Woodward Reports Second Fiscal Quarter and Six Months ResultsROCKFORD, IL -- 04/24/2006 -- Woodward Governor Company (NASDAQ: WGOV) today reported financial results for its second fiscal quarter and six months ended March 31, 2006.
Net sales for the quarter were $208,917,000, compared to $210,619,000 for the second quarter last year. Earnings before income taxes for the quarter were $17,177,000, compared with $20,290,000 in the same period a year ago. This year's pretax results included the effects of accruals totaling $5,000,000 for certain pending legal matters.
Net earnings for the quarter were $11,466,000, or $0.32 per share, compared with $12,979,000, or $0.37 per share, in last year's second quarter (all per share amounts are diluted).
Woodward adopted the new accounting standard for stock compensation this year. Had the same standard been applied last year, employee compensation expense, net of income tax benefits, would have increased by $359,000, and net earnings would have been $12,620,000 or $0.36 per share in last year's second quarter.
"For the quarter, our sales reflected fluctuations in a number of industrial market segments. We continue to focus on our two highest priorities for the year -- improved profitability and investment in future growth through new product development," said President and Chief Executive Officer Tom Gendron.
Industrial Controls' net sales for the second quarter were $132,030,000, a decrease of 3 percent from $136,031,000 for the second quarter a year ago. Segment earnings for the quarter increased 30 percent to $13,107,000 from $10,095,000 for the same quarter a year ago.
"We have seen growth in demand in many of our industrial market segments. For the current quarter, however, these increases were offset by lower sales of our large turbine combustion products. In spite of these sales declines, previous investments in our product portfolio and restructuring actions have allowed us to achieve higher margins in this segment of our business," commented Mr. Gendron.
Aircraft Engine Systems' net sales for the second quarter were $76,887,000, an increase of 3 percent from $74,588,000 for last year's second quarter. Segment earnings for the quarter were $16,054,000, compared with $15,922,000 for the same quarter a year ago.
"Overall performance in our Aircraft Engine Systems segment was consistent with our prior periods. We continued to improve operating efficiencies and meet our commitments on development programs," said Mr. Gendron. "Several of these programs will contribute to sales increases later this year and in the years to come."
Nonsegment expenses for the second quarter were $11,277,000 compared to $4,604,000 for the second quarter a year ago. This increase primarily relates to accruals for pending legal matters mentioned earlier, professional fees, and the effects of the new accounting standard for stock compensation.
For the six months ended March 31, 2006, consolidated net sales were $404,551,000, an increase of 1 percent from $399,944,000 for the corresponding period a year ago. Earnings before income taxes were $36,296,000 for the six-month period, which included the accruals for pending legal matters. In the same period a year ago, earnings before income taxes were $39,330,000, which included a pretax gain on the sale of product rights of $3,834,000. Net earnings for the six-month period were $23,893,000, or $0.68 per share, compared with $24,974,000, or $0.71 per share last year.
Had we adopted the new accounting standard for stock compensation last year, employee compensation expense, net of income tax benefits, would have increased by $703,000, and net earnings would have been $24,271,000 or $0.70 per share in last year's first six months.
"We look forward to several more years of expanding opportunities for Woodward although we recognize the variability of demand and timing of orders are realities in our markets. While we anticipate higher sales in the second half of the year for both segments, we believe volatility in sales of turbine combustion products as well as certain sales in China will cause our Industrial Controls segment sales for the year to be essentially flat with fiscal 2005," said Mr. Gendron.
"We continue to anticipate company-wide sales growth of 3 to 6 percent for the full year and net earnings of $1.67 to $1.75 per share, before accruing for the pending legal matters previously mentioned," concluded Mr. Gendron.
Woodward will hold an investor conference call at 7:30 a.m. CT on Tuesday, April 25, 2006, to provide an overview of the fiscal year 2006's second quarter and six month financial performance, business highlights, and outlook for the 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 1-866-814-1915 (domestic) or 1-703-639-1359 (international). Participants should call prior to the start time to allow for registration; the Conference ID is 887960. An audio replay will be available by telephone from 11:30 a.m. CT on April 25 until 11:59 p.m. CT on April 27, 2006. The telephone number to access the replay is 1-888-266-2081 (domestic) or 1-703-925-2533 (international), reference access code 887960.
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 for the year ended September 30, 2005 and Form 10-Q for the quarter ended March 31, 2006, expected to be available by mid-May 2006.
