Woodward Reports Fourth Quarter and Fiscal 2003 Results
ROCKFORD, IL -- 11/17/2003 -- Woodward Governor Company (NASDAQ: WGOV) today
reported fourth quarter and fiscal year 2003 results. For the full year,
earnings were $12,346,000, or $1.08 per share (all per-share amounts are
diluted) compared with $45,170,000, or $3.90 per share, in the prior year
as measured before the cumulative effect of a fiscal year 2002 accounting
change.
"Despite stronger performance in aircraft engine systems, deteriorating
power generation markets continued to hinder fourth quarter results," said
Chairman and Chief Executive Officer John A. Halbrook. "We started to see
early benefits from our realignment of staff and capacity, as well as the
progress made in Woodward's global supply chain in the quarter. Additional
savings should be realized over the next year."
Net sales in the fourth quarter were $154,061,000, an increase of 1 percent
from $152,586,000 in the previous year's fourth quarter. Net earnings in
the fourth quarter were $1,735,000, or $0.15 per share, compared with
$3,217,000, or $0.28 per share, in the previous year's fourth quarter.
Expenses associated with workforce management activities and the
consolidation of Aircraft Engine System's servovalve operations into its
Rockford facility reduced net earnings by approximately $1,875,000 in the
fourth quarter of fiscal 2003. Last year, expenses associated with
workforce management activities and the decrease in the carrying amount of
certain manufacturing equipment to its fair value reduced net earnings by
approximately $3,300,000.
Net sales for the full fiscal year were $586,682,000, a decrease of 14
percent from $679,991,000 in the previous year. For the full fiscal year
2003, earnings were $12,346,000, or $1.08 per share, compared with
$45,170,000, or $3.90 per share, in the prior year as measured before the
cumulative effect of a fiscal year 2002 accounting change. Expenses
associated with workforce management activities and other special items
reduced fiscal year 2003 earnings by approximately $9,100,000 and last
year's earnings by approximately $6,850,000. These special items are
described more fully in the paragraphs that follow.
"Beyond the results, there was good news in both Industrial Controls and
Aircraft Engine Systems," Mr. Halbrook continued. "Although we do not
expect the large gas turbine market to bottom until sometime in 2004, there
are signs power generation markets are recovering. In addition, we made
market share gains in Industrial Controls through the introduction of new
products, gaining new customers, and increasing content per engine. In
Aircraft Engine Systems, sales in the fourth quarter were higher than both
last year's fourth quarter and the third quarter of fiscal year 2003, but
it's too early to predict if this performance is indicative of an industry
upturn."
Industrial Controls' net sales in the fourth quarter were $88,793,000,
including $10,422,000 from businesses acquired in 2003, compared to
$90,743,000 in the same quarter a year ago. Industrial Controls incurred a
loss of $6,931,000 in the fourth quarter of 2003, compared to a loss of
$4,246,000 in the same quarter a year ago. Expenses associated with
workforce management activity totaled approximately $2,000,000 in this
year's fourth quarter and $2,100,000 in last year's fourth quarter. In
addition, $3,000,000 was recognized in last year's fourth quarter to reduce
the carrying amount of certain manufacturing equipment to its fair value.
(All expenses discussed in conjunction with segment earnings are on a
pretax basis.)
Industrial Controls' net sales for the full fiscal year were $332,755,000,
a decrease of 19 percent from the previous year. The impact of businesses
acquired in 2003 and 2002 increased net sales by approximately $19,000,000
in 2003 over 2002. Industrial Controls incurred a loss of $11,588,000 for
the full fiscal year 2003, compared to earnings of $33,294,000 in the
previous year. This year's results included expenses totaling
approximately $7,850,000 that were associated with workforce management
activities, lease termination costs, the write-off of certain advance
licenses fees, and the transfer of an overseas pension to a different plan.
Last year's results included expenses totaling approximately $7,000,000
that were associated with workforce management activities and the reduction
of the carrying amount of certain manufacturing equipment to its fair
value.
