News Release
Woodward Governor Company
1000 East Drake Road
Fort Collins, Colorado 80525
Tel: 970-482-5811
FOR IMMEDIATE RELEASE |
Woodward Reports Record Sales and Earnings for the Fourth Quarter and Fiscal Year 2007 |
Fort Collins, Colo., November 14, 2007—Woodward Governor Company (Nasdaq:WGOV) today reported record financial results for its fourth quarter and fiscal year 2007.
Fiscal Year 2007 Highlights |
• | Record sales of $1.042 billion, an increase of 22 percent over last year with organic sales growth of 11 percent |
• | Net earnings for the year were $2.79 per share compared to $1.99 per share last year, including the items highlighted below |
• | Strong financial performance in all segments with total segment earnings up 46 percent |
• | Cash generated from operations was $117.7 million, an increase of 46 percent over prior year |
• | New business segment structure aligns better with market focus |
Net sales for the fourth quarter were $290.8 million, up 25 percent from $232.9 million for the same quarter last year. Net earnings for the quarter were $36.0 million, or $1.02 per share, compared with $17.1 million, or $0.49 per share, in the previous year’s fourth quarter.
Net sales for the full fiscal year were $1.042 billion, up 22 percent from $854.5 million for the prior year. Net earnings for the year were $98.2 million, or $2.79 per share, compared with $69.9 million, or $1.99 per share, in the previous year.
Earnings for the quarter and full year included the items highlighted below:
Three Months Ended September 30 | Year Ended September 30 | |||||||||||||||||||||||
In millions, net of | Per share | In millions, net of | Per share | |||||||||||||||||||||
income tax | income tax | |||||||||||||||||||||||
Items that increased (decreased) net earnings in 2007: | ||||||||||||||||||||||||
Net tax adjustments | $ | 10.3 | $ | 0.29 | $ | 10.3 | $ | 0.30 | ||||||||||||||||
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 | ||||||||||||||||||||||
Expense accruals for certain legal matters | (5.3 | ) | (0.15 | ) |
This year’s and quarter’s results include the effect of the SEG acquisition in October 2006. This quarter’s results reflect two tax adjustments, a favorable resolution of issues with tax authorities resulting in a reduction of tax expense of $13.3 million, and a reduction in deferred tax assets resulting in tax expense of $3.0 million due to a decrease in the German statutory income tax rate.
“The strength of our targeted end-markets and our offerings to them raised Woodward sales over the $1 billion mark this year, confirming the successful execution of our strategies,” said President and Chief Executive Officer Thomas A. Gendron. “As energy costs and environmental concerns escalate, our strategy of addressing increasing efficiency and lowering emissions is being well received in the marketplace.”
Turbine Systems’ Results
Total net sales (including intersegment sales) for the fourth quarter were $143.8 million, an increase of 12.0 percent from $128.3 million for the fourth quarter a year ago. Segment earnings for the quarter increased to $21.0 million from $20.3 million for the same quarter a year ago, an increase of 3.8 percent. Segment earnings as a percent of sales for the quarter decreased to 14.6 percent from 15.8 percent a year ago.
Total net sales for the full year were $523.8 million, an increase of 14.1 percent from $458.9 million for last year. Segment earnings for the full year increased to $87.4 million from $67.6 million for the same period a year ago, an increase of 29.3 percent. Segment earnings as a percent of total net sales for the year improved to 16.7 percent from 14.7 percent a year ago.
Engine Systems’ Results
Total net sales for the fourth quarter were $124.7 million, an increase of 9.4 percent from $113.9 million for the fourth quarter a year ago. Segment earnings for the quarter increased to $17.2 million from $11.2 million for the same quarter a year ago, an increase of 54.5 percent. Segment earnings as a percent of sales for the quarter improved to 13.8 percent from 9.8 percent a year ago.
Total net sales for the full year were $455.2 million, an increase of 5.8 percent from $430.4 million last year. Segment earnings for the full year increased to $57.0 million from $40.8 million last year, an increase of 39.6 percent. Segment earnings as a percent of sales for the year improved to 12.5 percent from 9.5 percent a year ago.
