Woodward Reports Second Fiscal Quarter and Six Months ResultsROCKFORD, IL -- 04/25/2005 -- Woodward Governor Company today reported financial results for its second fiscal quarter and six months ended March 31, 2005.
Net sales for the quarter were $210,619,000, up 22 percent from $172,951,000 for the second quarter last year. Earnings before income taxes were $20,290,000 for the quarter compared with $14,589,000 for the same quarter a year ago. These results included the benefit of net reductions in the accruals for workforce management costs of $1,731,000 this year compared to $348,000 last year. Net earnings for the quarter were $12,979,000, or $1.11 per share, compared with $9,105,000, or $0.79 per share in last year's second quarter (all per share amounts are diluted).
"Our key markets continue to grow, and we are encouraged by their strength," said Chairman and Chief Executive Officer John Halbrook. "By developing the right products and services that have helped our customers achieve their competitive objectives, we are seeing increased sales and earnings."
Industrial Controls' net sales for the second quarter were $136,031,000, compared with $104,832,000 a year ago, an increase of 30 percent. Segment earnings were $10,095,000, compared with $5,374,000 a year ago. Segment earnings benefited from net reductions in the accruals for workforce management costs of $1,731,000 in this year's second quarter and $348,000 in last year's second quarter. The accruals were reduced as the result of changes in estimates for termination benefits payable.
The current workforce management actions primarily relate to the consolidation of our European operations. We will begin to realize savings from our consolidation activities as members leave the company over the next four quarters, and we expect to incur additional costs totaling approximately $2,800,000 during that same period. Once fully implemented, annual savings are expected to range from $9,000,000 to $11,000,000.
"Industrial Controls benefited from a broad industrial recovery that encompassed power generation, transportation, and process industries, including the mobile industrial and marine markets," continued Mr. Halbrook. "In addition, our strategy of investing in product development to build market share has contributed to the increased sales achieved in the second quarter. We believe that Industrial Controls' revenue growth will increasingly translate into improved operating leverage as we realize substantial savings from the European consolidation."
Aircraft Engine Systems' net sales for the second quarter were $74,588,000, compared with $68,119,000 in the same quarter a year ago, an increase of 9 percent. Segment earnings for the quarter increased 16 percent to $15,922,000 from $13,679,000.
"In Aircraft Engine Systems, our revenue improvements reflect the favorable trends in commercial aviation. We experienced a modest growth in commercial OEM sales, as Boeing and Airbus ramp up their production levels for narrow and widebody aircraft. Also, there has been an increased demand for commercial aftermarket spare parts and repair and overhaul services," said Halbrook.
For the six months ended March 31, 2005, consolidated net sales were $399,944,000, an increase of 20 percent from $331,924,000 for the corresponding period a year ago. Earnings before income taxes were $39,330,000 for the six-month period compared with $26,610,000 for the same period last year. These pre-tax earnings included a first fiscal quarter gain on the sale of certain product line rights of $3,834,000. They also included net reductions in workforce management accruals totaling $1,243,000 in this year's six-month period and $280,000 in last year's six-month period. Net earnings for the six-month period were $24,974,000, or $2.14 per share, compared with $16,498,000, or $1.43 per share last year.
Mr. Halbrook concluded, "Our markets are strong and indications suggest that the strength will continue. While our sales are dependent on how vigorous our markets remain, we anticipate higher sales for the second half of this fiscal year as compared to the first half. Our earnings will continue to be affected by the costs associated with the consolidation of our European operations. However, we expect these additional costs to be partially offset by savings from these actions. As a result of these items and the gain on the product line sale in the first quarter, we now anticipate our full-year earnings to be in the range of $3.85 to $4.15 per share."
Woodward will hold an investor conference call at 7:30 a.m. CT on Tuesday, April 26, 2005, 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 website, 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/A for the year ended September 30, 2004. Woodward's Form 10-Q for the quarterly period ending March 31, 2005 is expected to be available by May 5, 2005.
