Woodward Reports First Quarter ResultsROCKFORD, IL -- 01/26/2004 -- Woodward Governor Company (NASDAQ: WGOV) today reported financial results for the first fiscal quarter ended December 31, 2003.
Net sales for the quarter were $158,973,000, up 10 percent from $144,825,000 in the first quarter a year ago. The increase in sales reflected the effect of businesses acquired in last year's third and fourth fiscal quarters and fluctuations in foreign currency exchange rates. Net earnings were $7,393,000, or $0.65 per share (all per share amounts are diluted), an increase of 18 percent from $6,265,000, or $0.55 per share, in the same quarter last year.
"We have seen early indications that our key markets have reached the bottom of their cycles," said Chairman and Chief Executive Officer John A. Halbrook. "We have also benefited from the consolidation of our servovalve operations and other cost reduction actions taken in fiscal year 2003."
Industrial Controls' net sales for the first quarter were $96,819,000, compared to $78,529,000 in the same quarter a year ago. Businesses acquired in the third and fourth fiscal quarters last year accounted for $12,196,000 of the year-over-year increase. Most of the remaining increase was attributable to the effect of changes in foreign currency exchange rates. Segment earnings for the quarter were $4,591,000, compared with $1,670,000 for the same period last year, driven by both the increase in sales and improved margins due to cost reduction activities. Also, in last year's first quarter, we incurred approximately $550,000 for workforce management activities.
"Industrial Controls is beginning to rebuild its earnings margins after several quarters of declines," said Mr. Halbrook. "Shipments of large gas turbine products modestly recovered from fourth quarter levels. We also saw activity related to the reconstruction in Iraq and infrastructure development in China. In addition, we are beginning to benefit from new products as they enter into production and from the products and markets we gained through our acquisitions."
Aircraft Engine Systems' net sales for the first quarter were $62,154,000, a decrease of 6 percent from $66,296,000 in the first quarter last year, reflecting continued weakness in the commercial aviation industry. Segment earnings for the quarter were $11,421,000, compared with $12,831,000 a year ago. Last year's first quarter results included $2,300,000 of costs related to the consolidation of Aircraft Engine Systems' servovalve operations.
"In Aircraft Engine Systems, results were affected by lower sales and a less favorable sales mix as compared to the first quarter a year ago, reflecting normal variability in sales," commented Mr. Halbrook. "Our military business remained strong and commercial aftermarket sales remained fairly stable. Also, the consolidation of our servovalve operations, which was completed in fiscal year 2003, reduced our overall cost structure on a sustainable basis."
Mr. Halbrook concluded, "Our long-term strategies remain focused on building shareholder value throughout economic cycles. While we believe the weakness in the commercial aviation industry will continue through the end of 2004 and into 2005, many of our customers have expressed favorable sentiments about future demands in our industrial markets. Nevertheless, until actual orders begin to validate these indications, it is too early to be more specific than our previous guidance that earnings for fiscal 2004 will exceed those of 2003. Actual earnings will be influenced by 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, January 27, 2004, to provide an overview of the first quarter's 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 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 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 December 31, 2003 (expected to be available by early February 2004).
Woodward Governor Company and Subsidiaries
STATEMENTS OF CONSOLIDATED EARNINGS
Three months ended
December 31,
(Unaudited - in thousands except per share amounts) 2003 2002
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Net sales $158,973 $144,825
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Costs and expenses:
Cost of goods sold 127,317 118,266
Sales, general, and administrative expenses 17,176 14,797
Amortization of intangible assets 1,610 1,017
Interest expense 1,244 1,194
Interest income (573) (109)
Other expense (income) - net 178 (444)
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Total costs and expenses 146,952 134,721
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Earnings before income taxes 12,021 10,104
Income taxes 4,628 3,839
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Net earnings $ 7,393 $ 6,265
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Per share amounts:
Basic $ 0.66 $ 0.55
Diluted $ 0.65 $ 0.55
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Weighted-average number of shares outstanding:
Basic 11,264 11,306
Diluted 11,456 11,457
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Woodward Governor Company and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
At At
December September
(Unaudited - in thousands) 31, 2003 30, 2003
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Assets
Current assets:
Cash and cash equivalents $ 41,683 $ 24,058
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Accounts receivable 79,850 87,807
Inventories 132,178 126,289
Income taxes receivable - 1,782
Deferred income taxes 14,362 14,179
Other current assets 6,006 5,157
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Total current assets 274,079 259,272
Property, plant, and equipment - net 123,456 124,144
Goodwill 134,329 133,620
Other intangibles - net 83,974 85,291
Deferred income taxes 3,507 6,429
Other assets 6,460 7,243
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Total assets $625,805 $615,999
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Liabilities and shareholders' equity
Current liabilities:
Short-term borrowings $ 9,405 $ 5,774
Current portion of long-term debt 25,000 30,000
Accounts payable 28,347 26,703
Accrued liabilities 40,560 45,533
Income taxes payable 5,138 -
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Total current liabilities 108,450 108,010
Long-term debt, less current portion 89,743 89,970
Other liabilities 58,989 57,215
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Total liabilities 257,182 255,195
Shareholders' equity 368,623 360,804
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Total liabilities and shareholders' equity $625,805 $615,999
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Woodward Governor Company and Subsidiaries
OTHER SELECTED INFORMATION
Three months ended
December 31,
(Unaudited - in thousands) 2003 2002
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External net sales:
Industrial Controls $ 96,819 $ 78,529
Aircraft Engine Systems 62,154 66,296
Segment earnings:
Industrial Controls $ 4,591 $ 1,670
Aircraft Engine Systems 11,421 12,831
Capital expenditures 4,118 2,865
Depreciation expense 6,702 6,723
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Segment earnings in the table above do not reflect nonsegment expenses,
interest, and income taxes.
CONTACT:
Stephen P. Carter
Executive Vice President
Chief Financial Officer and Treasurer
1-815-639-6800
