Woodward Reports Third Fiscal Quarter and Nine Months ResultsROCKFORD, IL -- 07/25/2005 -- Woodward Governor Company (NASDAQ: WGOV) today reported financial results for its third fiscal quarter and nine months ended June 30, 2005.
Net sales for the quarter were $210,252,000, up 16 percent from $180,496,000 for the third quarter last year. Earnings before income taxes for the quarter were $25,488,000, compared with $13,218,000 for the same quarter a year ago. This year's results included a curtailment gain of $7,825,000 that resulted from changes to a retirement healthcare benefit plan. In addition, this year's results included workforce management and facility consolidation costs totaling approximately $1,329,000.
Net earnings for the quarter were $19,746,000, or $1.68 per share, compared with $8,213,000, or $0.71 per share in the same quarter last year (all per share amounts are diluted). Our effective income tax rate for the quarter was 22.5 percent of pretax earnings, which is below the rate expected for the full year due to changes in estimates of income taxes provided for previous periods. The changes in estimates resulted from increases in the amount of certain credits claimed or expected to be claimed, and changes in the amount of certain deductions taken or expected to be taken. The effect of the changes reduced reported income tax expense by $2,923,000, or the equivalent of 11.5 percent of pretax earnings. We currently anticipate the applicable rate for our fourth quarter will be 34.0 percent.
"Our results were significantly better than last year, largely driven by higher sales derived from stronger industrial and aircraft markets, as well as an income tax rate less than previously expected. Through our ongoing commitment to product development, we continue to be well positioned with the right solutions to meet our customers' new program demands," said Thomas A. Gendron, President and Chief Executive Officer.
The current workforce management actions primarily relate to the consolidation of our European operations, which we plan to complete by the end of March 2006. We currently expect to incur additional costs for these actions totaling approximately $1,400,000 over the next three quarters. The actions are expected to result in gradually increasing savings that, once fully implemented, will range from $9,000,000 to $11,000,000 annually from amounts that would have been incurred prior to the actions.
Industrial Controls' net sales for the third quarter were $136,592,000, compared with $113,130,000 a year ago, an increase of 21 percent. Segment earnings were $9,469,000, compared with $2,692,000 for the same quarter a year ago. This year's third quarter results included approximately $1,329,000 of workforce management and facility consolidation costs.
"Led by demand from Asia and emerging markets in Eastern Europe for infrastructure-related products, the strength of our markets continued into the third quarter," commented Mr. Gendron. "We are demonstrating our ability to meet our customers' increased production orders in an efficient manner, as well as servicing our large installed base of products on industrial gas turbines and engines."
Aircraft Engine Systems' net sales for the second quarter were $73,660,000, compared with $67,366,000 in the same quarter a year ago, an increase of 9 percent. Segment earnings for the quarter were $14,321,000, compared with $15,162,000 a year ago.
"During the quarter, Aircraft Engine Systems continued to perform at a very consistent and respectable level. Product development activity for commercial and military programs in the quarter was up reflecting a growing pipeline of projects, which is a positive sign of future growth," said Mr. Gendron. "In addition, approximately 75 percent of the aircraft orders announced at the 2005 Paris Air Show are expected to use aircraft engines equipped with one or more Woodward products."
For the nine months ended June 30, 2005, consolidated net sales were $610,196,000 compared with $512,420,000 for the same period a year ago, an increase of 19 percent. Earnings before income taxes were $64,818,000, compared with $39,828,000, for the same period last year. These results included a gain of $3,834,000 from the first quarter sale of certain product line rights and the curtailment gain of $7,825,000 described above. Net earnings were $44,720,000, or $3.83 per share, compared with $24,711,000, or $2.14 per share, last year. The effective tax rate for the nine-month period was 31.0 percent of pretax earnings. Changes in estimates of income taxes for previous periods, which are described above, reduced our nine-month tax rate by 3.0 percent of pretax earnings, or $1,940,000.
"Over the past two years, Woodward's industrial and aircraft engine markets have experienced impressive recoveries in demand, which helped Woodward increase revenues and raise profitability," said Mr. Gendron. "Looking forward, there is healthy OEM and aftermarket demand for our aircraft products and systems, as well as development opportunities to supply new programs.
"Despite otherwise strong demand, some of our industrial customers are experiencing production capacity limitations and supply constraints from other suppliers. Although Woodward is well positioned for increased capacity, these constraints may moderate the rate of sales growth we've seen over the past two years, which would influence our revenue growth.
"Our previous estimate of earnings for fiscal year 2005 of $3.85 to $4.15 per share included the gain on the sale of certain product line rights. It did not include the third quarter curtailment gain or the lower expected effective tax rate. Considering all these items, we now anticipate 2005 fiscal year earnings to be in the range of $4.70 to $4.85 per share," concluded Mr. Gendron.
