Woodward Governor Company
1000 East Drake Road
Fort Collins, Colorado 80525
Tel: 970-482-5811
FOR IMMEDIATE RELEASE |
CONTACT: Robert F. Weber, Jr. |
Chief Financial Officer and Treasurer
970-498-3112
Woodward Reports 2007 Third Fiscal Quarter and Nine Months Results
Fort Collins, Colo., July 23, 2007 — Woodward Governor Company (Nasdaq:WGOV) today reported financial results for its third quarter of fiscal 2007. (All per share amounts are diluted.)
Quarterly Highlights |
• | Sales for the quarter increased 23.9 percent over last year to $269 million |
• | Earnings before income taxes for the quarter increased to $37.1 million compared to $21.6 million a year ago |
• | Net earnings for the quarter were $0.68 per share compared to $0.82 per share last year, including the items highlighted below |
• | Industrial Controls’ segment earnings for the quarter improved to 12.9 percent of sales from 11.9 percent a year ago |
• | Aircraft Engine Systems’ segment earnings for the quarter improved to 23.7 percent of sales from 18.6 percent a year ago |
Net sales for the quarter were $269.0 million, up 23.9 percent from $217.1 million for the third quarter of the prior year. Net earnings for the third quarter were $24.0 million, or $0.68 per share, compared with $28.9 million, or $0.82 per share, in the previous year’s third quarter.
Net sales for the nine-month period were $751.6 million, up 20.9 percent from $621.6 million for the nine-month period of the prior year. Net earnings for the nine-month period were $62.1 million, or $1.76 per share, compared with $52.8 million, or $1.50 per share, in the previous year’s nine-month period.
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Three Months Ended June 30, | Nine Months Ended June 30, | |||||||||||||||||||||||||||
In millions, net | In millions, net | |||||||||||||||||||||||||||
of | of | |||||||||||||||||||||||||||
Income tax | Per share | Income tax | Per share | |||||||||||||||||||||||||
Items that increased (decreased) net earnings in 2007: | ||||||||||||||||||||||||||||
Impact of adverse arbitration ruling | $ | –– | $ | –– | $ | (2.5 | ) | $ | (0.07 | |||||||||||||||||||
Items that increased (decreased) net earnings in 2006: | ||||||||||||||||||||||||||||
Change in valuation allowance for deferred taxes | 13.7 | 0.39 | 13.7 | 0.39 | ||||||||||||||||||||||||
Expense accruals for certain legal matters | (2.2 | ) | (0.06 | ) | (5.3 | ) | (0.15 |
“Global economic growth and the strategic positioning of our product portfolio continued to result in strong demand for our products across both the industrial and aircraft segments,” said President and Chief Executive Officer Thomas A. Gendron. “Our investments in selected technologies and platforms have been strategically positioned in targeted markets to provide our customers with energy control and optimization solutions to address rising energy costs and more stringent emissions requirements. In addition to market strength, our financial performance benefited from the deliberate execution of our product strategies and our productivity initiatives. ”
Segment Results |
Industrial Controls’ net sales for the third quarter were $177.0 million, an increase of 28.3 percent from $137.9 million for the third quarter a year ago. Organic growth for the quarter was 8.7 percent. Segment earnings for the quarter increased to $22.9 million from $16.4 million for the same quarter a year ago, an increase of 39.6 percent. Segment earnings, as a percent of sales, for the quarter improved to 12.9 percent from 11.9 percent a year ago.
Aircraft Engine Systems’ net sales for the third quarter were $92.0 million, an increase of 16.3 percent from $79.1 million for last year’s third quarter. Segment earnings for the quarter increased to $21.8 million from $14.8 million for the same quarter a year ago, an increase of 47.9 percent. Segment earnings, as a percent of sales, for the quarter improved to 23.7 percent of sales from 18.6 percent a year ago
Industrial Controls’ net sales for the nine-month period were $488.7 million, an increase of 23.9 percent from $394.4 million for the nine-month period a year ago. Segment earnings for the nine-month period increased to $63.3 million from $41.1 million for the same period a year ago, an increase of 54.3 percent. Segment earnings, as a percent of sales, for the nine-month period improved to 13.0 percent from 10.4 percent a year ago.
