Woodward Reports Fourth Quarter and Fiscal 2005 ResultsROCKFORD, IL -- 11/21/2005 -- Woodward Governor Company (NASDAQ: WGOV) today reported financial results for its fourth quarter and fiscal year 2005.
Net sales for the quarter were $217,530,000, up 10 percent from $197,385,000 for the fourth quarter last year. Earnings before income taxes for the quarter were $14,290,000, compared with $9,464,000 a year ago. These pretax results included the effects of workforce management actions, which resulted in costs totaling $1,624,000 for the quarter, compared with $13,148,000 in the same quarter last year.
Net earnings for the quarter were $11,251,000, or $0.96 per share, compared with $6,671,000, or $0.57 per share a year ago (all per share amounts are diluted). Net earnings for the quarter reflected an effective income tax rate of 21.3 percent, compared with 29.5 percent for the year ago quarter.
Net sales for the full fiscal year of $827,726,000 were a record for the company, an increase of 17 percent from $709,805,000 for the previous year. Earnings before income taxes were $79,108,000 for the year, compared with $49,292,000 last year. The pretax results for the year included gains totaling $11,659,000 related to the first quarter sale of certain product line rights and third quarter changes to a retirement healthcare benefit plan. In addition, the pretax results for both years included charges relating to workforce management actions, totaling $1,710,000 for fiscal year 2005 and $12,868,000 for the previous year. Company-wide variable compensation expense was reduced in the fourth quarter of fiscal 2004 as a result of the cost of workforce management actions.
Net earnings for the year were $55,971,000, or $4.78 per share, compared with $31,382,000, or $2.71 per share in the previous year. Our effective income tax rate for 2005 was 29.2 percent of pretax earnings as compared to 36.3 percent for the prior year. Changes in estimates of income taxes for previous periods reduced our current year tax rate by 2.5 percent of pretax earnings. In addition, the 2005 rate reflected a more favorable worldwide distribution of earnings and higher tax credits than in 2004. The tax rate for 2006, while uncertain, is expected to be close to the 2004 tax rate.
"In the fourth quarter and full fiscal year 2005, growth in sales reflected broad strength in our markets generally and excellent demand for Woodward products and solutions," said President and Chief Executive Officer Thomas Gendron. "While the higher sales spread our fixed costs over a larger revenue base, our margins were affected by gains, charges, and differences in variable compensation costs, as reported above. In addition, some of the savings and margin improvement from the workforce management actions that were planned to occur in the final quarter of 2005 will occur in 2006."
Industrial Controls' net sales for the quarter were $141,959,000, compared with $125,020,000 a year ago, an increase of 14 percent. Industrial Controls' segment earnings were $4,202,000, compared with a segment loss of $6,220,000 for the same quarter a year ago. Costs associated with workforce management actions totaled $1,624,000 for the quarter, compared with $13,148,000 for the same quarter a year ago.
Industrial Controls' net sales for the full fiscal year were $536,937,000, an increase of 22 percent from $439,801,000 in fiscal year 2004. Industrial Controls' segment earnings were $28,821,000 in fiscal year 2005, compared with $6,437,000 for 2004. Costs for workforce management actions totaled $1,710,000 for the year, compared with $12,868,000 for the previous year.
"While operating margins in Industrial Controls showed improvement in 2005, they are still below our expectations," continued Mr. Gendron. "Realizing the savings from the restructuring, ongoing cost improvements from efficiency and quality initiatives, and the benefits of operating leverage are priority objectives for Woodward in 2006 and beyond."
As previously reported, the current workforce management actions primarily relate to the consolidation of our European operations, which should be substantially complete by the end of March 2006. These 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.
Aircraft Engine Systems' net sales for the quarter were $75,571,000, compared with $72,365,000 a year ago, an increase of 4 percent. Segment earnings were $15,497,000, compared with $18,930,000 for the same quarter a year ago.
Aircraft Engine Systems' net sales for the full fiscal year were $290,789,000, an increase of 8 percent from $270,004,000 in fiscal year 2004. Aircraft Engine Systems' segment earnings were $64,052,000 in fiscal year 2005, compared with $59,192,000 in fiscal year 2004.
Mr. Gendron continued, "Aircraft Engine Systems increased revenues and, through strong operating performance, maintained steady margins despite increased investment in awarded systems development programs. Our strategy over the next few years is to pursue opportunities for growth in new products and systems.
"Looking forward, the next few years appear to hold ample opportunities for Woodward," concluded Mr. Gendron. "For fiscal 2006, we expect higher sales in our core markets, and improved profitability throughout the year primarily driven by Industrial Controls. More specifically, we are targeting sales growth in the range of 3 to 6 percent for 2006. Additionally, we expect Industrial Controls segment earnings to improve to approximately 10 percent and Aircraft Engine Systems to remain solid. This will result in diluted earnings per share in the range of $5.00 to $5.25, including the effects of adoption of new rules regarding the expensing of stock compensation.
"Of course, while visibility has improved, the timing and volume of demand for our products are variable. Nevertheless, through strong customer commitments, investments in innovative solutions, and an intense focus on growth and profitability, we believe we have laid the groundwork to achieve these targets."
Woodward will hold an investor conference call at 7:30 a.m. CT on Tuesday, November 22, 2005, to provide an overview of the fourth quarter and fiscal 2005 financial performance, business highlights, and outlook for next year.
