SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant / x /
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
/ x / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material under Rule 14a-12
WOODWARD GOVERNOR COMPANY
(Name of Registrant as Specified In Its Charter)
--------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/ x / No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
Woodward Governor Company
5001 North Second Street
P.O. Box 7001
Rockford, IL 61125-7001 USA
Tel: 815-877-7441
Fax: 815-639-6033
December 10, 2003
Dear Shareholder:
You are cordially invited to attend the Company's annual meeting at 10:00 a.m.,
local time, on Wednesday, January 28, 2004, in the Auditorium of Northern
Illinois University Rockford located at 8500 East State Street, Rockford,
Illinois. Registration for the meeting will be in the foyer of the facility. We
invite you to join members of our management team for an informal social period
from 9:00 a.m. to 9:45 a.m. The formal meeting will begin promptly at 10:00 a.m.
Parking is available on site. A map is located on the back of this proxy
statement.
Please complete and return your proxy card, or vote via telephone or the
Internet as soon as possible regardless of whether you plan to attend.
Sincerely yours,
WOODWARD GOVERNOR COMPANY
John A. Halbrook
Chairman, Board of Directors
NOTICE OF ANNUAL MEETING OF
SHAREHOLDERS
The purpose of our Annual Meeting is to:
1. Elect three directors to serve for a term of three
years each; and
2. Transact other business that properly comes before
the meeting.
Shareholders who owned Woodward stock at the close of
business on December 1, 2003, are entitled to vote at
the meeting.
By Order of the Board of Directors,
WOODWARD GOVERNOR COMPANY
Carol J. Manning
Corporate Secretary
December 10, 2003
Wednesday, January 28, 2004
10:00 a.m.
NIU-Rockford
8500 East State Street
Rockford, Illinois
YOUR VOTE IS IMPORTANT
Even if you plan to attend the meeting in person, please date, sign, and
return your proxy in the enclosed envelope, or vote via telephone
or the Internet as soon as possible. Prompt response is helpful
and your cooperation will be appreciated.
Table of Contents
About the Annual Meeting and Voting 6
Board of Directors 7
Proposal 1 - Election of Directors 7
Board Meetings and Committees 9
Share Ownership of Management 11
Section 16(a) Beneficial Ownership Reporting Compliance 11
Persons Owning More than Five Percent of Woodward Stock 12
Common Stock Performance 12
Compensation Committee Report on Executive Compensation 13
Executive Compensation 14
Stock Options 16
Long-Term Management Incentive Compensation Plan Awards 17
Audit Committee Report to Shareholders 17
Independent Public Auditors 19
Shareholder Proposals 19
Other Matters 19
Section 2.8 of Bylaws 20
Audit Committee Charter 21
Annual Report on Form 10-K
You may obtain a free copy of our Annual Report on Form 10-K for the year
ended September 30, 2003, including schedules, filed with the Securities and
Exchange Commission. Please contact Carol Manning, Corporate Secretary,
Woodward Governor Company, P.O. Box 7001, Rockford, Illinois 61125-7001 or
email investorrelations@woodward.com. This report is expected to be available
at www.woodward.com by mid-December 2003.
About the Annual Meeting and Voting
Our Board of Directors is soliciting your proxy to vote
at our annual meeting of shareholders (or at any adjournment of the meeting).
This proxy statement summarizes the information you need to know to vote at the
meeting.
We began mailing this proxy statement and the enclosed
proxy card on or about December 10, 2003, to all shareholders entitled to vote.
The Woodward Governor Company Annual Report, which includes our financial
statements, is being sent with this proxy statement.
Shareholders who owned Woodward common stock at the
close of business on the record date, December 1, 2003, are entitled to vote at
the meeting. As of the record date, there were 11,264,385 shares outstanding.
Each share of Woodward common stock that you own
entitles you to one vote, except for the election of directors. Since three
directors are standing for election, you will be entitled to three director
votes for each share of stock you own. Of this total, you may choose how many
votes you wish to cast for each director.
Woodward offers shareholders the opportunity to vote by
mail, by telephone, or via the Internet. Instructions to use these methods are
set forth on the enclosed proxy card.
If you vote by telephone or via the Internet, please
have your proxy or voting instruction card available. A telephone or Internet
vote authorizes the named proxies in the same manner as if you marked, signed,
and returned the card by mail. Voting by telephone and via the Internet are
valid proxy voting methods under the laws of Delaware (our state of
incorporation) and Woodward Bylaws.
If you properly fill in your proxy card and send it to
us in time to vote, one of the individuals named on your proxy card (your
"proxy") will vote your shares as you have directed. If you sign the proxy card
but do not make specific choices, your proxy will follow the Board's
recommendations and vote your shares:
- "FOR" the election of the Board's nominees to the
Board of Directors.
If any other matter is presented at the meeting, your
proxy will vote in accordance with his or her best judgment. At the time this
proxy statement went to press, we knew of no other matters to be acted on at the
meeting.
You may revoke your proxy by:
- sending in another signed proxy card with a later
date,
- notifying our Corporate Secretary in writing before
the meeting that you have revoked your proxy, or
- voting in person at the meeting.
If you want to give your written proxy to someone other
than individuals named on the proxy card:
- cross out the individuals named and insert the name
of the individual you are authorizing to vote, or
- provide a written authorization to the individual you
are authorizing to vote along with your proxy card.
A quorum of shareholders is necessary to hold a valid meeting. The presence, in
person or by proxy, at the meeting of holders of shares representing a majority
of the votes of the common stock entitled to vote constitutes a quorum.
Abstentions and broker non-votes are counted as present for establishing a
quorum. A broker non-vote occurs when a broker votes on some matters on the
proxy card but not on others because he or she is not permitted to vote on that
item absent instruction from the beneficial owner of the shares and no
instruction is given.
Directors are elected by a plurality vote of shares
present at the meeting, meaning that the three director nominees receiving the
most votes will be elected.
