ended June 30:	2010	2009	2009 to 2010
Other (income) expense	$ (48)	$85	(156.5)%

          Other (income) expense was income of $48 in the first nine months of fiscal 2010 compared to expense of $85 in the first nine months of fiscal 2009. Other income in the first nine months of fiscal 2010 consisted of a $70 gain from the extinguishment of old outstanding accounts payable balances of various insolvent subsidiaries, whereas other expense in the first nine months of fiscal 2009 primarily consisted of losses related to the disposal of certain fixed assets.

			Percent Change
For the Nine Months Ended June 30:	2010	2009	2009 to 2010
Income tax expense (benefit)	$296	$ (1,445)	120.5%

          Tax benefit reflects an effective tax rate of 25.5% for the first nine months of fiscal 2010 compared to an effective tax rate of 37.8% for the comparable period in fiscal 2009. The effective tax rate fluctuations are primarily due to the jurisdictions in which pretax income (loss) is being earned and income tax rate differences between the domestic and foreign jurisdictions. The decrease in the tax rate from 2009 to 2010 is primarily due to discrete tax benefits recognized during the nine months ended June 30, 2010 associated with the class action lawsuit and the sale of short-term investments.

          Income tax expense (benefit) was benefited by $125 and $65 as a result of a tax holiday in the People’s Republic of China during the nine months ended June 30, 2010 and 2009, respectively.

20

Financial Condition, Liquidity and Capital Resources

          At June 30, 2010, we had cash and cash equivalents of $9,841. During the quarter, the Company declared a $1.00 per share cash dividend to be paid to all stockholders of record in July 2010. The cash dividend to be paid is $7,284. Also during the third quarter of fiscal 2010, the Company entered into a revolving loan facility with U.S. Bank and as of June 30, 2010 we had $5,746 available under our revolving loan facility. We believe our cash on hand and our capacity under the new revolving loan facility will be sufficient to meet our working capital needs on a short-term and longer-term basis.

          Cash generated by operating activities was $1,601 for the first nine months of fiscal 2010, a decrease of $1,125 from the cash generated by operating activities of $2,726 during the first nine months of fiscal 2009. Net income plus non-cash charges for depreciation and stock based compensation contributed $3,001 in the first nine months of fiscal 2010 compared to a charge of $334 in the first nine months of fiscal 2009.

          Changes in working capital items used cash of $895 in the first nine months of fiscal 2010 compared to generating cash of $2,685 in the first nine months of fiscal 2009. Changes in receivables for the first nine months of fiscal 2010 was a use of cash of $1,677 compared to a $3,500 generation of cash in the first nine months of fiscal 2009. The significant cash generation from the collection of receivables in the first nine months of fiscal 2009 was due to the reduction in sales and accounts receivable due to the deterioration of the general economy during that quarter. The increase in receivables in fiscal 2010 is the result of higher sales levels. Inventories increased $981 in the first nine months of fiscal 2010 in relation to increased sales compared to a decrease of $2,285 in the first nine months of fiscal 2009. Accounts payable and accrued expenses increased in the first nine months of fiscal 2010 primarily due to increases in purchases of inventory and supplies to remain in line with the significant increase in sales volumes and the accrual of the Cuesta legal settlement, whereas the decrease in accounts payable and accrued expenses in 2009 was primarily due to the lower sales and inventory purchases. Cash flows from operations for the nine months ended June 30, 2010 included payments to our pension plans of $425 compared to contributions of $92 for the nine months ended June 30, 2009. We believe it is likely we will continue to generate positive cash from operations, however, depending on changes in the world-wide economic market, we could experience periods of negative cash flow from operations.

          Cash used in investing activities was $1,029 for the nine months ended June 30, 2010 and $1,592 for the nine months ended June 30, 2009 and was comprised primarily of purchases of equipment for both periods. Cash flows from investing activities for the quarter ended June 30, 2010 included $511 of proceeds related to the sale of investments. We expect our cash use for investing activities to increase throughout the fiscal year as we continue to make purchases of capital equipment. We anticipate spending no more that $3,500 in fiscal 2010 related to the purchase of capital equipment.

          Cash generated in financing activities was $24 for the nine months ended June 30, 2010, compared to cash used in financing activities of $2,192 for the nine months ended June 30, 2009. Cash generated for financing activities for the first nine months of fiscal 2010 relates to proceeds from the exercise of stock options. In October 2008, the Company announced a share repurchase plan whereby the Company can, but is under no obligation to, repurchase up to $5,000 of the Company’s common stock. Repurchases may be made in the open market or through block trades, in compliance with Securities and Exchange Commission guidelines, subject to market conditions, applicable legal requirements and other factors. During the first nine months of fiscal 2009, the Company purchased 310,893 shares of common stock at a total value of $2,357 and did not make any repurchases during the first nine months of fiscal 2010. In addition, the first nine months of fiscal 2009 included cash generation of $165 related to proceeds from the exercise of stock options.