You are invited to listen to the live webcast of our conference call or a recording at our website, www.woodward.com. You may also listen to the call by dialing 1-888-423-4863 (domestic) or 1-703-871-3834 (international). Participants should call prior to the start time to allow for registration; the Conference ID is 778577. An audio replay will be available by telephone from 10:30 a.m. CT on November 22 until 11:59 p.m. CT on November 25, 2005. The telephone number to access the replay is 1-888-266-2081 (domestic) or 1-703-925-2533 (international), reference access code 778577.
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 and Form 10-Q for the quarterly period ended June 30, 2005. Woodward's Form 10-K for the year ended September 30, 2005 will be issued by mid-December 2005.
Woodward Governor Company and Subsidiaries
CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands except per share amounts)
Three months ended Year ended
September 30, September 30,
2005 2004 2005 2004
---------- ---------- ---------- ----------
Net sales $ 217,530 $ 197,385 $ 827,726 $ 709,805
---------- ---------- ---------- ----------
Costs and expenses:
Cost of goods sold 164,020 159,060 623,680 542,240
Sales, general, and
administrative
expenses 22,175 16,728 79,858 70,949
Research and
development costs 14,890 10,747 49,996 40,057
Amortization of
intangible assets 1,761 1,762 7,087 6,905
Curtailment gain - - (7,825) -
Interest expense 1,459 1,265 5,814 5,332
Interest income (644) (174) (2,159) (1,095)
Other income (1,004) (1,753) (9,322) (4,580)
Other expense 583 286 1,489 705
---------- ---------- ---------- ----------
Total costs and
expenses 203,240 187,921 748,618 660,513
---------- ---------- ---------- ----------
Earnings before income
taxes 14,290 9,464 79,108 49,292
Income taxes 3,039 2,793 23,137 17,910
---------- ---------- ---------- ----------
Net earnings $ 11,251 $ 6,671 $ 55,971 $ 31,382
========== ========== ========== ==========
Per share amounts:
Basic $ 0.98 $ 0.59 $ 4.91 $ 2.78
Diluted $ 0.96 $ 0.57 $ 4.78 $ 2.71
========== ========== ========== ==========
Weighted-average number
of shares outstanding:
Basic 11,459 11,304 11,400 11,286
Diluted 11,766 11,605 11,709 11,565
========== ========== ========== ==========
Woodward Governor Company and Subsidiaries
CONSOLIDATED CONDENSED BALANCE SHEETS
At September 30, At September 30,
(In thousands) 2005 2004
---------- ----------
Assets
Current assets:
Cash and cash equivalents $ 84,597 $ 48,895
Accounts receivable 107,403 99,277
Inventories 149,336 138,708
Income taxes receivable 5,330 -
Deferred income taxes 18,700 16,852
Other current assets 4,207 5,064
---------- ----------
Total current assets 369,573 308,796
Property, plant, and
equipment-net 114,787 117,310
Goodwill 131,035 131,542
Other intangibles-net 78,564 85,711
Deferred income taxes 2,310 4,318
Other assets 9,197 6,617
---------- ----------
Total assets $ 705,466 $ 654,294
========== ==========
Liabilities and shareholders'
equity
Current liabilities:
Short-term borrowings $ 8,419 $ 5,833
Current portion of long-term
debt 14,426 956
Accounts payable 37,015 35,207
Accrued liabilities 68,647 65,573
Income taxes payable - 3,703
---------- ----------
Total current liabilities 128,507 111,272
Long-term debt, less current
portion 72,942 88,452
Other liabilities 71,548 68,709
---------- ----------
Total liabilities 272,997 268,433
Shareholders' equity 432,469 385,861
---------- ----------
Total liabilities and
shareholders' equity $ 705,466 $ 654,294
========== ==========
Woodward Governor Company and Subsidiaries
OTHER SELECTED INFORMATION
Three months ended Year ended
September 30, September 30,
(In thousands) 2005 2004 2005 2004
--------- --------- --------- ---------
External net sales:
Industrial Controls $ 141,959 $ 125,020 $ 536,937 $ 439,801
Aircraft Engine
Systems 75,571 72,365 290,789 270,004
Segment earnings (losses):
Industrial Controls 4,202 (6,220) 28,821 6,437
Aircraft Engine Systems 15,497 18,930 64,052 59,192
Earnings reconciliation:
Total segment earnings 19,699 12,710 92,873 65,629
Nonsegment expenses (4,594) (2,155) (17,935) (12,100)
Curtailment gain - - 7,825 -
Interest expense and
income, net (815) (1,091) (3,655) (4,237)
--------- --------- --------- ---------
Consolidated earnings
before income taxes 14,290 9,464 79,108 49,292
--------- --------- --------- ---------
Workforce management costs:
Member termination
benefits 797 12,000 2,144 12,151
Contractual pension
termination benefits - 1,800 - 1,800
Related cost of facility
consolidation 827 - 1,770 -
Member termination benefits
adjustments - (652) (2,204) (1,083)
--------- --------- --------- ---------
Total workforce management
costs 1,624 13,148 1,710 12,868
--------- --------- --------- ---------
Capital expenditures 10,290 4,683 26,615 18,698
Depreciation and
amortization expense 7,252 7,838 31,538 32,761
========= ========= ========= =========
Woodward Governor Company
5001 North Second Street
P.O. Box 7001
Rockford, IL 61125-7001
Tel: 815-877-7441
Fax: 815-639-6050
CONTACT:
Bob Weber
Chief Financial Officer and Treasurer
815-639-6800
