Back to GetFilings.com
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
{ X }Annual report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the fiscal year ended September 30, 1996 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) (Zip Code)
Registrant's telephone number, including area code (815) 877-7441
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
None None
Securities registered pursuant to Section 12(g) of the Act:
Common stock, par value $.0625 per share
(Title of Class)
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. {X}
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
As of November 30, 1996, 2,887,095 shares of common stock with a par value
of $.0625 per share were outstanding. The aggregate market value on this
date of the voting stock held by non-affiliates of the registrant was
approximately $237,180,384 (such aggregate market value does not include
voting stock beneficially owned by directors, officers, the Woodward
Governor Company Profit Sharing Trust or the Woodward Governor Company
Charitable Trust).
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's annual report for the fiscal year ended
September 30, 1996, a copy of which is attached hereto, are incorporated by
reference into Parts I, II and IV hereof, to the extent indicated herein.
Portions of the registrant's proxy statement dated December 3, 1996, are
incorporated by reference into Part III hereof, to the extent indicated
herein.
Part I
Item 1. Business
(a) General Description of Business
Woodward Governor Company, established in 1870,designs and
manufactures engine fuel delivery and engine control systems,
subsystems and components. Products include devices that are
used on diesel engines, steam turbines, industrial and
aircraft gas turbines and hydraulic turbines.
Woodward sells directly to original equipment manufacturers,
service providers and equipment users world wide.
There have been no material changes in the mode of conducting
the business during the last five years.
(b) Industry Segments
Information with respect to business segments is set forth in
Note N to the consolidated financial statements on Page 29 of
the registrant's annual report for the fiscal year ended
September 30, 1996 and is hereby incorporated by reference.
(c)(1) Narrative Description of Business
(i) Information with respect to business segments is set forth
in Note N to the consolidated financial statements on Page
29 of the registrant's annual report for the fiscal year
ended September 30, 1996 and is hereby incorporated by
reference.
(ii) There has been no public information regarding a new
product or line of business requiring the investment of a
material amount of total assets.
(iii)Most of the Company's products are machined from cast iron,
cast aluminum and bar steel. Many of the Company's
machined products are produced by contractors. In
addition to the machined parts, there is an increasing
number of purchased electrical components used. There are
numerous sources of most of the raw materials and
components used by the Company in its operations, and they
are believed to be in adequate supply. Woodward products
utilize software or purchased electromagnetic products as
their core technology.
(iv) The Company has pursued a policy of applying for patents in
both the United States and certain other countries on
inventions made in the course of its development work. The
Company regards its patents collectively as important, but
does not consider its business dependent upon any one of
such patents.
(v) The Company's business is not subject to significant seasonal
variation.
(vi) The Company maintains inventory levels sufficient to meet
customer demands. The Company's working capital
requirements are not materially affected by return policies
or extended credit terms provided to customers.
(vii)One customer, General Electric Company, accounted for
approximately 17% of consolidated sales during the fiscal
year ended September 30, 1996. Seven other customers in
total accounted for approximately 18% of consolidated sales
in the fiscal year ended September 30, 1996. Sales to
these customers involve several autonomous divisions and
agencies. Products are supplied on the basis of individual
purchase orders and contracts. There are no other material
relationships between the Company and such customers.
(viii)Unfilled orders at September 30, 1996 totalled $218,020,000
or 24% higher than the September 30, 1995 total of
$175,336,000. Management believes that unfilled orders is
not necessarily an indicator of future shipment levels. As
customers demand shorter lead times and flexibility in
delivery schedules, they have also revised their purchasing
practices. As a result, orders may become firm only within
thirty to sixty days of delivery. Consequently, the
backlog of unfilled orders at the year-end cannot be relied
upon as a valid indication of profitability in a subsequent
year. Of the September 30, 1996 total, $172,017,000
currently is scheduled for fiscal year 1997 delivery.
(ix) The Company does business with various U.S. government
agencies, principally in the defense area, as both a prime
contractor and a subcontractor. Substantially all
contracts are firm fixed price and may require cost data to
be submitted in connection with contract negotiations. The
contracts are subject to government audit and review. It
is anticipated that adjustments, if any, with respect to
determination of reimbursable costs, will not have a
material effect on the Company's financial condition.
Substantially all of the Company's business, including both
commercial and government contracts, is subject to
cancellation by the customer. The military portion of all
shipments has increased from approximately 7 percent of
total company shipments last year to 10 percent this year.