Aircraft Engine Systems’ net sales for the nine-month period were $262.9 million, an increase of 15.7 percent from $227.2 million for last year’s nine-month period. Segment earnings for the nine-month period increased to $61.5 million from $45.6 million for the same period a year ago, an increase of 34.7 percent. Segment earnings, as a percent of sales, for the nine-month period improved to 23.4 percent from 20.1 percent a year ago.
Mr. Gendron continued, “Our Industrial Controls and Aircraft Engine Systems teams have brought winning products to growing markets while generating increased profit though cost reduction efforts at the product level as well as increasing efficiencies across our global infrastructure. A major Woodward asset is its close relationships with leading OEM customers. Continuing our strategy to build on that asset, during the quarter, we signed supply agreements with a significant wind-power customer as well as a major diesel engine manufacturer.”
Cash Flow and Financial Position |
Net cash provided by operating activities was $56.7 million for the nine-month period compared with a $43.1 million for the same period last year. Cash used for business acquisitions was $34.6 million. Capital expenditures for the first nine months of the year were $22.7 million compared to $19.7 million during the same period last year. The debt to total capitalization ratio was 10.9 percent at June 30, 2007 compared to 13.3 percent at the end of the prior year.
Outlook |
Mr. Gendron concluded, “In light of our recent performance and continued strength in the majority of our markets, we now believe that our outlook for 2007 financial results will be at the higher end of our $2.35 — $2.45 earnings per share outlook last stated in April.”
Conference Call |
Woodward will hold an investor conference call at 6:00 p.m. EDT on Monday, July 23, 2007, to provide an overview of the financial performance for the third quarter of fiscal 2007, 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 and view or download accompanying presentation slides at our website,www.woodward.com.
You may also listen to the call by dialing 1-866-818-1223 (domestic) or 1-703-639-1376 (international). Participants should call prior to the start time to allow for registration; the Conference ID is 1112145. An audio replay will be available by telephone from 9:00 p.m. EDT on July 23 until 11:59 p.m. EDT on July 25, 2007. The telephone number to access the replay is 1-888-266-2081 (domestic) or 1-703-925-2533 (international), reference access code 1112145.
About Woodward |
Woodward is the largest independent designer, manufacturer, and service provider of energy control and optimization solutions for aircraft engines, industrial engines and turbines, and power equipment packages. The company’s innovative fluid energy, combustion control, electrical energy, and motion control systems help customers offer cleaner, more reliable, and cost-effective equipment. Woodward is headquartered in Fort Collins, Colorado USA and serves global markets in aerospace, power generation, transportation, and process industries. Visit our website atwww.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, 2006 and Form 10-Q for the quarters ended December 31, 2006 and March 31, and June 30, 2007. Woodward’s Form 10-Q for the quarter ended June 30, 2007 will be filed July 24, 2007.
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Woodward Governor Company and Subsidiaries |
C O N S O L I D A T E D S T A T E M E N T S O F E A R N I N G S |
(Unaudited - in thousands except per share amounts) | 2007 | 2006 | ||
Net sales | $269,026 | $217,053 | ||
Costs and expenses: | ||||
Cost of goods sold | 186,055 | 154,089 | ||
Sales, general, and administrative expenses | 27,345 | 23,234 | ||
Research and development costs | 17,011 | 16,793 | ||
Amortization of intangible assets | 1,946 | 1,717 | ||
Interest expense | 1,156 | 1,299 | ||
Interest income | (503) | (754) | ||
Other, net | (1,124) | (904) | ||
To Total costs and expenses | 231,886 | 195,474 | ||
Earnings before income taxes | 37,140 | 21,579 | ||
Income taxes | 13,166 | (7,339) | ||
Net earnings | $23,974 | $28,918 | ||
Per share amounts: | ||||
Basic | $0.70 | $0.84 | ||
Diluted | 0.68 | 0.82 | ||
Weighted-average number of shares outstanding: | ||||
Basic | 34,357 | 34,410 | ||
Diluted | 35,338 | 35,254 | ||
Note: Income taxes for the three months ended June 30, 2006 benefited from a change in the valuation allowance for deferred tax assets of $13.7 million (or $0.39 per diluted share).