Other action is by an affirmative vote of the majority
of shares present at the meeting and entitled to vote. Abstentions have the same
effect as votes against a matter because they are considered present and
entitled to vote, but are not voted. Broker non-votes will be considered present
for quorum purposes but not entitled to vote. Accordingly, broker non-votes will
have no effect on the vote.
Board of Directors
Structure Our Board of Directors is divided into three classes
for purposes of election. One class is elected at each annual meeting of
shareholders to serve for a three-year term.
Directors elected at the 2004 Annual Meeting of
Shareholders will hold office for a three-year term expiring in 2007 or when
their successors are elected. Other directors are not up for election at this
meeting and will continue in office for the remainder of their terms.
If a nominee is unavailable for election, proxy holders
will vote for another nominee proposed by the Board.
PROPOSAL 1--ELECTION OF DIRECTORS
Directors Standing for Election at This Meeting for Terms Expiring in 2007:
John D. Cohn
Age: 49
Senior Vice President Strategic Development and
Communications of Rockwell Automation, Inc., a provider
of global industrial automation power, control, and
information solutions.
Mr. Cohn has been a director of the Company since 2002.
Michael H. Joyce
Age: 63
President and Chief Operating Officer of Twin Disc,
Incorporated, a designer and manufacturer of heavy-duty
transmission equipment. Other directorships: Twin Disc,
Incorporated and The Oilgear Company. Mr. Joyce has
been a director of the Company since 2000.
James R. Rulseh
Age: 48
Group Vice President of Modine Manufacturing Company, a
specialist in thermal management products, bringing
heating and cooling technology to diversified markets.
Mr. Rulseh has been a director of the Company since
2002.
Your Board of Directors recommends a vote "FOR" the nominees presented in
Proposal 1.
Directors Remaining in Office Until 2005:
Rodney O'Neal
Age: 50
President, Dynamics, Propulsion and Thermal Sector of
Delphi Corporation. Delphi is a world leader in mobile
electronics, transportation components and systems
technology. Mr. O'Neal has been a director of the
Company since 1999.
Mary L. Petrovich
Age: 40
Chief Executive Officer of AxleTech International, a
supplier of off-highway and specialty vehicle
drivetrain systems and components. Ms. Petrovich has
been a director of the Company since 2002.
Michael T. Yonker
Age: 61
Retired President and Chief Executive Officer of
Portec, Inc., which had operations in the construction
equipment, materials handling and railroad products
industries. Other directorships: Modine Manufacturing
Company, Inc. and Emcor Group, Inc. Mr. Yonker has been
a director of the Company since 1993.
Directors Remaining in Office Until 2006:
Paul Donovan
Age: 56
Retired on June 30, 2003 as Executive Vice President
and Chief Financial Officer of Wisconsin Energy
Corporation, a holding company with subsidiaries in
utility and non-utility businesses, including electric
and natural gas energy services, pump manufacturing,
waste-to-energy and real estate businesses. Other
directorships: \AMCORE Financial, Inc., CLARCOR, and
Solutia, Inc. Mr. Donovan has been a director of the
Company since 2000.
John A. Halbrook
Age: 58
Chairman and Chief Executive Officer of the Company.
Other directorships: AMCORE Financial, Inc.
Mr. Halbrook has been a director of the Company
since 1991.
Board Meetings and Committees
The Board of Directors met seven times during 2003; all
incumbent directors attended more than 75 percent of the aggregate of the total
meetings of the Board of Directors and all committees of the Board on which they
served.
All actions by committees are reported to the Board at
the next scheduled meeting. No legal rights of third parties may be affected by
Board revisions.
Nominating
Committee Membership Name Audit Compensation Executive and Governance
John D. Cohn X X
Paul Donovan X* X X
John A. Halbrook X*
Michael H. Joyce X X*
Rodney O'Neal X X
Mary L. Petrovich X X
James R. Rulseh X X
---------------------------------------------------------------------------------
Michael T. Yonker X X* X
* chairman
Audit Committee The Audit Committee oversees and monitors management's
and the independent public auditors' participation in the financial reporting
process. The Committee operates under a Charter, which is attached as Exhibit B,
that more fully describes the responsibilities of the Committee. Consistent with
the Nasdaq's independent director and Audit Committee listing standards, and in
accordance with the Committee charter, all members of the Audit Committee are
independent directors. The Board of Directors has determined that all members of
the Audit Committee are Audit Committee Financial Experts, as the Securities and
Exchange Commission defines that term. The Committeee held four meetings during
2003.
Compensation Committee The Compensation Committee recommends the base
compensation of Woodward's officers and key personnel, and evaluates the
performance of and reviews the results of the annual member evaluation for those
individuals. The Committee administers the Company's Long-Term Management
Incentive Compensation Plan and the 2002 Stock Option Plan, determining and
taking all action, including granting of all incentives and/or stock options to
eligible worker members, in accordance with the terms of the Plans. The
Committee held three meetings during 2003.
Executive Committee The Executive Committee exercises all the powers and
authority of the Board of Directors in the management of the business when the
Board is not in session and when, in the opinion of the Chairman, the matter
should not be postponed until the next scheduled Board meeting. The Committee
may declare cash dividends. The Committee may not authorize certain major
corporate actions such as amending the Certificate of Incorporation, amending
the Bylaws, adopting an agreement of merger or consolidation, or recommending
the sale, lease, or exchange of substantially all of Woodward's assets.
The Committee held no meetings during 2003.
Nominating and The Nominating and Governance Committee recommends
qualified individuals to fill any
Governance Committee vacancies on the Board and develops and administers the
Company's Corporate Governance guidelines. The Committee held two meetings
during 2003.
No procedures have been established for the Nominating
and Governance Committee to consider nominees recommended by shareholders.
Lead Director In addition to the above standing committees,
Mr. Yonker serves as "Lead Director." The Lead Director chairs a separate
meeting of the outside directors following each regularly scheduled Board
meeting. Topics discussed are at the discretion of the outside directors. The
Lead Director then meets with the Chairman and Chief Executive Officer to review
items discussed at the meeting.
