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 First Quarter Fiscal 2008 Results
Fort Collins, Colo., January 21, 2008—Woodward Governor Company (Nasdaq:WGOV) today reported financial results for its first quarter of fiscal 2008. (All per share amounts are diluted.)
Highlights
•
Sales for the quarter increased 20 percent over last year, with organic growth of 16 percent over last year.
•
Earnings per share for the quarter were $0.72, an increase of 41 percent over last year with operating earnings for the quarter increasing 43 percent.
•
Cash generated from operations was $6.4 million.
Net sales for the quarter were $272.1 million, up 20 percent from $226.2 million for the first quarter of the prior year. Net earnings for the quarter were $25.3 million, or $0.72 per share, compared with $17.9 million, or $0.51 per share, in the previous year’s first quarter.
“Our investments in both successful aircraft platforms and inverter technology, currently focused on wind power applications, have contributed to a strong first quarter for Woodward. These represent two key components of our overall energy control strategy,” said President and Chief Executive Officer Thomas A. Gendron. “Given the pricing and availability issues surrounding energy, our strategy of addressing a broad range of niche markets is serving us well. Concern over energy efficiency and environmental impacts drives increased demand for our control systems and we expect this to continue.”
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Segment Results
Turbine Systems’ net sales for the first quarter were $130.8 million, an increase of 12 percent from $117.0 million for the first quarter a year ago. Segment earnings for the quarter increased 41 percent to $27.2 million from $19.3 million for the same quarter a year ago. Our favorable sales performance reflects sustained strength in both commercial OEM and military and commercial aftermarket portions of our business as well as steady growth in the industrial turbine product lines. Earnings increased in the quarter primarily due to the higher sales on a consistent fixed cost base, a favorable product mix, and cost-control activities.
Engine Systems’ net sales for the first quarter were $114.0 million, an increase of 11 percent from $102.9 million for last year’s first quarter. Segment earnings for the quarter were down slightly at $12.1 million from $12.6 million for the same period a year ago. Sales were strong in both power generation and marine markets. Earnings were impacted by unfavorable product mix, expediting costs associated with supply chain constraints, and growth related investments.
Electrical Power Systems’ net sales for the first quarter were $57.5 million, an increase of 78 percent from $32.3 million for the first quarter a year ago. Organic growth was 50 percent. Segment earnings for the quarter increased to $7.2 million from $3.6 million for the same quarter a year ago. Inverter products sold into wind power applications are experiencing exceptional growth, and the business as a whole continues to show strength. Earnings increased period to period on the increased volume, favorable foreign currency impacts, and the effects of the SEG acquisition that occurred during the first quarter of last year.
Nonsegment expenses (including intersegment eliminations) declined to $7.6 million from $8.2 million last year, primarily as a result of reduced professional fees and costs associated with business development activities.
Cash Flow and Financial Position
Net cash provided by operating activities was $6.4 million for the quarter compared with $13.8 million for the same quarter last year reflecting increased variable compensation paid in the current year associated with the prior year’s financial performance. Capital expenditures were $6.6 million compared with $5.4 million last
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year. The debt to total capitalization ratio was 8.8 percent at the end of the first quarter, compared to 10.9 percent at the end of the prior fiscal year.
An amended credit facility expanding and extending the existing facility was announced in October. Also during the quarter, an accelerated stock repurchase program was completed. A total of 494,257 shares were repurchased under the program.
Mr. Gendron concluded, “Our order outlook in our core markets remains positive and we continue to anticipate company-wide sales growth of 8 to 10 percent for 2008, and earnings of $3.05 to $3.15 per share.”
Conference Call
Woodward will hold an investor conference call at 8:30 a.m. EST on Tuesday, January 22, 2008, to provide an overview of the financial performance for the first quarter of fiscal 2008, 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 1-866-804-3545 (domestic) or 1-703-639-1326 (international). Participants should call prior to the start time to allow for registration; the Conference ID is 1184947. An audio replay will be available by telephone from 12:30 p.m. EST on January 22 until 1:59 a.m. EST on January 25, 2008. The telephone number to access the replay is 1-888-266-2081 (domestic) or 1-703-925-2533 (international), reference access code 1184947.
About Woodward
Woodward is an independent designer, manufacturer, and service provider of energy control and optimization solutions for engine, aircraft and industrial turbines, and electrical power system 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.
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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, 2007 and Quarterly Report Form 10-Q for the quarter ended December 31, 2007, to be filed shortly.
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Woodward Governor Company and Subsidiaries
CONDENSED 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
Three months ended
December 31,
(Unaudited - in thousands except per share amounts)
2007
2006
Net sales
$272,063
$
226,248
Costs and expenses:
Cost of goods sold
190,830
157,744
Sales, general, and administrative expenses
25,980
26,380
Research and development costs
15,626
13,954
Amortization of intangible assets
1,895
1,726
Interest expense
956
1,192
Interest income
(580)
(623)
Other income, net
(1,132)
(777)
To Total costs and expenses
233,575
199,596
Earnings before income taxes
38,488
26,652
Income taxes
13,163
8,765
Net earnings
$25,325
$
17,887
Per share amounts:
Basic
$0.75
$
0.52
Diluted
0.72
0.51
Weighted-average number of shares outstanding:
Basic
33,942
34,112
Diluted
35,019
35,039
Cash dividends per share
$0.11
$
0.10
Note: Income taxes for the first quarter of fiscal 2007 includes a $1.2 million (or $0.03 per diluted share) benefit from the extension of the Research and Experimentation tax credit.