Woodward Governor Company
5001 North Second Street
P.O. Box 7001
Rockford, IL 61125-7001
Tel: 815-877-7441
Fax: 815-639-6050
Woodward Governor Company and Subsidiaries
STATEMENTS OF CONSOLIDATED EARNINGS
(Unaudited - in thousands Three months ended Six months ended
except per share March 31, March 31,
amounts) 2005 2004 2005 2004
---------- ---------- ---------- ----------
Net sales $ 210,619 $ 172,951 $ 399,944 $ 331,924
---------- ---------- ---------- ----------
Costs and expenses:
Cost of goods sold 157,520 130,063 300,793 247,752
Sales, general, and
administrative
expenses 19,559 16,899 38,256 34,910
Research and
development costs 11,690 9,169 22,295 18,795
Amortization of
intangible assets 1,780 1,820 3,556 3,430
Interest expense 1,525 1,451 2,894 2,695
Interest income (402) (213) (1,037) (786)
Other income (1,470) (898) (6,371) (1,859)
Other expense 127 71 228 377
---------- ---------- ---------- ----------
Total costs and
expenses 190,329 158,362 360,614 305,314
---------- ---------- ---------- ----------
Earnings before income
taxes 20,290 14,589 39,330 26,610
Income taxes 7,311 5,484 14,356 10,112
---------- ---------- ---------- ----------
Net earnings $ 12,979 $ 9,105 $ 24,974 $ 16,498
========== ========== ========== ==========
Per share amounts:
Basic $ 1.14 $ 0.81 $ 2.20 $ 1.46
Diluted $ 1.11 $ 0.79 $ 2.14 $ 1.43
========== ========== ========== ==========
Weighted-average number
of shares outstanding:
Basic 11,390 11,276 11,359 11,269
Diluted 11,703 11,557 11,672 11,507
========== ========== ========== ==========
Certain reclassifications have been made to the financial statement line
items for the three and six months ended March 31, 2004, to conform to the
2005 presentation.
Woodward Governor Company and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
At March 31, At September 30,
(Unaudited - in thousands) 2005 2004
---------- ----------
Assets
Current assets:
Cash and cash equivalents $ 65,024 $ 48,895
Accounts receivable 99,613 99,277
Inventories 153,372 138,708
Deferred income taxes 18,842 16,852
Other current assets 4,280 5,064
---------- ----------
Total current assets 341,131 308,796
Property, plant, and equipment-net 113,983 117,310
Goodwill 132,308 131,542
Other intangibles-net 82,333 85,711
Deferred income taxes 781 4,318
Other assets 10,431 6,617
---------- ----------
Total assets $ 680,967 $ 654,294
========== ==========
Liabilities and shareholders' equity
Current liabilities:
Short-term borrowings $ 4,945 $ 5,833
Current portion of long-term debt 13,715 956
Accounts payable 38,451 35,207
Accrued liabilities 62,331 65,573
Income taxes payable 880 3,703
---------- ----------
Total current liabilities 120,322 111,272
Long-term debt, less current portion 75,708 88,452
Other liabilities 73,051 68,709
---------- ----------
Total liabilities 269,081 268,433
Shareholders' equity 411,886 385,861
---------- ----------
Total liabilities and shareholders' equity $ 680,967 $ 654,294
========== ==========
Woodward Governor Company and Subsidiaries
OTHER SELECTED INFORMATION
Three months ended Six months ended
(Unaudited - March 31, March 31,
in thousands) 2005 2004 2005 2004
---------- ---------- ---------- ----------
External net sales:
Industrial Controls $ 136,031 $ 104,832 $ 258,386 $ 201,651
Aircraft Engine Systems 74,588 68,119 141,558 130,273
Segment earnings:
Industrial Controls 10,095 5,374 15,150 9,965
Aircraft Engine Systems 15,922 13,679 34,234 25,100
Workforce management costs:
Member termination
benefits 384 - 872 151
Member termination
benefits adjustments (2,115) (348) (2,115) (431)
---------- ---------- ---------- ----------
Total workforce
management costs (1,731) (348) (1,243) (280)
---------- ---------- ---------- ----------
Capital expenditures 5,326 5,243 9,686 9,361
Depreciation expense 6,651 6,882 13,166 13,584
========== ========== ========== ==========
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
815-639-6800