Director Qualifications The Company's Bylaws provide that:
- each director shall retire on September 30th
following his or her seventieth birthday unless approved otherwise by the Board,
- no person may serve as a director unless he or she
agrees to be guided by the philosophy and concepts expressed in Woodward's
Constitution, and
- Woodward must receive adequate notice regarding
nominees for directors. A copy of the notice requirement in Section 2.8 is
attached as Exhibit A.
Director Compensation We do not pay directors who are also Woodward officers
additional compensation for their service as directors. In 2003, compensation
for non-employee directors included the following:
- a monthly retainer of $2,000
- Board and committee members receive $1,000 for each
meeting attended
- committee chairmen receive $1,500 for each committee
meeting attended
- expenses of attending Board and committee meetings
- award of options in January 2003 to purchase 1,000
shares of Woodward common stock at the market price on the date of grant;
options vest after one year
Pursuant to Outside Director Stock Purchase Agreements
entered into prior to July 2002, we sold Treasury Shares at the closing price on
the dates of purchase. In payment of the purchase price, non-interest bearing
notes were signed and will be repaid by application of each director's monthly
retainer. The largest amount of indebtedness outstanding during the year and the
amount outstanding at December 1, 2003, were: Mr. Donovan, $65,283/$37,283;
Mr. Joyce, $65,282/$37,282; Mr. O'Neal $31,979/$3,979 and Mr. Rulseh,
$109,963/$81,963.
Share Ownership of Management
Directors and Executive
Officers The following table shows how much Woodward common
stock was owned, as of November 21, 2003, by each director, each executive
officer named in the Summary Compensation table, and all directors and executive
officers as a group.
Ownership of Common Stock
Non-Employee Directors Number Percent
John D. Cohn 2,000 0.02
Paul Donovan 3,502 (2) 0.03
Michael H. Joyce 4,792 (2) 0.04
Rodney O'Neal 6,553 (2) 0.06
Mary L. Petrovich 2,615 0.02
James R. Rulseh 1,692 0.02
Michael T. Yonker 8,036 (2) 0.07
Named Executive Officers
Stephen P. Carter 102,533 (1) 0.91
Thomas A. Gendron 68,159 (1) 0.61
John A. Halbrook 326,216 (1) 2.90
C. Phillip Turner 118,531 (1) (3) 1.05
-----------------------------------------------------------------------------------------
All directors and executive officers as a group 653,292 (1) (2) 5.80
(1) Includes the maximum number of shares which might
be deemed to be beneficially owned under rules of the
Securities and Exchange Commission. Includes options to
purchase shares of common stock as follows: Mr. Carter
96,710; Mr. Gendron 63,574; Mr. Halbrook 310,325; and
Mr. Turner 92,158. Also includes shares (does not
include fractional shares) allocated to participant
accounts of executive officers under the Woodward
Governor Company Retirement Savings Plan. The Plan
directs the Trustee to vote the shares allocated to
participant accounts under the Woodward Stock Plan
portion of the Plan as directed by
such participants and to vote all allocated shares for
which no timely instructions are received in the same
proportion as the allocated shares for which
instructions are received.
(2) Includes exercisable options to purchase 2,000
shares of common stock granted under the 2002 Stock
Option Plan to each indicated member of the Board of
Directors.
(3) Mr. Turner retired from the Company on July 1,
2003. In accordance with Item 402 (a)(3)(iii) of
Securities and Exchange Commission Regulation S-K,
information is provided even though Mr. Turner was not
serving as an executive officer at the end of fiscal
2003.
Share Ownership
Guidelines In 1998, the Board of Directors established share
ownership guidelines for executives and non-employee directors to align their
interests and objectives with the Company's shareholders. These guidelines
require that executives own shares with a value ranging from a minimum of two
times annual salary for executives at the level of vice president to a minimum
of four times annual salary for the Company's Chairman and Chief Executive
Officer. The guidelines also require that non-employee directors own shares with
a value equal to five times annual retainer, to be reached within five years of
election to the Board.
Section 16(a) Beneficial Ownership Reporting Compliance
Based upon a review of our records, all reports
required to be filed pursuant toSection 16(a) of the
Securities Exchange Act of 1934 (the "Exchange Act")
were filed on a timely basis.
Persons Owning More than Five Percent of Woodward Stock
As of November 21, 2003 Ownership of Common Stock
Principal Holders Number Percent
--------------------------------------------------------------------------------
Woodward Governor Company
Profit Sharing Trust
5001 North Second Street
Rockford, Illinois 61111 1,589,225 (1) 14.11
--------------------------------------------------------------------------------
Royce & Associates, LLC
1414 Avenue of the Americas
New York, New York 10019 1,255,576 (2) 11.15
(1) Shares owned by the Woodward Governor Company
Profit Sharing Trust are held in its Retirement Savings
Plan (the "Plan"). Vanguard Fiduciary Trust serves as
Trustee of the Profit Sharing Trust. The total number
of 1,589,225 shares of common stock held in the Profit
Sharing Trust is allocated to participant accounts. The
Plan directs the Trustee to vote the shares allocated
to participant accounts under the Woodward Stock Plan
portion of the Plan as directed by such participants
and to vote all allocated shares for which no timely
instructions are received in the same proportion as the
allocated shares for which instructions are received.
In the event of a tender or exchange offer,
participants have the right individually to decide
whether to tender or exchange shares in their account.
The Plan directs the Trustee to tender or exchange all
allocated shares for which no timely instructions are
received in the same proportion as the allocated shares
with respect to which it does receive directions.
(2) Royce & Associates, LLC has advised the Company
that it has sole investment power and sole voting power
for the entire holding.
Common Stock Performance
The following Performance Graph compares Woodward's
cumulative total return on its common stock for a
five-year period (years ended September 30, 1999 to
September 30, 2003) with the cumulative total return of
the S&P SmallCap 600 Index and the S&P 500 Industrial
Machinery Index.
