Woodward Reports Third Fiscal Quarter and Nine Months ResultsROCKFORD, IL -- 07/26/2004 -- Woodward Governor Company (NASDAQ: WGOV) today reported financial results for its third fiscal quarter and nine months ended June 30, 2004.
Net sales for the quarter were $180,496,000, up 27 percent from $141,637,000 for the third quarter last year. The increase primarily reflected higher volume and the effect of business acquisitions. Net earnings were $8,213,000, or $0.71 per share (all per share amounts are diluted), compared with a loss of $165,000, or $0.01 per share a year ago.
"Our financial performance in the third quarter benefited from improved markets and market share gains, while we continued to strengthen relationships with existing and prospective customers and make good progress in product development initiatives," said Chairman and Chief Executive Officer John A. Halbrook. "Our customers are still optimistic about the next six months -- some of them more so than last quarter -- but only a few are sufficiently confident in their outlook to express views about 2005."
Industrial Controls' net sales for the third quarter were $113,130,000, compared with $83,122,000 a year ago, an increase of $30,008,000. Businesses acquired in the past year accounted for $12,124,000 of the increase and currency exchange rate fluctuations for about $2,900,000. The remainder of the increase reflected greater demand in industrial markets. Segment earnings for the fiscal 2004 third quarter were $2,692,000, compared with a loss of $4,479,000 for the same period last year. The improvement was driven by higher sales and related operating leverage. Also, in last year's third quarter, Industrial Controls incurred expenses totaling $2,832,000 associated with workforce management activity, a write-off of certain advance license fees, and the transfer of an overseas pension to a different plan.
Mr. Halbrook continued, "Normal quarterly variations in sales mix and costs, as well as underperformance at one of our operations, negatively affected Industrial Controls' third quarter results when compared to the preceding two quarters. On average, we fully expect Industrial Controls' operating margins to approximate first and second quarter performance in the near term, with expectations of achieving higher levels in the long term."
Aircraft Engine Systems' net sales for the third quarter were $67,366,000, an increase of 15 percent from $58,515,000 for the third quarter last year. Sales in the year-ago quarter were influenced by the war in Iraq and concerns about SARS, as well as ongoing aircraft production and air travel considerations. Segment earnings for the quarter were $15,162,000, compared with $8,824,000 a year ago, reflecting the effects of higher sales and related operating leverage. Also, last year's third quarter results included expenses related to a facility consolidation and workforce management totaling $2,175,000.
"Strong sales of spares and repair and overhaul services for commercial and military markets, which reflects normal quarterly variations in our sales mix, drove Aircraft Engine Systems' third-quarter performance," said Mr. Halbrook. "In addition, the improved setting and outlook in virtually all Aircraft Engine Systems' end markets carried over into the third quarter, including the strengthening of commercial revenue passenger miles, high utilization of military aircraft, and up ticks in the outlook for commercial and private aircraft production."
For the nine months ended June 30, 2004, consolidated net sales were $512,420,000, an increase of 18 percent from $432,621,000 for the corresponding nine months a year ago. Net earnings were $24,711,000, or $2.14 per share, compared with $10,611,000, or $0.94 per share last year.
Mr. Halbrook concluded, "Our priority in Industrial Controls is to build profitability and efficiencies as markets recover, visibility improves, and customers launch new products. In Aircraft Engine Systems, our focus is to sustain our current performance, meet product development objectives, and secure roles for our products on new programs. As we enter the fourth quarter, our outlook for fiscal year 2004 earnings has not changed from the one expressed last quarter. We still expect second half earnings to approximate the quarterly average for the first half. Of course, actual results are subject to many internal and external variables, including the sustainability and slope of the recoveries in power generation, aviation, and our other global markets."
Woodward will hold an investor conference call at 7:30 a.m. CT on Tuesday, July 27, 2004, to provide an overview of the third 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, 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 website 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 June 30, 2004, expected to be available by early August.
Woodward Governor Company and Subsidiaries
STATEMENTS OF CONSOLIDATED EARNINGS
Three months ended Nine months ended
June 30, June 30,
(In thousands except per 2004 2003 2004 2003
share amounts) ---- ---- ---- ----
Net sales $ 180,496 $ 141,637 $ 512,420 $ 432,621
--------- --------- --------- ---------
Costs and expenses:
Cost of goods sold 145,947 121,343 412,494 361,723
Sales, general, and
administrative expenses 18,303 16,958 52,308 47,044
Amortization of intangible
assets 1,713 1,043 5,143 3,089
Interest expense 1,372 1,349 4,067 3,494
Interest income (135) (135) (921) (627)
Other expense (income) -net 78 1,487 (499) 784
--------- --------- --------- ---------
Total costs and expenses 167,278 142,045 472,592 415,507
--------- --------- --------- ---------
Earnings (loss) before income
taxes 13,218 (408) 39,828 17,114
Income taxes 5,005 (243) 15,117 6,503
--------- --------- --------- ---------
Net earnings (loss) $ 8,213 $ (165) $ 24,711 $ 10,611
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Per share amounts:
Basic $ 0.73 $ (0.01) $ 2.19 $ 0.95
Diluted $ 0.71 $ (0.01) $ 2.14 $ 0.94
========= ========= ========= =========
Weighted-average number
of shares outstanding:
Basic 11,299 11,112 11,279 11,190
Diluted 11,608 11,112 11,543 11,325
========= ========= ========= =========
Woodward Governor Company and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
At June 30, At September 30,
(In thousands) 2004 2003
---- ----
Assets
Current assets:
Cash and cash equivalents $ 27,861 $ 24,058
Accounts receivable 92,553 87,807
Inventories 141,636 126,289
Income taxes receivable - 1,782
Deferred income taxes 16,136 14,179
Other current assets 3,582 5,157
-------- --------
Total current assets 281,768 259,272
Property, plant, and equipment-net 118,779 124,144
Goodwill 131,398 133,620
Other intangibles-net 87,381 85,291
Deferred income taxes 2,174 6,429
Other assets 6,214 7,243
-------- --------
Total assets $627,714 $615,999
======== ========
Liabilities and shareholders' equity
Current liabilities:
Short-term borrowings $ 5,413 $ 5,774
Current portion of long-term debt - 30,000
Accounts payable 36,824 26,703
Accrued liabilities 46,822 45,533
Income taxes payable 6,380 -
-------- --------
Total current liabilities 95,439 108,010
Long-term debt, less current portion 88,495 89,970
Other liabilities 62,569 57,215
-------- --------
Total liabilities 246,503 255,195
Shareholders' equity 381,211 360,804
-------- --------
Total liabilities and
shareholders' equity $627,714 $615,999
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Woodward Governor Company and Subsidiaries
OTHER SELECTED INFORMATION
Three months ended Nine months ended
June 30, June 30,
(In thousands) 2004 2003 2004 2003
---- ---- ---- ----
External net sales:
Industrial Controls $ 113,130 $ 83,122 $ 314,781 $ 243,962
Aircraft Engine Systems 67,366 58,515 197,639 188,659
Segment earnings (losses):
Industrial Controls 2,692 (4,479) 12,657 (4,657)
Aircraft Engine Systems 15,162 8,824 40,262 33,822
Capital Expenditures 4,654 5,268 14,015 12,149
Depreciation Expense 6,196 7,291 19,780 20,897
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CONTACT:
Stephen P. Carter
Executive Vice President
Chief Financial Officer and Treasurer
815-639-6800