Military shipments are principally made by the Company's
Aircraft Controls business.
(x) The Company competes with several other manufacturers,
including divisions of large diversified and integrated
manufacturers. The Company also competes with other
divisions of its major customers. Although competition has
increased worldwide, the Company believes it maintains a
significant competitive position within its line of
business. The Company has several competitors in all
product applications. Published information pertinent to
the Company's product line and its competitors is not
available in sufficient detail to permit an accurate
assessment of its current relative competitive position.
The principal methods of competition in the industry are
price, product quality and customer service. In the
opinion of management, the Company's prices are generally
competitive and its product quality and customer service
are favorable competitive factors.
(xi) Information with respect to research and development is set
forth in Note A to the consolidated financial statements on
Page 24 of the registrant's annual report for the fiscal
year ended September 30, 1996 and is hereby incorporated by
reference. The Company's products, whether proposed by the
Company or requested by a customer, are offered for sale as
proprietary designs and products of the Company.
Consequently, all activities associated with basic
research, the development of new products and the
refinement of existing products are Company-sponsored.
(xii)Compliance with provisions regulating the discharge of
materials into the environment has caused and will continue
to require capital expenditures. The Company is involved in
certain environmental matters, in several of which it has
been designated a "de minimis potentially responsible
party" with respect to the cost of investigation and
cleanup of third-party sites. The Company's current
accrual for these matters is based on costs incurred to
date that have been allocated to the Company and its
estimate of the most likely future investigation and
cleanup costs. There is, as in the case of most
environmental litigation, the theoretical possibility of
joint and several liability being imposed upon the Company
for damages which may be awarded.
It is the opinion of management, after consultation with
legal counsel, that additional liabilities, if any,
resulting from these matters are not expected to have a
material adverse effect on the financial condition of the
Company, although such matters could have a material effect
on quarterly or annual operating results and cash flows
when (or if) resolved in a future period.
(xiii)Information with respect to the number of persons employed
by the Company is set forth in the "Summary of
Operations/Ten Year Record" on Page 31 of the registrant's
annual report for the fiscal year ended September 30, 1996
and is hereby incorporated by reference. As of November
30, 1996, 3228 members were employed by the Company.
(d) Company Operations
Information with respect to operations in the United States
and other countries is set forth in Note N to the consolidated
financial statements on Page 29 of the registrant's annual
report for the fiscal year ended September 30, 1996 and is
hereby incorporated by reference. Management is of the
opinion there are no unusual risks attendant to the conduct of
its operations in other countries.
Item 2. Description of Property
The registrant has plants located in five communities in the
United States. Aircraft controls and related aircraft components
are manufactured in Rockford, Illinois, and Buffalo, New York
while industrial controls are manufactured in Fort Collins and
Loveland, Colorado. The overhaul and repair of aircraft controls
and sales of aircraft controls spare parts are done in the
Rockton, Illinois facility. The registrant has ten facilities
located overseas. Industrial controls are manufactured in
Hoofddorp, The Netherlands; Reading, England; Aken and Kelbra
Germany; and Tomisato, Chiba, Japan. Aircraft controls are
assembled in Reading as well. A European aircraft product
service center for overhaul and repair of aircraft controls is
located in Hoofddorp, The Netherlands. Service shops are
maintained in Sydney, Australia; Kobe, Japan; Campinas, Sao
Paulo, Brazil; Singapore, Republic of Singapore; and Ballabgarh,
India.
All facilities were in excellent condition at the year-end and
adequate production capacity is available to satisfy the
Company's customers' needs throughout the coming year.
In 1995, a plant in Stevens Point, Wisconsin was closed except
for a small portion of the plant currently being leased to a
Woodward contractor. The plant has been placed for sale with an
international real estate broker. As yet, no acceptable offers
have been received. The Company sold Bauer Aerospace in Avon,
Connecticut during fiscal 1996, as discussed in the "Financial
Summary and Analysis" on page 14 of the registrant's annual
report for the fiscal year ended September 30, 1996 and is hereby
incorporated by reference.
Corporate offices are maintained at the plant in Rockford,
Illinois. Plants located in Rockford and Rockton, Illinois; Fort
Collins and Loveland, Colorado; Buffalo, New York; Hoofddorp, The
Netherlands; and Chiba, Japan are owned by the Company. The
facilities in Kobe, Japan; Campinas, Sao Paulo, Brazil; Reading,
England; Sydney, Australia; Ballabgarh, India; Aken and Kelbra
Germany; and Singapore, Republic of Singapore are leased.