Total Return to Shareholders
The graph assumes that the value of the investment in Woodward's Common Stock
and each index was $100 on September 30, 1998 and that all dividends were
reinvested.
Total Return to Shareholders
---------------------------------------------------------------------------------------------------
1998 1999 2000 2001 2002 2003
Woodward Governor Company $ 100.00 $ 112.68 $ 208.32 $ 230.27 $ 229.18 $ 214.75
S & P SMALLCAP 600 $ 100.00 $ 117.54 $ 145.95 $ 130.46 $ 128.12 $ 162.53
---------------------------------------------------------------------------------------------------
S & P 500 INDUSTRIAL MACHINERY $ 100.00 $ 137.36 $ 112.76 $ 107.41 $ 117.04 $ 147.81
Compensation Committee Report on Executive Compensation
The goal of the Compensation Committee (the "Committee") is to establish and
administer a compensation program that will (1) offer competitive compensation
to attract, retain, and motivate a high-quality senior management team, and (2)
link total annual cash compensation to Company and individual performance. The
Committee believes proper administration of such a program will result in
development of a management team that embraces the best long-term interests of
Woodward and its shareholders.
To accomplish this goal, the Committee, comprised entirely of independent
directors, structures total compensation packages comprised of base salary,
short-term and long-term incentive compensation, and stock options.
Market-based compensation recognizes responsibilities and accountabilities for
similarly situated positions within a representative comparative group. Guidance
is provided by a professional compensation and benefits consulting firm. This
process establishes base compensation and targets for incentive/variable
compensation. Woodward's stock performance is considered in determining any
incentive compensation.
Compensation Structure and Components
- individuals are assigned to salary grade ranges based upon their position
- base salary is set within the range based upon actual job responsibilities,
performance, and experience in the job
- annual incentive compensation targets of at least 10 percent, but not more
than 70 percent, of base salary are established
- incentive compensation targets are tied to salary grade
Base Salary
Base salary and annual rate adjustments are based on individual performance,
experience, responsibilities, management and leadership abilities.
Annual Incentive Compensation
Annual cash incentives are based on overall financial performance of the Company
or individual groups or operating units, achievement of short-term objectives,
and direct individual performance. If certain minimum target results are not
achieved, no annual incentive is paid. If targeted levels are attained, annual
incentive levels range from 10 percent to 70 percent of base salary.
Participants have an opportunity to significantly increase their annual
incentive compensation above targeted levels for outstanding performance.
The Woodward Governor Company 2002 Stock Option Plan (the "Stock Option Plan")
was established to further Woodward's long-term growth and profitability by
offering long-term incentives to certain key management worker members and
directors who are not worker members. By providing an equity position in the
Company, the Compensation Committee believes that participants' interests will
be better aligned with those of the Company's shareholders.
The Stock Option Plan authorizes awards of both incentive and nonqualified stock
options to worker members and nonqualified stock options to independent
directors. Management makes recommendations to the Committee on the size of
grant, if any, for each participant. The option price of the shares is
determined at the date of the grant and will not be less than the fair market
value as quoted on the Nasdaq National Market on that date.
In fiscal 2003, 24 worker members and 10 independent directors were granted
options under the Stock Option Plan.
Long-Term Management Incentive Compensation Plan
In fiscal 2000, the Company established a long-term, performance-based
compensation plan. Eligibility is limited to a few top-level executives,
currently three individuals, as determined by the Compensation Committee. The
Committee sets long-term performance goals and confirms attainment or lack
thereof. The performance goals are established to encourage consistent,
sustainable growth and are measured over three-year cycles.
Long-term cash award opportunities are determined at the beginning of each
performance cycle and are based on goals associated with:
- average annual growth in earnings per share
- average annual return on invested assets
A target award is established for each eligible executive based upon salary
grade ranging from 40 percent to 50 percent of base salary. A threshold level of
performance is established below which the executive receives no incentive
award. Once threshold performance is achieved, the executive receives a minimum
award equal to 5 percent to 10 percent of the target award. Above threshold
performance, the award increases proportionally until target performance is
achieved. The award opportunity continues to increase for above-target
performance to a practical maximum of 200 percent of the target award.
Compensation of the Chairman and Chief Executive Officer
Mr. Halbrook's base salary of $545,090 was determined in the same manner as for
all other executive officers. For fiscal 2003, no annual incentive compensation
was awarded to Mr. Halbrook.
Under the Stock Option Plan, Mr. Halbrook was awarded options in fiscal year
2004 to purchase 28,000 shares of Woodward common stock.
Mr. Halbrook also participates in the Long-Term Management Incentive
Compensation Plan. Mr. Halbrook received no payout for the three-year period
ended September 30, 2003. The amount of future incentive awards will be
determined at the end of each subsequent three-year period based on achievement
of performance goals.
Compensation Committee: Michael T. Yonker, chairman John D. Cohn
Paul Donovan Rodney O'Neal
Mary L. Petrovich
Executive Compensation
The following table sets forth a summary for the last three fiscal years of the
cash and non-cash compensation paid to John A. Halbrook, Woodward's Chairman and
Chief Executive Officer, and to each of the other most highly compensated
executive officers earning in excess of $100,000 in Annual Compensation.
