News Release
Woodward Governor Company
1000 East Drake Road
Fort Collins, Colorado 80525
Tel: 970-482-5811
Fax: 970-498-3058
FOR IMMEDIATE RELEASE
CONTACT: | Robert F. Weber, Jr. Chief Financial Officer and Treasurer 970-498-3112 |
Woodward Reports Second Fiscal Quarter and Six Months Results
Fort Collins, Colo., April 21, 2008—Woodward Governor Company (Nasdaq:WGOV) today reported financial results for its second quarter of fiscal 2008. (All per share amounts are presented on a fully diluted basis.)
Highlights
• | Sales for the quarter increased 19 percent over last year. |
• | Earnings per share for the quarter were $0.43, an increase of 48 percent over last year’s $0.29. |
• | Operating earnings for the quarter increased 38 percent over last year. |
• | Cash generated from operations during the quarter was $22.8 million. |
Net sales for the quarter were $305.8 million, up 19 percent from $256.3 million for the second quarter of the prior year. Net earnings for the quarter were $29.7 million, or $0.43 per share, compared with $20.3 million, or $0.29 per share, in the previous year’s second quarter.
Net sales for the first half were $577.8 million, up 20 percent from $482.5 million for the first half of the prior year. Net earnings for the first half were $55.0 million, or $0.79 per share, compared with $38.1 million, or $0.54 per share, in the previous year’s first half.
“We are pleased to see that investments made in prior years are delivering results in the growth of our systems and product sales. In addition to the sales growth, the successful development, production and marketing of our product offerings have been critical to realizing our improved financial performance,” said Chairman and Chief Executive Officer Thomas A. Gendron. “This quarter’s results reflect Woodward’s ability to deliver operating leverage and earnings on the increased demand for our energy control solutions, while concurrently making key investments in future growth.”
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Segment Results
Turbine Systems’ net sales for the second quarter were $147.5 million, an increase of 13 percent from $130.8 million for the second quarter a year ago. Segment earnings for the second quarter increased 30 percent to $31.0 million from $23.8 million for the same quarter a year ago. Earnings as a percent of sales were 21.0 percent this quarter compared to 18.2 percent in the prior year. As in recent quarters, our sales performance reflected generally strong demand for both our OEM and aftermarket offerings in the industrial and aerospace turbine markets. The earnings increase in Turbine Systems was principally the result of leverage on the increased volume.
Engine Systems’ net sales for the second quarter were $125.8 million, an increase of 14 percent from $110.0 million for last year’s second quarter. Sales continued to be strong in all of our markets. Segment earnings for the quarter increased 10 percent to $13.0 million from $11.8 million for the same period a year ago. Earnings as a percent of sales were 10.3 percent this quarter compared to 10.7 percent in the prior year reflecting higher than anticipated operating costs.
Electrical Power Systems’ net sales for the second quarter were $64.9 million, an increase of 43 percent from $45.2 million for the second quarter a year ago. Sales growth this quarter was entirely organic. Segment earnings for the quarter increased 49 percent to $9.5 million from $6.4 million for the same quarter a year ago. Earnings as a percent of sales were 14.7 percent this quarter compared to 14.2 percent in the prior year. Again this quarter, growth occurred in both our power generation & distribution and wind turbine inverter markets with growth in wind continuing at an exceptional pace. Earnings for Electrical Power Systems increased primarily because of the increase in volume as well as favorable currency translation and improved operating processes.
Nonsegment expenses for the quarter declined to $9.3 million from $9.9 million last year.
Turbine Systems’ net sales for the first half were $278.2 million, an increase of 12 percent from $247.8 million for the first half a year ago. Segment earnings for the first half increased 35 percent to $58.2 million compared to $43.1 million for the first half a year ago. Segment earnings as a percent of sales were 20.9 percent for the first half compared to 17.4 percent for the first half a year ago.
Engine Systems’ net sales for the first half were $239.9 million, an increase of 13 percent from $212.9 million for last year’s first half. Segment earnings for the first half were up slightly at $25.1 million from $24.4 million for the first half a year ago. Segment earnings as a percent of sales were down to 10.5 percent for the first half compared to 11.4 percent for the first half a year ago.