Additional leased sales offices are maintained worldwide.
Item 3. Legal Proceedings
The Company is currently involved in matters of litigation
arising from the normal course of business, including certain
environmental and product liability matters. For a further
discussion of these issues refer to Note L to the consolidated
financial statements on page 28 of the registrant's annual report
for the fiscal year ended September 30, 1996 which is hereby
incorporated by reference.
Item 4. Submission of Matters to a Vote of Shareholders
There were no matters submitted during the fourth quarter of the
year ended September 30, 1996 to a vote of shareholders, through
the solicitation of proxies or otherwise.
Executive Officers of the Registrant
John A. Halbrook, age 51, is chairman and chief executive officer and was
elected to this position on January 10, 1995. He was elected chief
executive officer on November 16, 1993 and served as president from
November 1991 until January 1995. He also served as chief operating
officer from November 1991 until November 16, 1993. He had formerly been
senior vice president in charge of Domestic Operations since January 1990.
Vern H. Cassens, age 64, is senior vice president and chief financial
officer and was elected to this position during 1988. Prior to this
appointment he had been a vice president since 1983 and treasurer of the
company from 1968 to 1983. He was also treasurer of the Company from 1988
until September 1996.
Stephen P. Carter, age 45, was elected a vice president and treasurer of
the Company in September, 1996. He had been serving as assistant treasurer
since January 1994. He has been employed by the Company in management
positions for the last five years.
Ronald E. Fulkrod, age 52, is a vice president of the Company and
Industrial Controls Manufacturing manager. He was elected to the vice
president position in January 1993. He has been employed by the Company in
management positions for the last five years.
Chuck Kovac, age 40, was elected vice president of the Company and manager
of the Industrial Controls Group in August 1996. He started with the
Company in 1988 and has been employed in management positions for the last
five years.
C. Phillip Turner, age 56, is a vice president of the Company and manager
of the Aircraft Controls Group. He was elected vice president in 1988. He
was treasurer of the Company from 1983 to 1988, and secretary of the
Company from 1977 to 1991.
Carol J. Manning, age 47, is secretary of the Company. She was elected to
this position in June 1991. She also served as administrative assistant to
the chairman of the board from 1984 to 1994.
All of the executive officers, unless otherwise noted, were elected to
their present positions at the January 10, 1996 Board of Directors' meeting
to serve until the organizational meeting of the Board of Directors to be
held on January 8, 1997 or until their respective successors shall have
been elected and qualified.
Part II
Item 5. Market for the Registrant's Common Stock
and Related Shareholder Matters
Information with respect to number of shareholders is set forth
in "Financial Highlights" which appears on Page 1 in the
registrant's annual report for the fiscal year ended September
30, 1996 and is hereby incorporated by reference. Information
with respect to common stock and dividends is set forth in the
"Financial Summary and Analysis" on Page 18 of the registrant's
annual report for the fiscal year ended September 30, 1996 and is
hereby incorporated by reference. No equity securities of the
Company were sold by the Company during the fourth quarter of the
fiscal year ended September 30, 1996.
Item 6. Selected Financial Data
Information with respect to this matter is set forth in the
"Summary of Operations/Ten Year Record" on Page 31 of the
registrant's annual report for the fiscal year ended September
30, 1996 and is hereby incorporated by reference.
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Management's Discussion and Analysis of Financial Condition and
Results of Operations is set forth in the "Financial Summary and
Analysis" on Pages 13 through 18 of the registrant's annual
report for the fiscal year ended September 30, 1996 and is hereby
incorporated by reference.
Information with respect to forward-looking statements is set
forth in the "Financial Summary and Analysis" on page 13 of the
registrant's annual report for the fiscal year ended September
30, 1996 and is hereby incorporated by reference.
Item 8. Financial Statements and Supplementary Data
Information with respect to this matter is set forth in the
registrant's annual report for the fiscal year ended September
30, 1996 (Financial Statements), as further set forth in the
Index to Consolidated Financial Statements and Schedules (See
Item 14) and is hereby incorporated by reference.