Summary Compensation
Long-Term Compensation
Annual Compensation Awards Payouts
--------------------------------------------------------------------------------------------------------------------------
Other Securities LTIP
Annual Underlying Payouts All Other
Name and Principal Position Year Salary Bonus (1) Compensation (2) Options [#] [$] (3) Compensation (5)
--------------------------------------------------------------------------------------------------------------------------
John A. Halbrook 2003 $ 592,846 $ -- -- 25,000 $ -- $ 53,981
Chairman and 2002 519,135 -- -- 50,000 399,740 54,066
Chief Executive Officer 2001 518,066 582,870 -- 40,000 403,830 53,439
--------------------------------------------------------------------------------------------------------------------------
Thomas A. Gendron 2003 320,404 -- -- 20,000 -- 31,405
President and 2002 266,317 -- -- 20,000 122,269 29,110
Chief Operating Officer 2001 263,732 262,293 -- 13,000 125,258 29,312
--------------------------------------------------------------------------------------------------------------------------
C. Phillip Turner (4) 2003 303,141 -- -- -- -- 31,430
Vice President 2002 280,356 71,963 -- 10,000 176,008 35,323
2001 279,979 398,021 -- 5,000 167,184 35,266
--------------------------------------------------------------------------------------------------------------------------
Stephen P. Carter 2003 273,775 -- -- 10,000 -- 29,447
Executive Vice President, Chief 2002 236,205 -- -- 15,000 148,138 26,841
Financial Officer and Treasurer 2001 235,859 $ 230,000 -- 10,000 150,480 26,879
(1) Includes annual incentive compensation.
(2) No executive officer received personal benefits valued at more than either
10 percent of cash compensation or $50,000.
(3) Amounts paid under the Long-Term Management Incentive Compensation Plan for
the performance cycle ended September 30, 2003.
(4) Mr. Turner retired from the Company on July 1, 2003.
(5) Company contributions to the Retirement Savings Plan and Unfunded Deferred
Compensation Plans are as follows:
Unfunded Deferred
Retirement Savings Plan* Compensation Plans
Officer 2003 2002 2001 2003 2002 2001
Halbrook $ 25,900 $ 26,700 $ 23,100 $ 28,081 $ 27,366 $ 30,339
Gendron 24,050 25,249 22,368 7,354 3,861 6,944
Turner 28,255 31,105 27,169 3,175 4,218 8,096
--------------------------------------------------------------------------------------------------
Carter 25,348 25,850 22,787 4,098 991 4,092
*Effective December 31, 2002, the Retirement Income Plan was merged into the
Member Investment and Stock Ownership Plan, which was then renamed the
Retirement Savings Plan. The plans were merged to simplify plan administration
and are applicable to all Woodward members.
Transitional Compensation Agreements
Woodward has transitional compensation agreements with Messrs. Halbrook,
Gendron, and Carter that become operative only upon a change in control or other
specified event. For purposes of these agreements, a change in control occurs
if:
- any person, entity, or group (with certain exceptions) becomes the beneficial
owner of 15 percent or more of the outstanding shares of Woodward common stock;
or
- there is a change in a majority of the Board during any two-year period other
than by election or nomination by a vote of two-thirds of the Board members as
of the beginning of the period; or Woodward's shareholders approve a merger,
consolidation, sale of assets or share exchange resulting in our shareholders
owning less than 51 percent of the combined voting power of the surviving
corporation following the transaction; or
- our shareholders approve a liquidation or dissolution.
Following a change in control, Woodward will continue to employ the executive
for a minimum period of two years in substantially the same position, for
substantially the same compensation and benefits. If the executive's employment
is terminated by Woodward (other than for cause or due to death or disability),
or the executive terminates with good reason (as defined in the agreement), he
or she receives an amount (payable in a lump sum) equal to 300 percent of each
of (1) the executive's annual base salary, (2) highest annual bonus in the last
three years, (3) highest long-term incentive compensation bonus in the last
three years, and (4) the sum of the Retirement Savings Plan and Executive
Benefit Plan annual contributions made or credited for the benefit of the
executive. Member benefits shall be continued at Woodward's expense for a period
of three years after the date of termination. Outplacement services will be
provided at Woodward's expense as well as tax preparation services for the
executive's taxable year in which the termination occurred.
If the benefits and amount payable to the executives are subject to federal
excise tax, the executive officers will also be entitled to receive an
additional payment so they will receive (on a net basis) the same amount they
would have received absent the applicability of the excise tax.
Stock Options
The following table shows stock options granted during fiscal 2003 under the
Woodward Governor Company 2002 Stock Option Plan to the individuals named in the
Summary Compensation table:
Option Grants in Last Fiscal Year
Individual Grants
% of Potential Realizable Value at Assumed
Number of Total Options Annual Rates of Stock Price
Securities Underlying Granted to Exercise Appreciation For Option Term (3)
-----------------------------------------------------------------------------------------------------------------------------
Options Granted Employees in Price Expiration
Name (1) Fiscal Year (2) Date 5%($) 10%($)
John A. Halbrook 25,000 20.00% $ 47.72 10/07/2012 $ 750,271 $ 1,901,335
Thomas A. Gendron 20,000 16.00 47.72 10/07/2012 600,217 1,521,068
C. Phillip Turner -- -- -- -- -- --
-----------------------------------------------------------------------------------------------------------------------------
Stephen P. Carter 10,000 8.00 47.72 10/07/2012 300,109 760,534
(1) Consists of non-qualified options issued for a ten-year term.
(2) Closing price of common stock as reported on the Nasdaq Stock Market as of
the date of grant.
(3) The potential realizable value is calculated based on the term of the option
at its time of grant (ten years). It is calculated assuming that the stock price
on the date of grant appreciates at the indicated annual rate compounded
annually for the entire term of the option and the option is exercised and sold
on the last day of its term for the appreciated stock price. No gain to the
optionee is possible unless the stock price increases over the option term.
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option
Values
The following table provides information on option exercises in 2003 by the
individuals named in the Summary Compensation table and the value of their
unexercised options at September 30, 2003.