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Woodward Governor Company and Subsidiaries |
C O N S O L I D A T E D S T A T E M E N T S O F E A R N I N G S |
Nine months ended | ||||
June 30, | ||||
(Unaudited - in thousands except per share amounts) | 2007 | 2006 | ||
Net sales | $751,572 | $621,604 | ||
Costs and expenses: | ||||
Cost of goods sold | 519,970 | 448,055 | ||
Sales, general, and administrative expenses | 84,325 | 69,548 | ||
Research and development costs | 46,911 | 41,772 | ||
Amortization of intangible assets | 5,856 | 5,230 | ||
Interest expense | 3,481 | 3,901 | ||
Interest income | (1,563) | (1,995) | ||
Other, net | (2,610) | (2,782) | ||
To Total costs and expenses | 656,370 | 563,729 | ||
Earnings before income taxes | 95,202 | 57,875 | ||
Income taxes | 33,079 | 5,064 | ||
Net earnings | $62,123 | $52,811 | ||
Per share amounts: | ||||
Basic | $1.81 | $1.53 | ||
Diluted | 1.76 | 1.50 | ||
Weighted-average number of shares outstanding: | ||||
Basic | 34,240 | 34,421 | ||
Diluted | 35,199 | 35,268 | ||
Note: Income taxes for the first nine months of fiscal 2007 include a $1.2 million (or $0.03 per diluted share) benefit from the extension of the Research and Experimentation tax credit. Income taxes for the first nine months of 2006 benefited from a change in the valuation allowance for deferred tax assets of $13.7 million (or$0.39 per diluted share).
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Woodward Governor Company and Subsidiaries |
C O N D E N S E D C O N S O L I D A T E D B A L A N C E S H E E T S |
At June 30, | At September 30, | |||||||
(Unaudited - in thousands) | 2007 | 2006 | ||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 68,472 | $ | 83,718 | ||||
Accounts receivable | 134,914 | 117,254 | ||||||
Inventories | 188,185 | 149,172 | ||||||
Income taxes receivable | 3,088 | 1,787 | ||||||
Deferred income taxes | 22,970 | 23,526 | ||||||
Other current assets | 8,591 | 5,777 | ||||||
Total current assets | 426,220 | 381,234 | ||||||
Property, plant, and equipment-net | 150,600 | 124,176 | ||||||
Goodwill | 133,347 | 132,084 | ||||||
Other intangibles-net | 79,074 | 71,737 | ||||||
Deferred income taxes | 13,321 | 16,687 | ||||||
Other assets | 6,701 | 9,579 | ||||||
Total assets | $ | 809,263 | $ | 735,497 | ||||
Liabilities and shareholders’ equity | ||||||||
Current liabilities: | ||||||||
Short-term borrowings | $ | 4,601 | $ | 517 | ||||
Current portion of long-term debt | 15,654 | 14,619 | ||||||
Accounts payable | 45,796 | 38,978 | ||||||
Accrued liabilities | 67,147 | 66,877 | ||||||
Total current liabilities | 133,198 | 120,991 | ||||||
Long-term debt, less current portion | 46,514 | 58,379 | ||||||
Deferred income taxes | 10,908 | 6,248 | ||||||
Other liabilities | 70,693 | 71,190 | ||||||
Total liabilities | 261,313 | 256,808 | ||||||
Shareholders’ equity | 547,950 | 478,689 | ||||||
Total liabilities and shareholders’ equity | $ | 809,263 | $ | 735,497 | ||||
• |
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Woodward Governor Company and Subsidiaries |
C O N D E N S E D C O N S O L I D A T E D STATEMENTS OF CASH FLOWS |
Nine months ended | ||||||||
June 30, | ||||||||
(Unaudited-in thousands) | 2007 | 2006 | ||||||
Net cash provided by (used in) operating activities | $ | 56,706 | $ | 43,065 | ||||
Cash flows from investing activities: | ||||||||
Business acquisitions, net of cash acquired | (34,611 | ) | - | |||||
Payments for purchase of property, plant, and equipment | (22,667 | ) | (19,661 | ) | ||||
Proceeds from sale of property, plant, and equipment | 165 | 695 | ||||||