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Electrical Power Systems’ net sales for the first half were $122.4 million, an increase of 58 percent from $77.5 million for the first half a year ago, of which, 46 percent represents organic growth. Segment earnings as a percent of sales for the first half increased to 13.7 percent or $16.7 million from 12.9 percent or $10.0 million for the first half a year ago.
Nonsegment expenses for the first half declined to $16.9 million from $18.2 million last year.
Cash Flow and Financial Position
Net cash provided by operating activities was $29.2 million for the first half compared with $20.3 million for the first half last year. Capital expenditures for the first half were $16.5 million compared with $13.1 million for the first half of last year. The debt to total capitalization ratio was 11.4 percent at the end of the second quarter, compared to 10.9 percent at the end of the prior fiscal year. Also, during the first half, share repurchases amounted to approximately $39 million.
During the quarter the dividend payment per split adjusted share was increased 9 percent to 6 cents per share. A two-for-one stock split was approved by shareholders at the 2007 annual meeting of shareholders on January 23, 2008. The stock split was completed in February 2008. The number of shares reported in this release and the attached condensed consolidated financial statements have been updated from amounts reported prior to February 1, 2008, to reflect the effects of the split.
“While overall macro-economic uncertainty continues, our prior investments in geographic and market expansion provide us with a broader base for sales growth,” said Mr. Gendron “As a result, our outlook in our core markets for the balance of this fiscal year is positive and we now anticipate company-wide sales growth of 14 to 16 percent for 2008. Also, primarily as a result of increased operating leverage on our higher sales, we now expect earnings of $1.61 to $1.66 per share.”
Conference Call
Woodward will hold an investor conference call at 6:00 p.m. EDT on Monday, April 21, 2008, to provide an overview of the financial performance for the second 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.
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You may also listen to the call by dialing 1-866-835-8907 (domestic) or 1-703-639-1414 (international). Participants should call prior to the start time to allow for registration; the Conference ID is 1220291. An audio replay will be available by telephone from 9:00 p.m. EDT on April 21 until 11:59 p.m. EDT on April 23, 2008. The telephone number to access the replay is 1-888-266-2081 (domestic) or 1-703-925-2533 (international), reference access code 1220291.
About Woodward
Woodward is an independent designer, manufacturer, and service provider of energy control and optimization solutions for engines, 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.
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 quarters ended December 31, 2007 and March 31, 2008, to be filed shortly.
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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 S T A T E M E N T S | O F E A R N I N G S | |||||||||||||||||
Three Months Ended March 31, | Six Months Ended March 31, | |||||||||||||||||
Unaudited - In thousands except per share amounts | 2008 | 2007 | 2008 | 2007 | ||||||||||||||
Net sales | $ | 305,753 | $ | 256,298 | $ | 577,816 | $ | 482,546 | ||||||||||
Costs and expenses: | ||||||||||||||||||
Cost of goods sold | 210,377 | 176,172 | 401,207 | 333,916 | ||||||||||||||
Selling, general, and administrative expenses | 31,667 | 30,593 | 57,647 | 56,977 | ||||||||||||||
Research and developments costs | 18,781 | 15,946 | 34,407 | 29,900 | ||||||||||||||
Amortization of intangible assets | 1,710 | 2,184 | 3,605 | 3,910 | ||||||||||||||
Interest expense | 986 | 1,133 | 1,942 | 2,325 | ||||||||||||||
Interest income | (420 | ) | (437 | ) | (1,000 | ) | (1,060 | ) | ||||||||||