Number of Securities Value of
Shares Underlying Unexercised Unexercised
Acquired Value Options at In-the-Money Options
on Exercise Realized Fiscal Year-End(#) at Fiscal Year-End ($)
Name (#) ($) Exercisable / Unexercisable Exercisable / Unexercisable
John A. Halbrook 0 0 272,825 / 91,250 $4,376,316 / $194,640
Thomas A. Gendron 0 0 48,324 / 43,500 673,467 / 47,531
C. Phillip Turner 0 0 84,658 / 13,750 1,451,341 / 73,843
--------------------------------------------------------------------------------------------------------------------------------
Stephen P. Carter 0 0 84,710 / 29,500 1,314,465 / 68,465
Equity Compensation Plan Information
Number of Securities
Number of Securities Remaining Available for
to be Issued upon Weighted-Average Future Issuance under
Exercise of Exercise Price of Equity Compensation Plans
Outstanding Options, Outstanding Options (excluding securities
Plan Category Warrents, and Rights Warrents, and Rights reflected in the first column)
----------------------------------------------------------------------------------------------------------------------------------
Equity compensation plans
approved by security holders (1) 1,004,762 $ 34.28 925,289
----------------------------------------------------------------------------------------------------------------------------------
Equity compensation plans
not approved by security holders 0 0 0
----------------------------------------------------------------------------------------------------------------------------------
Total 1,004,762 $ 34.28 925,289
(1) Consists of the 2002 Stock Option Plan
Long-Term Management Incentive Compensation Plan Awards
See "Compensation Committee Report on Executive Compensation" for a description
of the Long-Term Management Incentive Compensation Plan (LTMIC). The following
table shows, for the named executive officers, the calculated future payouts, if
any, under the LTMIC for the three-year performance cycle that began in fiscal
year 2003. Threshold amounts are the minimum amounts payable under the LTMIC
provided that the minimum level of performance is achieved with respect to the
pre-established performance objectives, measured in terms of the Company's
cumulative earnings per share and return on average invested assets for the
cycle. If such performance is not achieved, amounts will be zero.
Long-Term Incentive Plan Awards in Last Fiscal Year
Number of Performance or Estimated Future Payouts Under
Shares, Other Period Non-Stock Price-Based Plans
-------------------------------------------------------------------------------------------------------------------
Units, or Until Maturation
Name Other Rights or Payout Threshold Target Maximum
John A. Halbrook -- 3 years $ 27,936 $ 272,545 545,090
Thomas A. Gendron -- 3 years 12,301 120,016 240,032
C. Phillip Turner -- -- -- -- --
-------------------------------------------------------------------------------------------------------------------
Stephen P. Carter -- 3 years 10,383 101,296 202,592
Amounts shown in this table were calculated using the salaries for the named
executive officers in the LTMIC as of the beginning of the performance period
October 1, 2002 through September 30, 2005.
Audit Committee Report to Shareholders
Audit Committee Report
We recommended to the Board of Directors that the consolidated balance sheets of
the Company at September 30, 2003 and 2002, and the related statements of
consolidated earnings, shareholders' equity, and cash flows of the Company for
each of the three years ended September 30, 2003, be included in the Company's
Annual Report on Form 10-K filed with the Securities and Exchange Commission for
the year ended September 30, 2003. Our recommendation was based on our review
and discussion of the audited financial statements with management, and our
discussions with PricewaterhouseCoopers LLP, the independent public auditors who
audited the financial statements.
We discussed with PricewaterhouseCoopers LLP the matters required to be
discussed under Statement of Auditing Standards No. 61, as amended. We also
discussed with PricewaterhouseCoopers LLP their independence, received from them
the written disclosures and the letter required by Independence Standards Board
Standard No. 1, and considered whether the provision of services other than
audit services (the fees for which are disclosed in the table that follows) is
compatible with maintaining their independence.
Audit Committee: Paul Donovan, chairman John D. Cohn
James R. Rulseh Michael T. Yonker
Audit Committee's Policy on Pre-Approval of Services Provided by Independent
Public Auditors
The Audit Committee is responsible for appointing, setting compensation for, and
overseeing the work of the independent public auditors. As a result, the Audit
Committee has established a policy regarding pre-approval of all services
provided by the independent public auditors. Under the established policy, all
audit services and related fees require the specific approval of the Audit
Committee. For audit-related services, tax services, and all other services, the
Audit Committee has determined specific services and dollar thresholds under
which such services would be considered pre-approved. To the extent that
management requests services other than these pre-approved services, or beyond
the dollar thresholds, the Audit Committee must specifically approve the
services. Furthermore, under the established policy, the independent public
auditors are prohibited from performing the non-audit services identified by the
Securities and Exchange Commission as prohibited. Also, the policy requires
management to prepare reports for the Audit Committee on a periodic basis on the
Company's use of the independent public auditors.
The following table presents fees for professional audit services rendered by
PricewaterhouseCoopers LLP for the audit of the Company's consolidated financial
statements as of and for the years ended September 30, 2003, and September 30,
2002, and fees billed for other services rendered by PricewaterhouseCoopers LLP
during those periods. Certain amounts for 2002 have been reclassified to conform
to the 2003 presentation.
Year ended September 30 2003 2002
Audit Fees $ 535,823 $ 512,846
Audit-Related Fees (1) 23,011 78,009
Tax Fees 192,302 256,366
All Other Fees (2) 165,038 196,110
---------------------------------------------------------------------------------------------
Total $ 916,174 $ 1,043,331
(1) Audit-Related Fees consists of assurance and related services that are
reasonably related to the performance of the audit of the financial statements.
This category includes fees for pension and benefit plan audits, consultations
concerning accounting and financial reporting standards, assistance with
statutory financial reporting, consultation on general internal control matters
or Sarbanes-Oxley assistance, due diligence related to mergers and acquisitions,
and other auditing procedures and issuance of special purpose reports.
(2) All Other Fees consists primarily of internal investigations, training, and
actuarial reports and calculations (that were approved prior to April 29, 2003).
The Audit Committee pre-approves all services performed by
PricewaterhouseCoopers LLP in accordance with the Audit Committee Charter, which
is attached to this Proxy Statement.