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Electrical Power Systems’ Results
Total net sales for the fourth quarter increased to $54.6 million from $20.9 million for the fourth quarter a year ago. Organic sales growth for the quarter was 12 percent. Segment earnings for the quarter increased to $5.1 million from $0.6 million for the same quarter a year ago. Segment earnings as a percent of sales for the quarter improved to 9.3 percent from 2.7 percent a year ago.
Total net sales for the full year were $181.4 million as compared to $76.2 million last year. Organic sales growth for the full year was 14 percent. Segment earnings for the full year increased to $20.3 million from $4.5 million last year. Segment earnings as a percent of sales for the year improved to 11.2 percent from 5.9 percent a year ago.
“During the course of the year we have won significant long-term sourcing agreements with many of our key customers,” Mr. Gendron continued. “By teaming with our customers early in the development process and maintaining a competitive cost structure, we continue to earn their business.”
Cash Flow and Financial Position |
Net cash provided by operating activities was $117.7 million for the full year compared with $80.5 million for last year. Capital expenditures for the year were $32.0 million compared to $31.7 million during the same period last year. The debt to total capitalization ratio was 10.8 percent at September 30, 2007 compared to 13.3 percent at the end of the prior year.
Outlook |
Mr. Gendron concluded, “We believe the strength in our end markets will continue through 2008 and our efforts to improve our overall cost structure will deliver enhanced margins and improved profitability. As a result, for fiscal 2008 we have targeted sales growth for Woodward in the range of 8-10 percent and earnings of $3.05 — $3.15 per diluted share.”
Conference Call |
Woodward will hold an investor conference call at 6:00 p.m. EST on Wednesday, November 14, 2007, to provide an overview of the financial performance for the fourth quarter and 2007 financial performance, business highlights, and outlook for the next 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 1-866-814-1917 (domestic) or 1-703-639-1361 (international). Participants should call prior to the start time to allow for registration; the Conference ID is 1157382. An audio replay will be available by telephone from 9:00 p.m. EST on November 14 until 11:59 p.m. EST on November 16, 2007. The telephone number to access the replay is 1-888-266-2081 (domestic) or 1-703-925-2533 (international), reference access code 1157382.
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 electrical power equipment. 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 and process industries and transportation. Visit our website atwww.woodward.com.
CONTACT: |
Robert F. Weber, Jr. |
Chief Financial Officer and Treasurer
970-498-3112
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-K for the year ended September 30, 2007 will be issued by early-December 2007.
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Woodward Governor Company and Subsidiaries | ||||||||||||||||||||
CONSOLIDATED STATEMENTS OF EARNING S | ||||||||||||||||||||
Three months ended | Year ended | |||||||||||||||||||
September 30, | September 30, | |||||||||||||||||||
(Unaudited - in thousands except per share amounts) | 2007 | 2006 | 2007 | 2006 | ||||||||||||||||
Net sales | $ | 290,765 | $ | 232,911 | $ | 1,042,337 | $ | 854,515 | ||||||||||||
Costs and expenses: | ||||||||||||||||||||