Contractual Obligations as of June 30, 2010

          At June 30, 2010, our contractual obligations consisted of operating lease obligations and a license agreement. We did not have any material letters of credit, or debt guarantees outstanding at June 30, 2010. Maturities of these contractual obligations consist of the following:

21

	Payments due by period
	Total		Less than 1 year		1 – 3 years		3 – 5 years
Operating lease obligations	$	1,703	$	728	$	975	$	—
MMT license - minimum royalties		250		50		150		50
	$	1,953	$	778	$	1,125	$	50

          Certain liabilities, including those related to our pension and post-retirement benefit plans, are reported in the accompanying condensed consolidated balance sheets but are not reflected in the table above due to the absence of stated maturities. We have net obligations at June 30, 2010 related to our pension plans and post-retirement medical plan of $5,702 and $2,682, respectively. We funded $425 to our pension plans during the first nine months of fiscal 2010 compared to $92 during the first nine months of fiscal 2009. We expect to make payments to our pension plans of $146 throughout the rest of fiscal 2010.

Item 3.        Quantitative and Qualitative Disclosures About Market Risk

          Market risk is the potential loss arising from adverse changes in market rates and prices, such as interest rates, foreign currency exchange rates and changes in the market value of investments. The Company’s primary market risk results from fluctuations in exchange rates of foreign currency exchange rates.

Interest Rate Risk

          The Company has a revolving loan facility with U.S. Bank, which expires on June 30, 2012.

          As of June 30, 2010, there was no balance outstanding on the revolving loan. The Company does not believe a hypothetical 10% change in end of period interest rates or changes in future interest rates on these variable rate obligations would have a material effect on its financial position, results of operations, or cash flows. The Company has not hedged its exposure to interest rate fluctuations.

Foreign Currency Risk:

          We sell our products to customers in the heavy truck, transit bus and off-road equipment industries. For the nine months ended June 30, 2010 and 2009, the Company had foreign sales of approximately 40% and 36% of net sales, respectively. All worldwide sales in the first nine months of fiscal 2010 and 2009, with the exception of $2,341 and $1,469, respectively, were denominated in U.S. dollars. During fiscal 2005, we established a manufacturing facility in Suzhou, China and we opened sales offices in Shanghai, China and Munich, Germany. During fiscal 2010, we are establishing a manufacturing facility in Pune, India. We purchase components internationally for use in both our products whose sales are denominated in U.S. dollars and other currencies. Although the Company is expanding its international exposure, it does not believe that changes in future exchange rates would have a material effect on its financial position, results of operations, or cash flows at this time. As a result, the Company has not entered into forward exchange or option contracts for transactions to hedge against foreign currency risk. The Company will continue to assess its foreign currency risk as its international operations, international purchases and sales increase.

Investment Risk:

          The Company does not use derivative financial or commodity instruments. The Company’s financial instruments include cash and cash equivalents, accounts receivable, accounts payable and long-term obligations. The Company’s cash and cash equivalents, accounts receivable and accounts payable balances are short-term in nature, and, thus, the Company believes they are not exposed to material investment risk.

22

Item 4.        Controls and Procedures

Evaluation of Disclosure Controls and Procedures

          The Company’s Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934 (the “Exchange Act”). Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of the period covered by this report, our disclosure controls and procedures are effective in ensuring that information required to be disclosed in our Exchange Act reports is (1) recorded, processed, summarized and reported in a timely manner, and (2) accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Controls

          There has been no change in the Company’s internal controls over financial reporting that occurred during our last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.

          Internal control systems, no matter how well designed and operated, have inherent limitations. Therefore, even a system which is determined to be effective cannot provide absolute assurance that all control issues have been detected or prevented. Our systems of internal controls are designed to provide reasonable assurance with respect to financial statement preparation and presentation.

23

PART II – OTHER INFORMATION

Item 1.	Legal Proceedings
We are a party to various pending judicial and administrative proceedings arising in the ordinary course of business. Our management and legal counsel have reviewed the probable outcome of these proceedings, the costs and expenses reasonably expected to be incurred, the availability and limits of our insurance coverage, and our established liabilities. While the outcome of the pending proceedings cannot be predicted with certainty, based on our review, other than the Cuesta class action lawsuit discussed below, we believe that any unrecorded liability that may result is not likely to have a material effect on our liquidity, financial condition or results of operations.
On October 1, 2004, the Company was named as a co-defendant in a product liability case (Cuesta v. Ford, et al), brought in the Oklahoma State District Court in Bryant, Oklahoma. The complaint seeks an unspecified amount of damages on behalf of the class based on allegations that certain of our products, as incorporated into certain models of Ford motor vehicles, are in some way defective. Management continues to believe the claim to be without merit, however, the Company has entered into a settlement agreement between and among Ford and the plaintiff group. During the second quarter of fiscal 2010, the Company recorded a $775 provision for a full settlement and release of all claims. The settlement agreement involves settlements with both Ford and the Company, with the Company’s settlement costs to be $775. Such settlement will require court approval, which the Company believes is probable.
Item 1A.	Risk Factors
There have been no material changes in risk factors for the quarter ended June 30, 2010. See the information set forth in the section entitled “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended September 30, 2009.
Item 3.	Defaults Upon Senior Securities
None
Item 4.	Reserved
Item 5.	Other Information
None
Item 6.	Exhibits