Independent Public Auditors
In 2003, PricewaterhouseCoopers LLP served as Woodward's independent public
auditors. A representative from the firm is expected to attend the annual
meeting and will have the opportunity to make a statement, if he or she desires
to do so, and be available to answer appropriate questions. The appointment of
independent public auditors for the fiscal year ending September 30, 2004, is
currently expected to occur in April 2004 and will be determined by the Audit
Committee of the Company. We expect PricewaterhouseCoopers LLP will be
considered for reappointment.
Shareholder Proposals
If you want to submit a proposal for possible inclusion in our proxy statement
for the 2005 Annual Meeting of Shareholders, you must ensure your proposal is
received by us on or before August 11, 2004.
If you intend to present a proposal to shareholders, but do not want it included
in the proxy statement, management's proxies for that meeting will be entitled
to exercise their discretionary authority on that proposal, unless we receive
notice of your proposal no later than October 24, 2004. Even if we receive
proper notice before October 24, 2004, the proxies may still exercise their
discretionary authority on the proposal by telling shareholders about the
proposal and how they intend to vote on it, unless you solicit proxies for the
proposal as required by Rule 14a-4(c)(2) under the Exchange Act.
Other Matters
Woodward is soliciting this proxy on behalf of its Board of Directors. This
solicitation is being made by mail, but also may be made by telephone or in
person. The Company has employed Morrow & Company to solicit proxies for the
annual meeting from brokers, bank nominees, other institutional holders, and
certain individual shareholders. The Company has agreed to pay $5,000, plus the
out-of-pocket expenses of Morrow & Company, for these services. The Company will
also pay the regular charge of brokers and other nominees who hold shares of
record for forwarding proxy material to the beneficial owners of such shares.
We do not know of any matters to be acted upon at the meeting other than those
discussed in this statement. If any other matter is presented, proxy holders
will vote on the matter in their discretion.
By Order of the Board of Directors
WOODWARD GOVERNOR COMPANY
Carol J. Manning
Corporate Secretary
December 10, 2003
Exhibit A
Section 2.8 of the Bylaws Requiring Written Notice
SECTION 2.8. NOMINATIONS FOR DIRECTOR. Nominations for election to the Board of
Directors may be made by the Board of Directors or by any stockholder entitled
to vote for the election of directors. Nominations other than those made by the
Board of Directors shall be made by notice in writing, delivered or mailed by
registered or certified United States mail, return receipt requested, postage
prepaid, to the Secretary of the Corporation, not less than 20 days nor more
than 50 days prior to any meeting of stockholders called for the election of
directors; provided, however, if less than 21 days' notice of the meeting is
given to stockholders, such written notice shall be delivered or mailed, as
prescribed, not later than the close of business on the seventh day following
the day on which the notice of meeting was mailed to the stockholders. Each such
written notice shall contain the following information:
(a) The name and residence address of the stockholder making the nomination;
(b) Such information regarding each nominee as would have been required to be
included in a proxy statement filed pursuant to the proxy rules of the
Securities and Exchange Commission had the nominee been nominated by the Board
of Directors; and
(c) The signed consent of each nominee to serve as a member of the Board of
Directors if elected, and the signed agreement of each nominee that if elected
he or she will be guided by the philosophy and concepts of human and industrial
association of the Corporation as expressed in its Constitution in connection
with the nominee's service as a member of the Board of Directors.
Unless otherwise determined by the Chairman of the Board of Directors or by a
majority of the directors then in office, any nomination which is not made in
accordance with the foregoing procedure shall be defective, and any votes which
may be cast for the defective nominee shall be disregarded.
Exhibit A
Charter of the Audit Committee of the Board of Directors
of Woodward Governor Company
Purpose
The Audit Committee shall provide assistance to the directors in fulfilling
their responsibility to the shareholders, potential shareholders, and the
investment community relating to accounting and reporting practices of the
Company and the quality and integrity of financial reports. In so doing, it is
the responsibility of the committee to maintain free and open communication
among the directors, the independent auditors, and the financial management of
the Company.
Responsibilities
The committee oversees and monitors management's and the independent auditors'
participation in the financial reporting process. In this role, the committee is
responsible for the following:
- appointment, retention, and oversight of the work of any auditing firm engaged
(including resolution of disagreements between management and the auditor
regarding financial reporting) for the purpose of preparing or issuing an audit
report or performing other audit, review, or attest services for the Company.
Each such auditing firm must report directly to the committee
- review and discuss with management their plans related to internal audit/risk
assessment activities and the results of those activities
- review and discuss with management the audited financial statements
- discuss with the independent auditors any matters required to be discussed
under Statement of Auditing Standards No. 61, as amended
- obtain from the independent auditors the written disclosures and the letter
required by Independence Standards Board Standard No. 1; discuss with the
auditors any disclosed relationships or services that may impact the objectivity
and independence of the auditors; and take appropriate actions with respect to
the independence of the auditors
- recommend to the Board of Directors, based on reviews and discussions referred
to in the preceding three items, that the audited financial statements be
included in the Company's Annual Report on Form 10-K
- review with management and the independent auditors the Company's quarterly
financial statements prior to filing of its Form 10-Q and earnings releases
- review major changes to the Company's auditing and accounting principles and
practices as suggested by the external auditor, internal auditor, or management
- review management's internal control report prior to its inclusion in the
Company's annual report, which addresses the effectiveness of the Company's
internal controls and procedures for purposes of financial reporting
- establish procedures for the receipt, retention, and treatment of complaints
received by the Company regarding accounting, internal accounting controls, or
auditing matters and the confidential, anonymous submission by employees of the
Company of concerns regarding questionable accounting or auditing matters
- pre-approve all audit, review, or attest engagements and permissible non-audit
services to be provided to the Company by the independent auditors, and approve
the fees of the independent auditors for such services; provided, however, that
in no event shall the committee have the authority to pre-approve any non-audit
services which may not be performed by the independent auditors under applicable
law
- review the findings, comments, and recommendations of the independent auditors
- provide a report in the Company's proxy statement as required by the
Securities and Exchange Commission
The committee has the authority to establish pre-approval policies and
procedures with respect to audit, review, and attest engagements and permissible
non-audit services. The committee also has the authority to delegate to one or
more members of the committee the authority to grant pre-approvals of any audit,
review, or attest engagements and permissible non-audit services to be performed
by the independent auditors. Any member to whom such pre-approval authority is
delegated shall advise the committee at its next scheduled meeting of any such
pre-approvals by such member.