Other, net | (996 | ) | (703 | ) | (2,128 | ) | (1,484 | ) | ||||||||||
Total costs and expenses | 262,105 | 224,888 | 495,680 | 424,484 | ||||||||||||||
Earnings before income taxes | 43,648 | 31,410 | 82,136 | 58,062 | ||||||||||||||
Income taxes | (13,934 | ) | (11,148 | ) | (27,097 | ) | (19,913 | ) | ||||||||||
Net earnings | $ | 29,714 | $ | 20,262 | $ | 55,039 | $ | 38,149 | ||||||||||
Per share amounts: | ||||||||||||||||||
Basic | $ | 0.44 | $ | 0.30 | $ | .81 | $ | .56 | ||||||||||
Diluted | $ | 0.43 | $ | 0.29 | $ | .79 | $ | .54 | ||||||||||
Weighted-average number of shares outstanding: | ||||||||||||||||||
Basic | 67,603 | 68,503 | 67,762 | 68,362 | ||||||||||||||
Diluted | 69,473 | 70,361 | 69,776 | 70,225 | ||||||||||||||
Cash dividends per share | $ | 0.060 | $ | 0.055 | $ | 0.115 | $ | 0.105 | ||||||||||
Note: A two-for-one stock split was approved by shareholders at the 2007 annual meeting of shareholders on January 23, 2008. The stock split became effective for shareholders at the close of business on February 1, 2008. The number of shares reported in these condensed consolidated financial statements have been updated from amounts reported prior to February 1, 2008, to reflect the effects of the split. |
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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 | |||||||||||||
March 31, | September 30, | ||||||||||||||
(Unaudited - in thousands) | 2008 | 2007 | |||||||||||||
Assets | |||||||||||||||
Current assets: | |||||||||||||||
Cash and cash equivalents | $ | 60,242 | $ | 71,635 | |||||||||||
Accounts receivable | 162,140 | 152,826 | |||||||||||||
Inventories | 210,369 | 172,500 | |||||||||||||
Income taxes receivable | 611 | 9,461 | |||||||||||||
Deferred income taxes | 23,157 | 23,754 | |||||||||||||
Other current assets | 12,120 | 8,429 | |||||||||||||
Total current assets | 468,639 | 438,605 | |||||||||||||
Property, plant, and equipment-net | 164,325 | 158,998 | |||||||||||||
Goodwill | 142,884 | 141,215 | |||||||||||||
Other intangibles-net | 70,273 | 73,018 | |||||||||||||
Deferred income taxes | 8,628 | 11,250 | |||||||||||||
Other assets | 9,081 | 6,681 | |||||||||||||
Total assets | $ | 863,830 | $ | 829,767 | |||||||||||
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Liabilities and shareholders’ equity | |||||||||||||||
Current liabilities: | |||||||||||||||
Short-term borrowings | $ | 25,672 | $ | 5,496 | |||||||||||
Current portion of long-term debt | 13,990 | 15,940 | |||||||||||||
Accounts payable | 60,944 | 57,668 | |||||||||||||
Accrued liabilities | 62,627 | 83,890 | |||||||||||||
Total current liabilities | 163,233 | 162,994 | |||||||||||||
Long-term debt, less current portion | 34,133 | 45,150 | |||||||||||||
Deferred income taxes | 26,087 | 19,788 | |||||||||||||
Other liabilities | 66,274 | 57,404 | |||||||||||||
Total liabilities | 289,727 | 285,336 | |||||||||||||
Shareholders’ equity | 574,103 | 544,431 | |||||||||||||
Total liabilities and shareholders’ equity | $ | 863,830 | $ | 829,767 | |||||||||||
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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 | ||||||||
Six-months ended | |||||||||||
March 31, | |||||||||||
(Unaudited-in thousands) | 2008 | 2007 | |||||||||
Net cash provided by operating activities | $ | 29,191 | $ | 20,264 | |||||||
Cash flows from investing activities: | |||||||||||
Business acquisitions, net of cash acquired | — | (34,594 | ) | ||||||||
Payments for purchase of property, plant, and equipment | (15,937 | ) | (13,058 | ) | |||||||
Proceeds from sale of property, plant, and equipment | 134 | 109 | |||||||||
Net cash used in investing activities | (15,803 | ) | (47,543 | ) | |||||||
Cash flows from financing activities: | |||||||||||
Cash dividends paid | (7,793 | ) | (7,192 | ) | |||||||
Proceeds from sales of treasury stock | 5,859 | 5,158 | |||||||||
Purchases of treasury stock | (38,701 | ) | (6,869 | ) | |||||||
Excess tax benefits from stock compensation | 6,958 | 3,669 | |||||||||
Net borrowings (payments) under revolving lines of credit | 20,175 | (2,388 | ) | ||||||||