Exhibit Number		Description
3.01	(a)	Certificate of Incorporation of the Registrant, as amended (Incorporated by reference to Exhibit 3.01 (a) to the Registrant’s quarterly report on Form 10-Q for the quarter ended December 31, 2006)
3.01	(b)	Certificate of Amendment to Certificate of Incorporation of the Registrant, dated February 27, 1995 (Incorporated by reference to Exhibit 3.01 (b) to the Registrant’s quarterly report on Form 10-Q for the quarter ended December 31, 2006)
3.01	(c)	Certificate of Amendment to Certificate of Incorporation of the Registrant, dated October 28, 2004 (Incorporated by reference to Exhibit 3.01 (c) to the Registrant’s quarterly report on Form 10-Q for the quarter ended December 31, 2006)
3.01	(d)	Certificate of Amendment to Certificate of Incorporation of the Registrant, dated February 22, 2005 (Incorporated by reference to Exhibit 3.01 (d) to the Registrant’s quarterly report on Form 10-Q for the quarter ended December 31, 2006)
3.01	(e)	Certificate of Amendment to Certificate of Incorporation of the Registrant, dated March 2, 2006 (Incorporated by reference to Exhibit 3.01 (e) to the Registrant’s quarterly report on Form 10-Q for

24

	the quarter ended December 31, 2006)
3.02	Restated By-Laws of the Registrant as amended July 1, 2002 (Incorporated by reference to Exhibit 3.6 to the Registrant’s quarterly report on Form 10-Q, Commission File No. 000-18083, for the quarter ended June 30, 2002)
31.01	Certification of Chief Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a) (Filed herewith)
31.02	Certification of Chief Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a) (Filed herewith)
32.01	Certification of Patrick W. Cavanagh Pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Filed herewith)
32.02	Certification of Dennis E. Bunday Pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Filed herewith)

25

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.

	WILLIAMS CONTROLS, INC.
Date: August 9, 2010	/s/ PATRICK W. CAVANAGH
	Patrick W. Cavanagh
	President and Chief Executive Officer
Date: August 9, 2010	/s/ DENNIS E. BUNDAY
	Dennis E. Bunday
	Chief Financial Officer

26

EX-31.01

Exhibit 31.01

CERTIFICATION

I, Patrick W. Cavanagh, certify that:

          1. I have reviewed this report on Form 10-Q of Williams Controls Inc.;

          2. Based on my knowledge, this report does not contain any untrue statement of material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

          3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

          4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f) and 15d-15(f)) for the registrant and have:

          a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

          b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

          c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

          d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

          5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

          a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

          b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 9, 2010	/s/ PATRICK W. CAVANAGH
	Patrick W. Cavanagh
	Chief Executive Officer

EX-31.02

Exhibit 31.02

CERTIFICATION

I, Dennis E. Bunday, certify that:

          1. I have reviewed this report on Form 10-Q of Williams Controls Inc.;

          2. Based on my knowledge, this report does not contain any untrue statement of material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

          3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

          4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f) and 15d-15(f)) for the registrant and have:

          a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

          b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

          c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

          d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

          5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

          a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

          b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 9, 2010	/s/ DENNIS E. BUNDAY
	Dennis E. Bunday
	Chief Financial Officer

EX-32.01

Exhibit 32.01

CERTIFICATION OF CHIEF EXECUTIVE OFFICER
REQUIRED BY RULE 13a-14(b) or RULE 15d-14(b)
AND SECTION 906 OF THE SARBANES-OXLEY ACT
OF 2002, 18 U.S.C. SECTION 1350

In connection with the Quarterly Report of Williams Controls, Inc (the “Company”) on Form 10-Q for the period ended June 30, 2010 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Patrick W. Cavanagh, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that:

(1)	The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

/s/ PATRICK W. CAVANAGH

Patrick W. Cavanagh

Chief Executive Officer

Williams Controls, Inc.

August 9, 2010

EX-32.02

Exhibit 32.02

CERTIFICATION OF CHIEF FINANCIAL OFFICER
REQUIRED BY RULE 13a-14(b) or RULE 15d-14(b)
AND SECTION 906 OF THE SARBANES-OXLEY ACT
OF 2002, 18 U.S.C. SECTION 1350

In connection with the Quarterly Report of Williams Controls, Inc (the “Company”) on Form 10-Q for the period ended June 30, 2010 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Dennis E. Bunday, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that:

(1)	The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

/s/ DENNIS E. BUNDAY

Dennis E. Bunday

Chief Financial Officer

Williams Controls, Inc.

August 9, 2010