The committee has the authority to engage independent counsel and other advisers
as it determines necessary to carry out its duties.
The committee has the authority to determine, on behalf of the Company, (i) the
compensation payable to any registered public auditing firm engaged for the
purpose of preparing or issuing an audit report or performing other audit,
review, or attest services for the Company; (ii) compensation payable to any
advisers employed by the committee; and (iii) the ordinary administrative
expenses of the committee that are necessary or appropriate in carrying out its
duties.
Membership
The committee is to consist of three or more members of the Board of Directors,
one of whom is to be elected chairperson. Each member of the committee is to be
an "independent" director as defined under applicable federal securities laws
and the rules of The Nasdaq Stock Market. Each member must be able to read and
understand fundamental financial statements, including a balance sheet,
statement of earnings, and statement of cash flows. At least one member of the
committee must have past employment experience in finance or accounting or
comparable experience or background that results in the individual's financial
sophistication and be designated as an "audit committee financial expert" as
required by applicable federal securities laws.
Meetings
The committee is to meet four or more times each fiscal year. The chairman will
determine meeting agendas and will involve or exclude management and independent
auditors as considered appropriate to fulfill the committee's responsibilities.
Minutes of each meeting are to be prepared and approved at a subsequent meeting.
Minutes are to be distributed to committee members and the Chairman of the Board
of Directors, and are to be made available to all Board members.
The committee is responsible for the duties set forth in this Charter but is not
responsible for either preparation of the financial statements or auditing of
the financial statements. Management has the responsibility for preparing the
financial statements and implementing internal controls, and the independent
auditors have the responsibility for auditing the financial statements. The
review of the financial statements by the committee is not of the same quality
as the audit performed by the independent auditors.
* * *
The adequacy of this Charter is to be reviewed and reassessed by the committee
annually and will be included in the proxy statement at least every three years.
Revised as of April 28, 2003
NIU-Rockford
Wednesday, January 28, 2004
10:00 a.m.
NIU-Rockford
8500 East State Street
Rockford, Illinois
Access from the south and west
(via Bypass 20)
Exit Bypass 20 to I-90 north (to Wisconsin) and drive three miles to the
Business 20/East State Street exit. Follow north and east directions.
Access from the north and east
(via I-90)
Exit I-90 at Business 20 (East State Street). Turn left (east) from the exit
ramp onto East State Street. Drive 1/2 mile and turn left at the light onto
University Drive. Drive one block to Northern Avenue and turn right. There are
350 non-metered parking spaces surrounding the center.
PLEASE MARK VOTES
AS IN THIS EXAMPLE X
1. ELECTION OF DIRECTORS __ FOR __ WITHHOLD __ FOR ALL EXCEPT
01 John D. Cohn
02 Michael H. Joyce
03 James R. Rulseh
INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, MARK THE
"FOR ALL EXCEPT" BOX AND STRIKE A LINE THROUGH THE NOMINEE'S NAME
IN THE LIST PROVIDED ABOVE. YOUR SHARES WILL BE VOTED FOR THE
REMAINING NOMINEES.
2. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
MATTERS AS MAY PROPERLY COME BEFORE THE MEETING.
A majority of said attorneys or proxies who are present at the meeting
shall have, and may exercise, all of the powers of all said attorneys or
proxies hereunder.
Date:
-------------------------
-------------------------------
Signature
-------------------------------
Signature (if held jointly)
NOTE: Please sign exactly as name appears hereon. When shares are
held by joint tenants, both should sign. When signing as attorney,
executor, administrator, trustee or guardian, please give full title
as such. If a corporation, please sign in full corporate name by
President or other authorized officer. If a partnership, please sign
in partnership name by authorized person.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD USING THE ENCLOSED ENVELOPE.
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
*FOLD AND DETACH HERE*
VOTE BY TELEPHONE OR INTERNET
QUICK***EASY***IMMEDIATE
ANNUAL MEETING OF SHAREHOLDERS OF
WOODWARD GOVERNOR COMPANY
JANUARY 28, 2004
PROXY VOTING INSTRUCTIONS
TO VOTE BY MAIL
Please date, sign and mail your proxy card in the envelope provided as soon as
possible.
TO VOTE BY TELEPHONE (TOUCH-TONE PHONE ONLY)
Please call 1-888-266-6788 toll-free and follow the instructions. Have your
proxy card available when you call.
TO VOTE BY INTERNET
Please access the web page at www.proxyvoting.com/wgov and follow the on-screen
instructions.
Control Number for
Internet/Telephone Voting
Please Detach and Mail in the Envelope Provided
PROXY PROXY
WOODWARD GOVERNOR COMPANY
PROXY FOR ANNUAL MEETING OF THE SHAREHOLDERS - JANUARY 28, 2004
SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoints Paul Donovan, John A. Halbrook and
Michael T. Yonker, as the undersigned's proxy, with full power of substitution,
to represent and to vote, as designated on the reverse side, all the
undersigned's common stock in the Woodward Governor Company at the Annual
Meeting of Shareholders to be held on Wednesday, January 28, 2004, and at any
adjournment thereof, with the same authority as if the undersigned were
personally present.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED SHAREHOLDERS. IF NO SPECIFICATION IS MADE, THIS PROXY WILL BE
VOTED IN THE DISCRETION OF THE NAMED PROXIES ON ALL MATTERS. THE BOARD FAVORS A
VOTE "FOR" THE ELECTION OF THE NOMINEES TO THE BOARD OF DIRECTORS.
- - - - - -- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
*FOLD AND DETACH HERE*