Net cash used in investing activities | (57,113 | ) | (18,966 | ) | ||||
Cash flows from financing activities: | ||||||||
Cash dividends paid | (10,969 | ) | (10,643 | ) | ||||
Proceeds from sales of treasury stock | 8,612 | 3,287 | ||||||
Purchases of treasury stock | (7,888 | ) | (15,370 | ) | ||||
Excess tax benefits from stock compensation | 8,784 | 2,547 | ||||||
Payments from borrowings under revolving lines | (3,500 | ) | (8,475 | ) | ||||
Payments of long-term debt | (13,635 | ) | (13,535 | ) | ||||
Net cash used in financing activities | (18,596 | ) | (42,189 | ) | ||||
Effect of exchange rate changes on cash | 3,757 | 431 | ||||||
Net change in cash and cash equivalents | (15,246 | ) | (17,659 | ) | ||||
Cash and cash equivalents, beginning of year | 83,718 | 84,597 | ||||||
Cash and cash equivalents, end of period | $ | 68,472 | $ | 66,938 | ||||
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Woodward Governor Company and Subsidiaries |
SELECTED FINANCIAL INFORMATION |
Three months ended | Nine months ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
(Unaudited - in thousands) | 2007 | 2006 | 2007 | 2006 | ||||||||||||
External net sales: | ||||||||||||||||
Industrial Controls | $ | 177,013 | $ | 137,930 | $ | 488,659 | $ | 394,419 | ||||||||
Aircraft Engine Systems | 92,013 | 79,123 | 262,913 | 227,185 | ||||||||||||
Segment earnings: | ||||||||||||||||
Industrial Controls | 22,904 | 16,406 | 63,341 | 41,058 | ||||||||||||
Aircraft Engine Systems | 21,814 | 14,753 | 61,466 | 45,619 | ||||||||||||
Earnings reconciliation: | ||||||||||||||||
Total segment earnings | 44,718 | 31,159 | 124,807 | 86,677 | ||||||||||||
Nonsegment expenses | (6,925 | ) | (9,035 | ) | (27,687 | ) | (26,896 | ) | ||||||||
Interest expense and income, net | (653 | ) | (545 | ) | (1,918 | ) | (1,906 | ) | ||||||||
Consolidated earnings before income taxes | $ | 37,140 | $ | 21,579 | $ | 95,202 | $ | 57,875 | ||||||||
Capital expenditures | $ | 9,609 | $ | 6,679 | $ | 22,667 | $ | 19,661 | ||||||||
Depreciation expense | 7,162 | 5,871 | 20,690 | 17,110 | ||||||||||||
Woodward Governor Company and Subsidiaries |
R E C O N C I L I A T I O N O F N E T E A R N I N G S T O E B I T a n d E B I T D A |
Three months ended | Nine months ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
(Unaudited - in thousands) | 2007 | 2006 | 2007 | 2006 | ||||||||||||
Net earnings | $ | 23,974 | $ | 28,918 | $ | 62,123 | $ | 52,811 | ||||||||
Income taxes (benefit) | 13,166 | (7,339 | ) | 33,079 | 5,064 | |||||||||||
Interest expense | 1,156 | 1,299 | 3,481 | 3,901 | ||||||||||||
Interest income | (503 | ) | (754 | ) | (1,563 | ) | (1,995 | ) | ||||||||
Amortization of intangible assets | 1,946 | 1,717 | 5,856 | 5,230 | ||||||||||||
Depreciation expense | 7,162 | 5,871 | 20,690 | 17,110 | ||||||||||||
EBITDA | $ | 46,901 | $ | 29,712 | $ | 123,666 | $ | 82,121 | ||||||||
EBITDA (earnings before interest, taxes, depreciation, and amortization) is a non-GAAP financial measure. The use of this measure is not intended to be considered in isolation of or as a substitute for the financial information prepared and presented in accordance with generally accepted accounting principles. Securities analysts, investors, and others frequently use EBITDA in their evaluation of companies, particularly those with significant property, plant, and equipment, and intangible assets that are subject to amortization. At June 30, 2007, property, plant, and equipment, and intangible assets subject to amortization represented 28 percent of our total assets.
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