Payments of long-term debt | (13,432 | ) | (12,686 | ) | |||||||
Net cash used in financing activities | (26,934 | ) | (20,308 | ) | |||||||
Effect of exchange rate changes on cash | 2,153 | 2,145 | |||||||||
Net change in cash and cash equivalents | (11,393 | ) | (45,442 | ) | |||||||
Cash and cash equivalents, beginning of year | 71,635 | 83,718 | |||||||||
Cash and cash equivalents, end of period | $ | 60,242 | $ | 38,276 | |||||||
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Woodward Governor Company and Subsidiaries SELECTED FINANCIAL INFORMATION Three-months ended Six-months ended March 31, March 31, (Unaudited - in thousands) 2008 2007 2008 2007 External net sales: Turbine Systems $ 143,298 $125,428 $270,080 $237,752 Engine Systems 114,027 99,749 217,778 193,561 Electrical Power Systems 48,428 31,121 89,958 51,233 Segment earnings: Turbine Systems 30,951 23,830 58,179 43,124 Engine Systems 13,005 11,785 25,066 24,362 Electrical Power Systems 9,546 6,409 16,740 10,002 Earnings reconciliation: Total segment earnings 53,502 42,024 99,985 77,488 Nonsegment expenses (9,288) (9,918) (16,907) (18,161) - -------------------------------- --------------------------- --------------------- ------------------- ----------------- Operating earnings 44,214 32,106 83,078 59,327 Interest expense and income, net (566) (696) (942) (1,265) - --------------------------------------------- --------------------------- --------------------- ------------------- ----------------- Consolidated earnings before income taxes $ 43,648 $31,410 $82,136 $58,062 Capital expenditures $9,926 $7,635 $16,498 $13,058 Depreciation expense 7,294 7,005 14,696 13,528 ==================== ============================== ======================== ==================== =============================
Three-months ended | Six-months ended | |||||||||||||||
March 31, | March 31, | |||||||||||||||
(Unaudited - in thousands) | 2008 | 2007 | 2008 | 2007 | ||||||||||||
Sales Reconciliation*: | ||||||||||||||||
Turbine Systems | $ | 147,454 | $ | 130,772 | $ | 278,247 | $ | 247,777 | ||||||||
Engine Systems | 125,828 | 110,024 | 239,862 | 212,945 | ||||||||||||
Electrical Power Systems | 64,891 | 45,223 | 122,365 | 77,525 | ||||||||||||
Less intersegment sales | (32,420 | ) | (29,721 | ) | (62,658 | ) | (55,701 | ) | ||||||||
Total external sales | $ | 305,753 | $ | 256,298 | 577,816 | $ | 482,546 | |||||||||
Earnings Reconciliation: | ||||||||||||||||
Turbine Systems | $ | 30,951 | $ | 23,830 | $ | 58,179 | $ | 43,124 | ||||||||
As a percent of sales | 21.0 | 18.2 | 20.9 | 17.4 | ||||||||||||
Engine Systems | 13,005 | 11,785 | 25,066 | 24,362 | ||||||||||||
As a percent of sales | 10.3 | 10.7 | 10.5 | 11.4 | ||||||||||||
Electrical Power Systems | 9,546 | 6,409 | 16,740 | 10,002 | ||||||||||||
As a percent of sales | 14.7 | 14.2 | 13.7 | 12.9 | ||||||||||||
Total segment earnings | 53,502 | 42,024 | 99,985 | 77,488 | ||||||||||||
Nonsegment expenses | (9,288 | ) | (9,918 | ) | (16,907 | ) | (18,161 | ) | ||||||||
Interest expense and income, net | (566 | ) | (696 | ) | (942 | ) | (1,265 | ) | ||||||||
Consolidated earnings before income taxes | $ | 43,648 | $ | 31,410 | $ | 82,136 | $ | 58,062 | ||||||||
*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 | Six-months ended | |||||||||||||||||
March 31, | March 31, | |||||||||||||||||
(Unaudited - in thousands) | 2008 | 2007 | 2008 | 2007 | ||||||||||||||
Net earnings | $ | 29,714 | $ | 20,262 | $ | 55,039 | $ | 38,149 | ||||||||||
Income taxes | 13,934 | 11,148 | 27,097 | 19,913 | ||||||||||||||
Interest expense | 986 | 1,133 | 1,942 | 2,325 | ||||||||||||||
Interest income | (420 | ) | (437 | ) | (1,000 | ) | (1,060 | ) | ||||||||||
Amortization of intangible assets | 1,710 | 2,184 | 3,605 | 3,910 | ||||||||||||||
Depreciation expense | 7,294 | 7,005 | 14,696 | 13,528 | ||||||||||||||
EBITDA | $53,218 | $ | 41,295 | $ | 101,379 | $ | 76,765 |
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.
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