SECURITIES AND EXCHANGE COMMISSION 	Washington, D.C. 20549 	FORM 10-Q { X }	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) 	OF THE SECURITIES EXCHANGE ACT OF 1934 	For the quarter ended June 30, 1996 Commission File #0-8408 	OR { }	TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE 	SECURITIES EXCHANGE ACT OF 1934 	 WOODWARD GOVERNOR COMPANY 	(Exact name of registrant as specified in its charter) Delaware 36-1984010 (State or other jurisdiction of I.R.S. Employer identification No.) incorporation or organization) 	5001 North Second Street, Rockford, Illinois 61125-7001 	(Address of principal executive offices) 	Registrant's telephone number - (815) 877-7441 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. 				Yes X No As of July 31, 1996, 2,886,854 shares of common stock with a par value of 6.25 cents per share were outstanding. 	WOODWARD GOVERNOR COMPANY 	FORM 10-Q 	For the Quarter Ended June 30, 1996 	INDEX Description				 Part I.	Financial Information 	Item 1.	Financial Statements 			Statements of Consolidated Earnings for the	 			Three Months Ended June 30, 1996 and 1995 			Statements of Consolidated Earnings for the Nine	 			Months Ended June 30, 1996 and 1995 			Consolidated Balance Sheets as of June 30, 1996 	 			and September 30, 1995 			Statements of Consolidated Cash Flows for the Nine	 			Months Ended June 30, 1996 and 1995 	 			Note to Consolidated Financial Statements	 	Item 2.	Management's Discussion and Analysis of Financial	 			Condition and Results of Operations Part II. Other Information		 Signatures			 WOODWARD GOVERNOR COMPANY AND SUBSIDIARIES							 STATEMENTS OF CONSOLIDATED EARNINGS							 for the three months ended June 30, 1996 and 1995							 (in thousands except per share amounts)							 (Unaudited)							 1996 1995 Net billings for products and services $106,034 $90,808 							 Costs and expenses:							 							 Cost of goods sold 79,312 66,704 							 Sales, service and administrative							 expenses 16,534 18,100 							 Restructuring expense - $1,172 Interest expense $760 976 Interest (income) (107) (166) Miscellaneous expense, net 1,259 1,912 1,297 3,279 							 Total costs and expenses 97,758 88,083 							 Earnings before income taxes 8,276 2,725 							 Income taxes 3,311 1,117 							 Net earnings $4,965 $1,608 							 Net earnings per share $1.72 $0.55 							 Average shares outstanding 2,895 2,910 							 Cash dividends per share $0.93 $0.93 							 							 See accompanying note to consolidated financial statements.							 WOODWARD GOVERNOR COMPANY AND SUBSIDIARIES							 STATEMENTS OF CONSOLIDATED EARNINGS							 for the nine months ended June 30,1996 and 1995							 (in thousands except per share amounts)							 (Unaudited)							 1996 1995 Net billings for products and services $300,961 $271,036 							 Costs and expenses:							 							 Cost of goods sold 224,412 198,429 							 Sales, service and administrative							 expenses 47,978 49,075 							 Restructuring expense - $5,909 Interest expense $2,568 2,802 Interest (income) (448) (372) Miscellaneous expense, net 3,633 5,753 2,896 11,235 							 Total costs and expenses 278,143 258,739 							 Earnings before income taxes 22,818 12,297 							 Income taxes 9,128 5,041 							 Net earnings $13,690 $7,256 							 Net earnings per share $4.73 $2.49 							 Average shares outstanding 2,889 2,910 							 Cash dividends per share $2.79 $2.79 							 							 							 							 See accompanying note to consolidated financial statements.							 WOODWARD GOVERNOR COMPANY AND SUBSIDIARIES				 CONSOLIDATED BALANCE SHEETS				 (in thousands of dollars)				 JUNE SEPTEMBER 30,1996 30,1995 (Unaudited) Assets Current assets: Cash and cash equivalents $5,955 $12,451 Accounts receivable, less allowance for losses of $2,995 for June and $4,605 for September 76,779 81,880 Inventories 96,169 92,831 Deferred income taxes 21,853 21,853 Total current assets 200,756 209,015 				 Property, plant and equipment, at cost: Land 6,253 6,674 Buildings and improvements 122,140 121,870 Machinery and equipment 183,372 175,455 Construction in progress 613 985 312,378 304,984 Less allowance for depreciation 198,695 186,918 Property, plant and equipment - net 113,683 118,066 Intangibles and other assets 8,678 4,741 Deferred income taxes 17,702 17,777 				 Total assets $340,819 $349,599 				 Liabilities and Shareholders' Equity				 Current liabilities: Short-term borrowings $16,580 $30,297 Current portion of long-term debt 4,867 4,867 Accounts payable and accrued expenses 57,586 50,765 Taxes on income 3,309 6,722 Total current liabilities 82,342 92,651 Long-term debt, less current portion 27,588 27,796 Other liabilities 31,249 31,249 Commitments and contingencies - - 				 Shareholders' equity represented by: Preferred stock - - Common stock 190 190 Additional paid-in capital 13,168 13,560 Unearned stock plan compensation (17,207) (17,333) Currency translation adjustment 13,729 16,802 Retained earnings 201,494 195,598 211,374 208,817 Less treasury stock, at cost 11,734 10,914 199,640 197,903 				 Total liabilities and shareholders' equity $340,819 $349,599 				 See accompanying note to consolidated financial statements.				 