Cost of goods sold | 208,850 | 164,208 | 728,820 | 612,263 | ||||||||||||||||
Sales, general, and administrative expenses | 26,979 | 22,465 | 111,297 | 92,013 | ||||||||||||||||
Research and development costs | 18,383 | 18,089 | 65,294 | 59,861 | ||||||||||||||||
Amortization of intangible assets | 1,640 | 1,723 | 7,496 | 6,953 | ||||||||||||||||
Interest expense | 1,046 | 1,188 | 4,527 | 5,089 | ||||||||||||||||
Interest income | (2,041) | (755) | (3,604) | (2,750) | ||||||||||||||||
Other income | (1,108) | (982) | (4,186) | (4,245) | ||||||||||||||||
Other expense | 230 | 353 | 705 | 834 | ||||||||||||||||
Total costs and expenses | 253,979 | 206,289 | 910,349 | 770,018 | ||||||||||||||||
Earnings before income taxes | 36,786 | 26,622 | 131,988 | 84,497 | ||||||||||||||||
Income taxes | 752 | 9,533 | 33,831 | 14,597 | ||||||||||||||||
Net earnings | $ | 36,034 | $ | 17,089 | $ | 98,157 | $ | 69,900 | ||||||||||||
Per share amounts: | ||||||||||||||||||||
Basic | $ | 1.05 | $ | 0.50 | $ | 2.87 | $ | 2.03 | ||||||||||||
Diluted | $ | 1.02 | $ | 0.49 | $ | 2.79 | $ | 1.99 | ||||||||||||
Weighted-average number of shares outstanding: | ||||||||||||||||||||
Basic | 34,259 | 34,145 | 34,245 | 34,351 | ||||||||||||||||
Diluted | 35,334 | 34,966 | 35,244 | 35,191 | ||||||||||||||||
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Woodward Governor Company and Subsidiaries | ||||||||||||
CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||||||||
At September 30, | At September 30, | |||||||||||
(Unaudited - in thousands) | 2007 | 2006 | ||||||||||
Assets | ||||||||||||
Current assets: | ||||||||||||
Cash and cash equivalents | $ | 71,635 | $ | 83,718 | ||||||||
Accounts receivable | 152,826 | 117,254 | ||||||||||
Inventories | 172,500 | 149,172 | ||||||||||
Income taxes receivable | 9,461 | 1,787 | ||||||||||
Deferred income taxes | 23,754 | 23,526 | ||||||||||
Other current assets | 8,429 | 5,777 | ||||||||||
Total current assets | 438,605 | 381,234 | ||||||||||
Property, plant, and equipment-net | 158,998 | 124,176 | ||||||||||
Goodwill | 141,215 | 132,084 | ||||||||||
Other intangibles-net | 73,018 | 71,737 | ||||||||||
Deferred income taxes | 11,250 | 16,687 | ||||||||||
Other assets | 6,681 | 9,579 | ||||||||||
Total assets | $ | 829,767 | $ | 735,497 | ||||||||
Liabilities and shareholders’ equity | ||||||||||||
Current liabilities: | ||||||||||||
Short-term borrowings | $ | 5,496 | $ | 517 | ||||||||
Current portion of long-term debt | 15,940 | 14,619 | ||||||||||
Accounts payable | 57,668 | 38,978 | ||||||||||
Accrued liabilities | 83,890 | 66,877 | ||||||||||
Total current liabilities | 162,994 | 120,991 | ||||||||||
Long-term debt, less current portion | 45,150 | 58,379 | ||||||||||
Deferred income taxes | 19,788 | 6,248 | ||||||||||
Other liabilities | 57,404 | 71,190 | ||||||||||
Total liabilities | 285,336 | 256,808 | ||||||||||
Shareholders’ equity | 544,431 | 478,689 | ||||||||||
Total liabilities and shareholders’ equity | $ | 829,767 | $ | 735,497 | ||||||||
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Woodward Governor Company and Subsidiaries | |||||||||
CONDENSED CONSOLIDATED | STATEMENTS OF | CASH FLOWS | |||||||
Year ended | |||||||||
September 30, | |||||||||
(Unaudited - in thousands) | 2007 | 2006 | |||||||
Net cash provided by operating activities | $ | 117,718 | $ | 80,536 | |||||
Cash flows from investing activities: | |||||||||
Business acquisitions, net of cash acquired | (35,289 | ) | — | ||||||
Payments for purchase of property, plant, and equipment | (31,984 | ) | (31,713 | ) | |||||