Aircraft Engine Systems' net sales in the fourth quarter were $65,268,000,
compared to $61,843,000 in the same quarter a year ago, an increase of 6
percent. Aircraft Engine Systems' earnings were $13,793,000 in the fourth
quarter of fiscal year 2003, compared to $11,973,000 in the same quarter a
year ago, an increase of 15 percent. Expenses associated with the
consolidation of Aircraft Engine Systems' servovalve operations into its
Rockford facility totaled approximately $1,000,000 in the fiscal year 2003
fourth quarter. In last year's fourth quarter, Aircraft Engine Systems
expensed approximately $210,000 for workforce management activities.
Aircraft Engine Systems' net sales for the full fiscal year were
$253,927,000, a decrease of 6 percent from the previous year. Aircraft
Engine Systems' earnings were $47,615,000 for the full fiscal year 2003,
down 17 percent from the prior year. Expenses associated with workforce
management activities totaled approximately $4,000,000 this year and
$4,000,000 last year. In addition, we incurred other costs associated with
the consolidation of Aircraft Engine System's servovalve operations into
our Rockford facility this year that totaled approximately $2,600,000.
Mr. Halbrook concluded, "In fiscal 2003, as our key markets were seeking a
cyclical trough, we took decisive steps to adjust our capacity and improve
operations, while preserving Woodward's core strengths. In the case of two
of those strengths -- commitment to our customers' needs and world-class
engineering -- we chose to maintain our investment in developing new
fuel-efficient, low-emission products and bundled systems rather than to
pull back and wait for an upturn. The strategy impacted near-term
financial results, but we believe created long-term value for our customers
and shareholders.
"Despite the challenges ahead, Woodward's strategic momentum is solid. The
speed at which we can transform our momentum into financial performance
that meets our long-term objectives will depend on economic and industry
conditions. In the meantime, based on prospects for market share gains,
cost reductions achieved through actions in 2003, and our recent
acquisitions, we reaffirm our outlook that earnings for fiscal 2004 will
exceed those of 2003."
Woodward will hold an investor conference call at 7:30 a.m. CT on Tuesday,
November 18, 2003, to provide an overview of the fourth quarter and fiscal
2003 financial performance, business highlights, and outlook for fiscal
2004. You are invited to listen to the live Webcast of our conference call
or a recording at our Web site, www.woodward.com.
About Woodward
Woodward is the world's largest independent designer and manufacturer of
energy control solutions for aircraft and industrial engines, turbines and
power equipment. The company's innovative controls and fuel delivery
systems help manufacturers worldwide operate cleaner and more efficient
power equipment. Woodward's products and services are used in the
aerospace, power generation, oil and gas processing, and transportation
markets, which include rail, marine and many light and heavy industrial
applications. Woodward is headquartered in Rockford, Illinois, and serves
global markets from locations worldwide. Visit our Web site at
www.woodward.com.
The statements in this release concerning the company's future sales,
earnings, business performance, prospects, and the economy in general
reflect current expectations and are forward-looking statements that
involve risks and uncertainties. Actual results could differ materially
from projections or any other forward-looking statement and we have no
obligation to update our forward-looking statements. Factors that could
affect performance and could cause actual results to differ materially from
projections and forward-looking statements might include ability to capture
and retain market share, ability to improve margins, ability to integrate
past and future acquisitions into operations, risks of power generation or
airline industry economic conditions and the timing associated with
recovery of those markets, political risks, military actions or trade
embargoes affecting customers' markets, including the continuance of
military actions in Iraq, potential cancellation of orders by customers,
and competitive product and pricing pressures. These factors and others are
more fully described in Woodward's Annual Report and Form 10-K for the year
ended September 30, 2003 (expected to be available by
mid-December 2003).