WOODWARD GOVERNOR COMPANY AND SUBSIDIARIES			 STATEMENTS OF CONSOLIDATED CASH FLOWS			 for the nine months ended June 30, 1996 and 1995			 (in thousands of dollars)			 (Unaudited)			 1996 1995 Cash flows from operating activities: Net earnings $13,690 $7,256 			 Adjustments to reconcile net earnings to net cash provided (used) by operating activities: Depreciation and amortization 18,157 18,884 Deferred income taxes, noncurrent 76 (54) Stock plan compensation expense 126 333 Changes in assets and liabilities: Accounts receivable 3,746 2,384 Inventories (4,399) (16,023) Current liabilities, other than short-term borrowings and current portion of long-term debt 5,056 13,713 Other, net (4,020) 691 Total adjustments 18,742 19,928 			 Net cash provided by operating activities 32,432 27,184 			 Cash flows from investing activities: Payments for purchase of property, plant and equipment (16,023) (13,321) Other 1,007 217 Net cash (used) in investing activities (15,016) (13,104) 			 Cash flows from financing activities: Cash dividends paid (8,073) (8,128) Proceeds from sale of treasury stock 436 - Purchase of treasury stock (1,731) (2,194) Payments of long-term debt (209) (200) Short-term borrowings proceeds (payments) (13,439) (6,098) Tax benefit applicable to ESOP dividend 276 292 Net cash (used) in financing activities (22,740) (16,328) 			 Effect of exchange rate changes on cash (1,172) (441) 			 Net change in cash and cash equivalents (6,496) (2,689) 			 Cash and cash equivalents, beginning of year 12,451 10,272 			 Cash and cash equivalents, end of quarter $5,955 $7,583 			 SUPPLEMENTAL CASH FLOW INFORMATION:			 Interest paid $2,587 $2,235 Income taxes paid $11,562 $6,797 			 See accompanying note to consolidated financial statements. 	WOODWARD GOVERNOR COMPANY AND SUBSIDIARIES 	NOTE TO CONSOLIDATED FINANCIAL STATEMENTS The consolidated balance sheet as of June 30, 1996, and the statements of consolidated earnings and cash flows for the three and nine month periods ended June 30, 1996 and 1995, have been prepared by the Company without audit. The September 30, 1995 consolidated balance sheet was derived from audited financial statements, but does not include all disclosures required by generally accepted accounting principles. Information furnished in this 10-Q report is based in part on approximations and is subject to year-end adjustment and audit. The figures do reflect all adjustments necessary, in the opinion of management, to present fairly the Company's financial position as of June 30, 1996, and the results of its operations for the three and nine month periods ended June 30, 1996 and 1995, and cash flows for the nine months then ended. All such adjustments are of a normal and recurring nature. The statements have been prepared in accordance with accounting policies set forth in the Company's 1995 annual report on Form 10-K and should be read in conjunction with the Notes to Consolidated Financial Statements therein. The statements of consolidated earnings for the three and nine month periods ended June 30, 1996 are not necessarily indicative of the results to be expected for other interim periods or for the full year. 	 	PART I - ITEM 2 	WOODWARD GOVERNOR COMPANY AND SUBSIDIARIES 	MANAGEMENT'S DISCUSSION AND ANALYSIS OF 	FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results for the third quarter of fiscal year 1996 were good, and continued the improvement trend we have seen throughout this year. Net billings for products and services delivered to customers in the third quarter ending June 30, 1996, increased almost 17% from the prior year and totaled $106,034,000, compared to $90,808,000 last year. During that same period, costs and expenses increased 11% from $88,083,000 last year to $97,758,000 this year. Earnings before income taxes increased substantially from $2,725,000 to $8,276,000. Net earnings