Woodward Reports Second Quarter and Six Months Results
ROCKFORD, IL -- 04/26/2004 -- Woodward Governor Company (NASDAQ: WGOV) today
reported financial results for the second fiscal quarter and six months
ended March 31, 2004.
Net sales for the quarter were $172,951,000, up 18 percent from
$146,159,000 in the second quarter last year. The increase reflected the
effect of business acquisitions, currency exchange rate fluctuations, and
higher volume. Net earnings were $9,105,000, or $0.79 per share (all per
share amounts are diluted), compared to $4,511,000, or $0.40 per share, in
the same quarter last year.
"In the second quarter, many of our key markets went from showing early
signs of improvement to what may be the beginning of a fairly vibrant,
broad-based recovery," said Chairman and Chief Executive Officer John A.
Halbrook. "Our results also reflected benefits from cost initiatives and
our continuous focus on efficiency and quality."
Industrial Controls' net sales for the second quarter were $104,832,000,
compared with $82,311,000 a year ago, an increase of $22,521,000.
Businesses acquired in the past year accounted for $13,539,000 of the
increase and currency exchange rate fluctuations for about $4,800,000. The
remainder of the increase reflected firmer demand in many product lines,
particularly from Asian and North American markets. Segment earnings for
the quarter were $5,374,000, compared to a loss of $1,848,000 for the same
period last year. Earnings were driven by higher sales and related
operating leverage, as well as recent cost-reduction activities. Also, in
last year's second quarter, we incurred approximately $2,460,000 in charges
for workforce management and lease termination expenses.
"Industrial Controls' results in the second quarter benefited from
market-focused strategies and an improving economic setting," said Mr.
Halbrook. "As a result of recent acquisitions and other development
activities, we supplied a growing share of products to our global markets
as the demand for engines and turbines began to revive. Distributed power,
marine auxiliary power, and alternative-fuel transportation were among the
diverse markets that generated higher demand. In addition, shipments of
large gas turbine products were encouraging for the second consecutive
quarter."
Aircraft Engine Systems' net sales for the second quarter were $68,119,000,
an increase of 7 percent from $63,848,000 in the second quarter last year,
which reflected improvement in military and commercial aftermarket sales.
Segment earnings for the quarter were $13,679,000, compared with
$12,167,000 a year ago. Last year's second quarter results included
workforce management and facility consolidation expenses totaling
$1,020,000.
Mr. Halbrook continued, "In Aircraft Engine Systems, demand for Woodward
spares and repair and overhaul services for both military and commercial
aftermarkets was a source of strength in the quarter. In addition, demand
for Woodward's products in the commercial OEM market took a slightly better
tone, particularly narrow body and regional jets in which Woodward is
broadly represented."
For the six months ended March 31, 2004, net sales were $331,924,000, an
increase of 14 percent from $290,984,000 for the corresponding six months a
year ago. Net earnings for the six-month period were $16,498,000, or $1.43
per share this year, compared with $10,776,000, or $0.95 per share last
year, an increase of 53 percent.
Mr. Halbrook concluded, "The broad-based improvement in demand for
industrial products in the second quarter is consistent with the
indications from many of our customers that industrial markets bottomed
last fall and are beginning to recover. Tempered by the past few years, we
do not yet have sufficient visibility to characterize the recovery in our
industrial markets as a sustainable trend. However, we currently expect
sales in the second half of the fiscal year to approximate the run rate of
the second quarter. At this sales level, combined with anticipated
increased product development activities and other initiatives, we expect
net earnings in the second half of the year will be approximately the same
as generated in the first half. Actual results will be influenced by many
internal and external variables including the timing and slope of the
recoveries in our power generation, commercial aviation, and other global
markets."
Woodward will hold an investor conference call at 7:30 a.m. CT on Tuesday,
April 27, 2004, to provide an overview of the second quarter and six
months' financial performance, business highlights, and outlook for the
remainder of the year. 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, manufacturer, and
service provider of energy control solutions for aircraft engines,
industrial engines and turbines, power generation, and process automation
equipment. The company's innovative control, fuel delivery, combustion, and
automation systems help customers worldwide operate cleaner, more cost
effective, and more reliable equipment. 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, demand in the company's markets,
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 are described in Woodward's Annual Report and
Form 10-K for the year ended September 30, 2003, and Form 10-Q for the
quarterly period ended March 31, 2004, expected to be available by early
May.