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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
December 31,
September 30,
(Unaudited - in thousands)
2007
2007
Assets
Current assets:
Cash and cash equivalents
$
61,142
$
71,635
Accounts receivable
140,669
152,826
Inventories
191,638
172,500
Income taxes receivable
6,954
9,461
Deferred income taxes
23,718
23,754
Other current assets
8,601
8,429
Total current assets
432,722
438,605
Property, plant, and equipment-net
159,037
158,998
Goodwill
141,391
141,215
Other intangibles-net
71,331
73,018
Deferred income taxes
10,194
11,250
Other assets
7,148
6,681
Total assets
$
821,823
$
829,767
Liabilities and shareholders’ equity
Current liabilities:
Short-term borrowings
$
5,499
$
5,496
Current portion of long-term debt
14,957
15,940
Accounts payable
53,601
57,668
Accrued liabilities
61,200
83,890
Total current liabilities
135,257
162,994
Long-term debt, less current portion
34,364
45,150
Deferred income taxes
20,696
19,788
Other liabilities
63,992
57,404
Total liabilities
254,309
285,336
Shareholders’ equity
567,514
544,431
Total liabilities and shareholders’ equity
$
821,823
$
829,767
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5
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
Three months ended
December 31,
(Unaudited-in thousands)
2007
2006
Net cash provided by operating activities
$
6,373
$
13,754
Cash flows from investing activities:
Business acquisitions, net of cash acquired
—
(34,564
)
Payments for purchase of property, plant, and equipment
(6,572
)
(5,423
)
Proceeds from sale of property, plant, and equipment
267
105
Net cash used in investing activities
(6,305
)
(39,882
)
Cash flows from financing activities:
Cash dividends paid
(3,726
)
(3,415
)
Proceeds from sales of treasury stock
4,160
559
Purchases of treasury stock
(4,777
)
(1,859
)
Excess tax benefits from stock compensation
5,258
1,926
Net payments from borrowings under revolving lines
(31
)
(614
)
Payments of long-term debt
(11,884
)
(11,693
)
Net cash used in financing activities
(11,000
)
(15,096
)
Effect of exchange rate changes on cash
439
889
Net change in cash and cash equivalents
(10,493
)
(40,335
)
Cash and cash equivalents, beginning of year
71,635
83,718
Cash and cash equivalents, end of period
$
61,142
$
43,383
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Woodward Governor Company and Subsidiaries
SELECTED FINANCIAL
INFORMATION
Three months ended
December 31,
(Unaudited - in thousands)
2007
2006
External net sales:
Turbine Systems
$
126,782
$
112,324
Engine Systems
103,751
93,812
Electrical Power Systems
41,530
20,112
Segment earnings:
Turbine Systems
27,228
19,294
Engine Systems
12,061
12,577
Electrical Power Systems
7,194
3,593
Earnings reconciliation:
Total segment earnings
46,483
35,464
Nonsegment expenses
(7,619
)
(8,243
)
Operating earnings
38,864
27,221
Interest expense and income, net
(376
)
(569
)
Consolidated earnings before income taxes
$
38,488
$
26,652
Capital expenditures
$
6,572
$
5,423
Depreciation expense
7,402
6,523
Three months ended
December 31,
(Unaudited - in thousands)
2007
2006
Sales Reconciliation*:
Turbine Systems
$
130,793
$
117,005
Engine Systems
114,034
102,921
Electrical Power Systems
57,474
32,302
Less intersegment sales
(30,238
)
(25,980
)
Total external sales
$
272,063
$
226,248
Earnings Reconciliation:
Turbine Systems
$
27,228
$
19,294
Engine Systems
12,061
12,577
Electrical Power Systems
7,194
3,593
Total segment earnings
46,483
35,464
Nonsegment expenses
(7,619
)
(8,243
)
Interest expense and income, net
(376
)
(569
)
Consolidated earnings before income taxes
$
38,488
$
26,652
*This schedule reconciles segment sales, which include intersegment sales, with consolidated external sales.
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Woodward Governor Company and Subsidiaries
R E C O N C I L I A T I O N O F NET E A R N I N G S
T O
E B I T D A
Three months ended
December 31,
(Unaudited - in thousands)
2007
2006
Net earnings
$
25,325
$
17,887
Income taxes
13,163
8,765
Interest expense
956
1,192
Interest income
(580
)
(623
)
Amortization of intangible assets
1,895
1,726
Depreciation expense
7,402
6,523
EBITDA
$
48,161
$
35,470
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 accounting principles generally accepted in the United States of America. 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 December 31, 2007, property, plant, and equipment, and intangible assets subject to amortization represented 28 percent of our total assets.
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