Item 9. Changes in and Disagreements on Accounting and Financial
Disclosure
The accounting firm of Coopers & Lybrand L.L.P. has been engaged
since 1940. There have been no disagreements on any matter of
accounting principles or practices or financial statement
disclosure.
Part III
Item 10. Directors and Executive Officers of the Registrant
Information with respect to directors and executive officers,
except for the information with respect to executive officers
which appears in Part I of this report, is set forth under the
caption "Election of Directors" on Pages 7 and 8 of the
registrant's proxy statement dated December 3, 1996, which was
filed with the Securities and Exchange Commission within 120 days
following the end of the registrant's fiscal year ended September
30, 1996, and is made a part hereof.
Item 11. Executive Compensation
Information with respect to executive compensation is set forth
under the caption "Executive Compensation" on Pages 9 through 13
of the registrant's proxy statement dated December 3, 1996,
which is made a part hereof.
Item 12. Security Ownership of Certain
Beneficial Owners and Management
Information with respect to security ownership of certain
beneficial owners and management is set forth under the captions
"Security Ownership of Principal Holders and Executive Officers"
on Page 6 and "Election of Directors" on Pages 7 and 8 of the
registrant's proxy statement dated December 3, 1996, which is
made a part hereof.
Item 13. Certain Relationships and Related Transactions
Information with respect to certain relationships and related
transactions is set forth under the caption "Compensation
Committee Interlocks and Insider Participation" on Page 13 of the
registrant's proxy statement dated December 3, 1996, which is
made a part hereof.
Part IV
Item 14.
Exhibits, Financial Statement
Schedule, and Reports on Form 8-K
(a) Index to Consolidated Financial Statements and Schedule
Reference
Form 10-K Annual Report
Annual Report to Shareholders
Page Page
Data incorporated by reference to the
registrant's annual report to shareholders
for the fiscal year ended September 30, 1996:
Statements of Consolidated Earnings (Loss)
for the years ended September 30, 1996,
1995 and 1994 - 20
Consolidated Balance Sheets
at September 30, 1996 and 1995 - 21
Statements of Consolidated Shareholders'
Equity for the years ended September 30,
1996, 1995 and 1994 - 22
Statements of Consolidated
Cash Flows for the years ended
September 30, 1996, 1995 and 1994 - 23
Notes to Consolidated Financial Statements - 24-29
Report of Independent Accountants - 30
Financial Statement Schedule:
Report of Independent Accountants S-1 -
II. Valuation and Qualifying Accounts S-2 -
Exhibits, Financial Statement
Schedule, and Reports on Form 8-K (continued)
Financial statements and schedules other than those listed on the
preceding page are omitted for the reason that they are not applicable,
are not required, or the information is included in the financial
statements or the footnotes therein.
(b) There were no reports filed on Form 8-K during the fourth quarter of
the fiscal year ended September 30, 1996.
(c) The following exhibits are filed as part of this report:
(3)Articles of incorporation Articles of incorporation are
and by-laws set forth in the exhibits
filed with Form 10-K for the
fiscal year ended September
30, 1977 and are hereby
incorporated by reference.
Two amendments to the
Articles of incorporation
effective January 14, 1981
are set forth in the exhibits
filed with Form 10-K for the
fiscal year ended September
30, 1981 and are hereby
incorporated by reference.
Two amendments to the
Articles of incorporation
effective January 11, 1984
are set forth in exhibits
filed with Form 10-K for the
fiscal year ended September
30, 1984 and are hereby
incorporated by reference.
One amendment to the Articles
of incorporation effective
January 13, 1988 is set forth
in exhibits filed with Form
10-K for the fiscal year
ended September 30, 1988 and
is hereby incorporated by
reference.
By-laws as amended through
September 30, 1992 together
with three amendments to the
By-laws effective November
16, 1993 are set forth in
exhibits filed with Form 10-K
for the fiscal year ended
September 30, 1993 and are
hereby incorporated by
reference.
Exhibits, Financial Statement
Schedule, and Reports on Form 8-K (continued)
(3) Articles of incorporation One amendment to the by-law
and bylaws (continued) effective June 22, 1994 is
set forth in exhibits filed
with Form 10-K for the fiscal
year ended September 30, 1994
and is hereby incorporated
by reference.
Three amendments to the by-
laws effective January 11,
1995, March 29, 1995 and June
28, 1995 are set forth in
exhibits filed with form 10-K
for the fiscal year ended
September 30, 1995 and are
hereby incorporated by
reference.