CONSOLIDATED STATEMENTS OF EARNINGS WOODWARD
Three months ended Six months ended
(Unaudited – in thousands March 31, March 31,
except per share amounts) 2006 2005 2006 2005
--------- --------- --------- ---------
Net sales $ 208,917 $ 210,619 $ 404,551 $ 399,944
--------- --------- --------- ---------
Costs and expenses:
Cost of goods sold 152,027 157,520 293,966 300,793
Sales, general, and
administrative expenses 25,257 19,559 46,314 38,256
Research and development costs 13,069 11,690 24,979 22,295
Amortization of intangible
assets 1,758 1,780 3,513 3,556
Interest expense 1,305 1,525 2,602 2,894
Interest income (598) (402) (1,241) (1,037)
Other income (1,163) (1,470) (2,191) (6,371)
Other expense 85 127 313 228
--------- --------- --------- ---------
Total costs and expenses 191,740 190,329 368,255 360,614
--------- --------- --------- ---------
Earnings before income taxes 17,177 20,290 36,296 39,330
Income taxes 5,711 7,311 12,403 14,356
Net earnings $ 11,466 $ 12,979 $ 23,893 $ 24,974
========= ========= ========= =========
Per share amounts:
Basic $ 0.33 $ 0.38 $ 0.69 $ 0.73
Diluted $ 0.32 $ 0.37 $ 0.68 $ 0.71
========= ========= ========= =========
Weighted-average number of
shares outstanding:
Basic 34,508 34,170 34,427 34,077
Diluted 35,369 35,109 35,269 35,016
========= ========= ========= =========
CONDENSED CONSOLIDATED BALANCE SHEETS WOODWARD
At March 31, At Sept. 30,
(Unaudited - in thousands) 2006 2005
--------- ---------
Assets
Current assets:
Cash and cash equivalents $ 76,653 $ 84,597
Accounts receivable 103,206 107,403
Inventories 156,663 149,336
Income taxes receivable 4,240 5,330
Deferred income taxes 20,992 18,700
Other current assets 3,645 4,207
--------- ---------
Total current assets 365,399 369,573
Property, plant, and equipment-net 115,514 114,787
Goodwill 130,883 131,035
Other intangibles-net 75,033 78,564
Deferred income taxes 1,069 2,310
Other assets 9,122 9,197
--------- ---------
Total assets $ 697,020 $ 705,466
========= =========
Liabilities and shareholders' equity
Current liabilities:
Short-term borrowings $ 12,476 $ 8,419
Current portion of long-term debt 14,413 14,426
Accounts payable 36,197 37,015
Accrued liabilities 48,692 68,647
--------- ---------
Total current liabilities 111,778 128,507
Long-term debt, less current portion 60,188 72,942
Other liabilities 70,448 71,548
--------- ---------
Total liabilities 242,414 272,997
Shareholders' equity 454,606 432,469
--------- ---------
Total liabilities and shareholders' equity $ 697,020 $ 705,466
========= =========
OTHER SELECTED INFORMATION WOODWARD
Three months ended Six months ended
March 31, March 31,
(Unaudited - in thousands) 2006 2005 2006 2005
--------- --------- --------- ---------
External net sales:
Industrial Controls $ 132,030 $ 136,031 $ 256,489 $ 258,386
Aircraft Engine Systems 76,887 74,588 148,062 141,558
Segment earnings:
Industrial Controls 13,107 10,095 24,652 15,150
Aircraft Engine Systems 16,054 15,922 30,866 34,234
Earnings reconciliation:
Total segment earnings 29,161 26,017 55,518 49,384
Nonsegment expenses (11,277) (4,604) (17,861) (8,197)
Interest expense and
income, net (707) (1,123) (1,361) (1,857)
--------- --------- --------- ---------
Consolidated earnings before
income tax $ 17,177 $ 20,290 $ 36,296 $ 39,330
========= ========= ========= =========
Workforce management costs:
Member termination benefits $ - $ 384 $ 70 $ 872
Member termination benefits
adjustments - (2,115) - (2,115)
--------- --------- --------- ---------
Total workforce management
costs $ - $ (1,731) $ 70 $ (1,243)
========= ========= ========= =========
Capital expenditures $ 7,900 $ 5,326 $ 12,982 $ 9,686
Depreciation expense 5,764 6,651 11,239 13,166
========= ========= ========= =========
CONTACT:
Robert F. Weber, Jr.
Chief Financial Officer and Treasurer
970-498-3112
Woodward Governor Company
5001 North Second Street
P.O. Box 7001
Rockford, IL 61125-7001
Tel: 815-877-7441
Fax: 815-639-6050