Woodward will hold an investor conference call at 7:30 a.m. CT on Tuesday, July 26, 2005, to provide an overview of the third quarter and nine 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, and power generation and mobile industrial equipment. The company's innovative control, fuel delivery, and combustion systems help customers worldwide operate cleaner, more reliable, and cost effective equipment. Woodward is headquartered in Rockford, Illinois, and serves global power generation, transportation, process industries, and aerospace 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 ended June 30, 2005 is expected to be available by August 10, 2005.
Woodward Governor Company and Subsidiaries
STATEMENTS OF CONSOLIDATED EARNINGS
Three months ended Nine months ended
June 30, June 30,
(Unaudited - in thousands
except per share amounts) 2005 2004 2005 2004
-------- -------- -------- --------
Net sales $210,252 $180,496 $610,196 $512,420
-------- -------- -------- --------
Costs and expenses:
Cost of goods sold 158,867 135,428 459,660 383,180
Sales, general, and
administrative expenses 19,427 19,311 57,683 54,221
Research and
development costs 12,811 10,515 35,106 29,310
Amortization of
intangible assets 1,770 1,713 5,326 5,143
Curtailment gain (7,825) - (7,825) -
Interest expense 1,461 1,372 4,355 4,067
Interest income (478) (135) (1,515) (921)
Other income (1,947) (968) (8,318) (2,827)
Other expense 678 42 906 419
-------- -------- -------- --------
Total costs and expenses 184,764 167,278 545,378 472,592
-------- -------- -------- --------
Earnings before income taxes 25,488 13,218 64,818 39,828
Income taxes 5,742 5,005 20,098 15,117
-------- -------- -------- --------
Net earnings $ 19,746 $ 8,213 $ 44,720 $ 24,711
======== ======== ======== ========
Per share amounts:
Basic $ 1.73 $ 0.73 $ 3.93 $ 2.19
Diluted $ 1.68 $ 0.71 $ 3.83 $ 2.14
-------- -------- -------- --------
Weighted-average number of
shares outstanding:
Basic 11,423 11,299 11,380 11,279
Diluted 11,730 11,608 11,686 11,543
======== ======== ======== ========
Certain reclassifications have been made to the financial statement line
items for the three and nine months ended June 30, 2004, to conform to
the 2005 presentation.
Woodward Governor Company and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
At June 30, At September 30,
(Unaudited - in thousands) 2005 2004
--------- ---------
Assets
Current assets:
Cash and cash equivalents $ 74,671 $ 48,895
Accounts receivable 94,812 99,277
Inventories 155,423 138,708
Income taxes receivable 3,811 -
Deferred income taxes 19,239 16,852
Other current assets 4,455 5,064
--------- ---------
Total current assets 352,411 308,796
Property, plant, and equipment-net 111,345 117,310
Goodwill 131,341 131,542
Other intangibles-net 80,348 85,711
Deferred income taxes - 4,318
Other assets 10,196 6,617
--------- ---------
Total assets $ 685,641 $ 654,294
========= =========
Liabilities and shareholders' equity
Current liabilities:
Short-term borrowings $ 6,291 $ 5,833
Current portion of long-term debt 14,435 956
Accounts payable 34,421 35,207
Accrued liabilities 59,585 65,573
Income taxes payable - 3,703
--------- ---------
Total current liabilities 114,732 111,272
Long-term debt, less current portion 73,985 88,452
Other liabilities 68,064 68,709
Deferred income taxes 1,301 -
--------- ---------
Total liabilities 258,082 268,433
Shareholders' equity 427,559 385,861
--------- ---------
Total liabilities and shareholders' equity $ 685,641 $ 654,294
========= =========
Woodward Governor Company and Subsidiaries
OTHER SELECTED INFORMATION
Three months ended Nine months ended
June 30, June 30,
(Unaudited - in thousands) 2005 2004 2005 2004
-------- -------- -------- --------
External net sales:
Industrial Controls $136,592 $113,130 $394,978 $314,781
Aircraft Engine Systems 73,660 67,366 215,218 197,639
Segment earnings:
Industrial Controls 9,469 2,692 24,619 12,657
Aircraft Engine Systems 14,321 15,162 48,555 40,262
Workforce management costs:
Member termination benefits 469 - 1,341 151
Related costs of
facility consolidation 943 - 943 -
Member termination
benefits adjustments (83) (348) (2,198) (431)
-------- -------- -------- --------
Total workforce management costs 1,329 (348) 86 (280)
-------- -------- -------- --------
Capital expenditures 6,639 4,654 16,325 14,015
Depreciation expense 5,794 6,196 18,960 19,780
======== ======== ======== ========
Segment earnings in the table above do not reflect nonsegment expenses,
curtailment gain, interest, and income taxes.
Contact:
Stephen P. Carter
Executive Vice President,
Chief Financial Officer and Treasurer
815-639-6800
Woodward Governor Company
5001 North Second Street
P.O. Box 7001
Rockford, IL 61125-7001
Tel: 815-877-7441
Fax: 815-639-6050