Woodward Governor Company and Subsidiaries
STATEMENTS OF CONSOLIDATED EARNINGS
Three months ended Six months ended
(Unaudited - in thousands March 31, March 31,
except per share amounts) 2004 2003 2004 2003
--------- --------- --------- ---------
Net sales $ 172,951 $ 146,159 $ 331,924 $ 290,984
--------- --------- --------- ---------
Costs and expenses:
Cost of goods sold 139,232 122,114 266,547 240,380
Sales, general, and
administrative expenses 16,827 15,289 34,005 30,086
Amortization of
intangible assets 1,820 1,029 3,430 2,046
Interest expense 1,451 951 2,695 2,145
Interest income (213) (383) (786) (492)
Other income -net (755) (259) (577) (703)
--------- --------- --------- ---------
Total costs and expenses 158,362 138,741 305,314 273,462
--------- --------- --------- ---------
Earnings before
income taxes 14,589 7,418 26,610 17,522
Income taxes 5,484 2,907 10,112 6,746
--------- --------- --------- ---------
Net earnings $ 9,105 $ 4,511 $ 16,498 $ 10,776
========= ========= ========= =========
Per share amounts:
Basic $ 0.81 $ 0.40 $ 1.46 $ 0.96
Diluted $ 0.79 $ 0.40 $ 1.43 $ 0.95
========= ========= ========= =========
Weighted-average number of shares outstanding:
Basic 11,276 11,151 11,269 11,229
Diluted 11,557 11,270 11,507 11,366
========= ========= ========= =========
Woodward Governor Company and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
At March 31, At September 30,
(Unaudited - in thousands
except per share amounts) 2004 2003
--------- ---------
Assets
Current assets:
Cash and cash equivalents $ 36,969 $ 24,058
Accounts receivable 84,100 87,807
Inventories 136,442 126,289
Income taxes receivable - 1,782
Deferred income taxes 14,922 14,179
Other current assets 3,392 5,157
--------- ---------
Total current assets 275,825 259,272
Property, plant, and
equipment-net 120,574 124,144
Goodwill 131,505 133,620
Other intangibles-net 86,002 85,291
Deferred income taxes 3,450 6,429
Other assets 6,669 7,243
--------- ---------
Total assets $ 624,025 $ 615,999
========= =========
Liabilities and shareholders' equity
Current liabilities:
Short-term borrowings $ 9,248 $ 5,774
Current portion of
long-term debt - 30,000
Accounts payable 36,654 26,703
Accrued liabilities 43,722 45,533
Income taxes payable 7,313 -
--------- ---------
Total current liabilities 96,937 108,010
Long-term debt, less
current portion 90,064 89,970
Other liabilities 60,331 57,215
--------- ---------
Total liabilities 247,332 255,195
Shareholders' equity 376,693 360,804
--------- ---------
Total liabilities and
shareholders' equity $ 624,025 $ 615,999
========= =========
Woodward Governor Company and Subsidiaries
OTHER SELECTED INFORMATION
Three months ended Six months ended
(Unaudited - in thousands March 31, March 31,
except per share amounts) 2004 2003 2004 2003
--------- --------- --------- ---------
External net sales:
Industrial Controls $ 104,832 $ 82,311 $ 201,651 $ 160,840
Aircraft Engine Systems 68,119 63,848 130,273 130,144
Segment earnings (losses):
Industrial Controls 5,374 (1,848) 9,965 (178)
Aircraft Engine Systems 13,679 12,167 25,100 24,998
Capital Expenditures 5,243 4,016 9,361 6,881
Depreciation Expense 6,882 6,883 13,584 13,606
========= ========= ========= =========
Segment earnings in the table above do not include nonsegment expenses,
interest, and income taxes.