Proceeds from sale of property, plant, and equipment | 225 | 698 | |||||||
Net cash used in investing activities | (67,048 | ) | (31,015 | ) | |||||
Cash flows from financing activities: | |||||||||
Cash dividends paid | (14,747 | ) | (13,742 | ) | |||||
Proceeds from sales of treasury stock | 7,856 | 4,163 | |||||||
Purchases of treasury stock | (50,952 | ) | (22,306 | ) | |||||
Excess tax benefits from stock compensation | 9,788 | 3,305 | |||||||
Payments from borrowings under revolving lines | (2,760 | ) | (8,025 | ) | |||||
Payments of long-term debt | (15,681 | ) | (14,510 | ) | |||||
Other payments | — | (318 | ) | ||||||
Net cash used in financing activities | (66,496 | ) | (51,433 | ) | |||||
Effect of exchange rate changes on cash | 3,743 | 1,033 | |||||||
Net change in cash and cash equivalents | (12,083 | ) | (879 | ) | |||||
Cash and cash equivalents, beginning of year | 83,718 | 84,597 | |||||||
Cash and cash equivalents, end of period | $ | 71,635 | $ | 83,718 | |||||
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Woodward Governor Company and Subsidiaries | ||||||||||||||||
SELECTED FINANCIAL INFORMATION | ||||||||||||||||
Three months ended | Year ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
(Unaudited - in thousands) | 2007 | 2006 | 2007 | 2006 | ||||||||||||
Sales Reconciliation*: | ||||||||||||||||
Turbine Systems | $ | 143,767 | $ | 128,327 | $ | 523,842 | $ | 458,923 | ||||||||
Engine Systems | 124,690 | 113,927 | 455,200 | 430,448 | ||||||||||||
Electrical Power Systems | 54,601 | 20,874 | 181,366 | 76,186 | ||||||||||||
Less intersegment sales | (32,293 | ) | (30,217 | ) | (118,071 | ) | (111,042 | ) | ||||||||
Total external sales | 290,765 | 232,911 | 1,042,337 | 854,515 | ||||||||||||
Earnings Reconciliation: | ||||||||||||||||
Turbine Systems | 21,036 | 20,266 | 87,353 | 67,584 | ||||||||||||
Engine Systems | 17,225 | 11,152 | 56,984 | 40,829 | ||||||||||||
Electrical Power Systems | 5,092 | 571 | 20,294 | 4,475 | ||||||||||||
Total segment earnings | 43,353 | 31,989 | 164,631 | 112,888 | ||||||||||||
Nonsegment expenses | (7,562 | ) | (4,934 | ) | (31,720 | ) | (26,052 | ) | ||||||||
Interest expense and income, net | 995 | (433 | ) | (923 | ) | (2,339 | ) | |||||||||
Consolidated earnings before income taxes | $ | 36,786 | $ | 26,622 | $ | 131,988 | $ | 84,497 | ||||||||
�� | ||||||||||||||||
Capital expenditures | $ | 9,317 | $ | 12,052 | $ | 31,984 | $ | 31,713 | ||||||||
Depreciation expense | 4,737 | 4,954 | 25,428 | 22,064 | ||||||||||||
*This schedule reconciles segment sales, which include intersegment sales, with Woodward external sales.
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Woodward Governor Company and Subsidiaries | |||||||||||||||||||
RECONCILIATION O F | NET EARNINGS TO | EBITDA | |||||||||||||||||
Three months ended | Year ended | ||||||||||||||||||
September 30, | September 30, | ||||||||||||||||||
(Unaudited - in thousands) | 2007 | 2006 | 2007 | 2006 | |||||||||||||||
Net earnings | $ | 36,034 | $ | 17,089 | $ | 98,157 | $ | 69,900 | |||||||||||
Income taxes (benefit) | 752 | 9,533 | 33,831 | 14,597 | |||||||||||||||
Interest expense | 1,046 | 1,188 | 4,527 | 5,089 | |||||||||||||||
Interest income | (2,041 | ) | (755 | ) | (3,604 | ) | (2,750 | ) | |||||||||||
Amortization of intangible assets | 1,640 | 1,723 | 7,496 | 6,953 | |||||||||||||||
Depreciation expense | 4,737 | 4,954 | 25,428 | 22,064 | |||||||||||||||
EBITDA | $ | 42,168 | $ | 33,732 | $ | 165,835 | $ | 115,853 | |||||||||||
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.
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