Two amendments to the by-laws
effective January 15, 1996 and
January 23, 1996 are filed
herewith.
(4) Instruments defining the Instruments with respect to
rights of security holders, long-term debt and the ESOP
including indentures debt guarantee are not being
filed as they do not
individually exceed 10
percent of the registrant's
assets. The registrant
agrees to furnish a copy of
each such instrument to the
Commission upon request.
(13)Annual report to Except to the extent
shareholders for the fiscal specifically incorporated
year ended September 30, herein by reference, said
1996 report is furnished solely
for the information of the
Commission and is not deemed
"filed" as part of this
report.
(21)Subsidiaries of the Information with respect to
registrant subsidiary operations is
filed as an exhibit hereto.
(23)Consent of Independent Consent of Independent
Accountants Accountants is filed as an
exhibit hereto.
(27)Financial data schedule Information with respect to
financial data required by
electronic filers is filed as
an exhibit hereto.
SIGNATURES
This report has been prepared in accordance with the rules and regulations
of the Securities and Exchange Commission and the financial statements
referenced herein have been prepared in accordance with such rules and
regulations and with generally accepted accounting principles, by officers
and worker members of Woodward Governor Company. This has been done under
the general supervision of Vern H. Cassens, senior vice president and chief
financial officer. The consolidated financial statements have been audited
by Coopers & Lybrand L.L.P., independent accountants, as indicated in
their report in the annual report to shareholders for the fiscal year ended
September 30, 1996.
This report contains much detailed information of which the various
signatories cannot and do not have independent personal knowledge. The
signatories believe, however, that the preparation and review processes
summarized above are such as to afford reasonable assurance of compliance
with applicable requirements.
Pursuant to the requirements of Section 13 or 15(d) 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
(Registrant)
Name
/s/ John A. Halbrook Director, Chairman of the
John A. Halbrook Board and Chief Executive
Officer
/s/ Vern H. Cassens Director, Senior Vice
Vern H. Cassens President and Chief
Financial and
Date 12/19/96 Accounting Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated:
Signature Title Date
/s/ J. Grant Beadle Director
J. Grant Beadle
/s/ Carl J. Dargene Director 12/18/96
Carl J. Dargene
/s/ Lawrence E. Gloyd Director 12/19/96
Lawrence E. Gloyd
/s/ Thomas W. Heenan Director
Thomas W. Heenan
/s/ J. Peter Jeffery Director
J. Peter Jeffrey
/s/ Mark Leum Director 12/19/96
Mark Leum
/s/ Michael T. Yonker Director 12/20/96
Michael T. Yonker
REPORT OF INDEPENDENT ACCOUNTANTS
Shareholders and Worker Members
Woodward Governor Company
Our report on the consolidated financial statements of Woodward Governor
Company and Subsidiaries has been incorporated by reference in this Form
10-K from Page 30 of the 1996 Annual Report to Shareholders and Worker
Members of Woodward Governor Company and Subsidiaries. In connection with
our audits of such financial statements, we have also audited the related
financial statement schedule listed in the index on Page 11 of this Form
10-K.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.
COOPERS & LYBRAND L.L.P.
Chicago, Illinois
November 12, 1996
WOODWARD GOVERNOR COMPANY AND SUBSIDIARIES
SCHEDULE VIII -VALUATION AND QUALIFYING ACCOUNTS
for the years ended September 30, 1996, 1995 and 1994
(In thousands of dollars)
Col. A Col. B Col. C Col. D Col. E
Additions
Balance at Charged to Charged to Balance
Beginning Costs and Other at End
DESCRIPTION of Year Expenses Accounts (B) Deductions(A) of Year
1996:
Allowance for
Doubtful accounts $4,605 $937 $50 $2,837 $2,755
1995:
Allowance for
Doubtful accounts $3,021 $2,192 $32 $640 $4,605
1994:
Allowance for
Doubtful accounts $1,989 $977 $218 $163 $3,021
NOTE:
(A) Represents accounts written off during the year with overseas
currency translation adjustments increasing the deduction from
reserves by $99 in 1996 and decreasing the deduction from
reserves by $80 in 1995 and $71 in 1994. Writeoffs in 1996
were $1,864, with the remaining portion related to reduction of
previously established reserves based on an overall assessment
of accounts.
(B) Recovery of accounts previously written off.