Woodward Governor Company and Subsidiaries
STATEMENTS OF CONSOLIDATED EARNINGS
Three months
ended Year ended
(Unaudited-in thousands September 30, September 30,
------------ ------------
except per share amounts) 2003 2002 2003 2002
---- ---- ---- ----
Net sales $154,061 $152,586 $586,682 $679,991
-------- -------- -------- --------
Costs and expenses:
Cost of goods sold 130,518 127,826 492,241 539,130
Sales, general, and
administrative expenses 17,994 14,353 65,038 58,765
Amortization of
intangible assets 1,781 1,446 4,870 3,748
Interest expense 1,141 1,186 4,635 5,109
Interest income (243) (158) (870) (635)
Other expense-net 45 3,223 829 3,194
-------- -------- -------- --------
Total costs and expenses 151,236 147,876 566,743 609,311
-------- -------- -------- --------
Earnings before income taxes
and cumulative effect of
accounting change 2,825 4,710 19,939 70,680
Income taxes 1,090 1,493 7,593 25,510
-------- -------- -------- --------
Earnings before cumulative
effect of accounting change 1,735 3,217 12,346 45,170
Cumulative effect of accounting
change, net of income taxes - - - (2,489)
-------- -------- -------- --------
Net earnings $ 1,735 $ 3,217 $ 12,346 $ 42,681
======== ======== ======== ========
Basic per share amounts:
Earnings before cumulative
effect of accounting change $ 0.15 $ 0.28 $ 1.10 $ 3.99
Cumulative effect of accounting
change, net of income taxes - - - (0.22)
-------- -------- -------- --------
Net earnings $ 0.15 $ 0.28 $ 1.10 $ 3.77
======== ======== ======== ========
Diluted per share amounts:
Earnings before cumulative
effect of accounting change $ 0.15 $ 0.28 $ 1.08 $ 3.90
Cumulative effect of accounting
change, net of income taxes - - - (0.21)
-------- -------- -------- --------
Net earnings $ 0.15 $ 0.28 $ 1.08 $ 3.69
======== ======== ======== ========
Weighted-average number
of shares outstanding:
Basic 11,253 11,328 11,246 11,325
Diluted 11,419 11,535 11,389 11,577
======== ======== ======== ========
Woodward Governor Company and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
At September 30, At September 30,
(in thousands) 2003 2002
---- ----
Assets
Current assets:
Cash and cash equivalents $ 24,058 $ 29,828
Accounts receivable 87,807 76,406
Inventories 126,289 127,112
Income taxes receivable 1,782 -
Deferred income taxes 14,179 15,340
Other current assets 5,157 3,128
--------- ---------
Total current assets 259,272 251,814
Property, plant, and equipment-net 124,144 123,622
Goodwill 133,620 115,265
Other intangibles-net 85,291 66,762
Deferred income taxes 6,429 17,885
Other assets 7,243 7,047
--------- ---------
Total assets $ 615,999 $ 582,395
========= =========
Liabilities and shareholders' equity
Current liabilities:
Short-term borrowings $ 5,774 $ 16,185
Current portion of long-term debt 30,000 2,000
Accounts payable 26,703 22,739
Accrued liabilities 45,533 52,256
Income taxes payable - 3,194
--------- ---------
Total current liabilities 108,010 96,374
Long-term debt, less current
portion 89,970 78,192
Other liabilities 57,215 52,928
--------- ---------
Total liabilities 255,195 227,494
Shareholders' equity 360,804 354,901
--------- ---------
Total liabilities and
shareholders' equity $ 615,999 $ 582,395
========= =========
Woodward Governor Company and Subsidiaries
OTHER SELECTED INFORMATION
Three months ended Year ended
September 30, September 30,
(Unaudited-in thousands) 2003 2002 2003 2002
---- ---- ---- ----
External net sales:
Industrial Controls $ 88,793 $ 90,743 $ 332,755 $ 408,665
Aircraft Engine Systems 65,268 61,843 253,927 271,326
Segment earnings (loss):
Industrial Controls (6,931) (4,246) (11,588) 33,294
Aircraft Engine Systems 13,793 11,973 47,615 57,226
Capital Expenditures 6,653 6,599 18,802 22,898
Depreciation Expense 6,651 7,054 27,548 28,340
========= ========= ========= =========
Segment earnings in the table above do not reflect interest, corporate
expenses, income taxes, and cumulative effect of accounting change.