were $4,965,000 or $1.72 per share for the quarter, compared to $1,608,000 or $.55 per share last year. Year-to-date results are also encouraging. Net billings through the third quarter were $300,961,000 or 11% ahead of last year's $271,036,000. During the same time period, expenses were up less than 8% from $258,739,000 last year to $278,143,000 this year. As a result, earnings before income taxes were up over 85% and totaled $22,818,000 this year. Net earnings were $13,690,000 or $4.73 per share, compared to $7,256,000 or $2.49 per share last year. ONGOING OPERATIONS Shipments from ongoing operations (excluding Bauer Aerospace) for the nine month period ending June 30, increased 11% to $297,253,000 from $267,770,000. As noted in prior reports to shareholders, last year included over $7,000,000 in nonrecurring engineering charges incurred in previous years. Taking this into account, shipments are up 14% from last year. In looking at the change in costs and expenses, it is also important to remember that last year included over $11,600,000 for an early retirement program at domestic plants, costs related to the move of the Hydraulic Turbine Controls business unit, a large provision for an accounts receivable write-off, and the ongoing restructuring and consolidation of the Aircraft Controls group. Without these items, costs and expenses have increased almost 13% from approximately $243,400,000 last year to $274,000,000 this year. The increase was due principally to the additional shipment volume. Shipments from on-going operations of the Aircraft Controls group have increased 21% to $129,488,000 for the first nine months of fiscal 1996, compared to $106,987,000 last year, excluding the nonrecurring engineering charges. The increase reflects improved demand for our products in the commercial aircraft markets, particularly in aftermarket spares and overhauls. Industrial Controls shipments were up over 9% from last year and totaled $167,765,000, compared to $153,782,000. The trend of domestic shipments being up slightly and overseas up substantially continued during the third quarter. ACQUISITION AND DIVESTITURE In late June we completed the acquisition of Deltec Fuel Systems Holding B.V., located in Rotterdam, The Netherlands. Deltec supplies fuel systems and fuel system components for heavy-duty gas engines and has acquired considerable know-how in gas flow and combustion, microelectronics, software, and precision mechanical technology. Deltec will add 30 people and fits well into the Engine Controls organization. Subsequent to the end of the third quarter, negotiations were completed to sell Bauer Aerospace. Efforts to sell Bauer have been ongoing since the intent to divest was announced in September 1994. The sale will not have a significant effect on year end results and will allow us to focus our resources on our core businesses. BALANCE SHEET Cash and cash equivalents decreased to $5,955,000 at June 30, 1996 from $12,451,000 at September 30, 1995. Accounts receivable decreased from $81,880,000 at September 30, 1995 to $76,779,000 at June 30, 1996. Inventories increased from $92,831,000 at September 30, 1995 to $96,169,000 at June 30, 1996 due to the increased sales volume and a higher level of past due shipments. Property, plant and equipment - net decreased to $113,683,000 at June 30, 1996 from $118,066,000 at September 30, 1995, due to capital expenditures being less than depreciation. Intangibles and other assets increased from $4,741,000 at September 30, 1995 to $8,678,000 at June 30, 1996 due to the impact of the Deltec acquisition. During this same period, short-term borrowings were reduced from $30,297,000 at September 30, 1995 to $16,580,000 at June 30, 1996, Accounts payable and accrued expenses increased to $57,586,000 at June 30, 1996 from $50,765,000 at September 30, 1995 due in part to accounts payable and accruals for early retirement programs and member benefits. The company's effective tax rate for the nine months ended June 30, 1996 and 1995 was 40.0% and 41.0%, respectively. The effective tax rate for the fiscal year ended September 30, 1995 was 40.9%. PART II - OTHER INFORMATION Item 6(b) No Form 8-K was filed for the quarter ended June 30, 1996. 	SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. 	WOODWARD GOVERNOR COMPANY August 14, 1996 /s/ John A. Halbrook John A. Halbrook, President and Chief Executive Officer August 14, 1996 /s/ Vern H. Cassens Vern H. Cassens, Senior Vice President, Treasurer, and Chief Financial Officer