Woodward Governor Company (NASDAQ: WGOV) today reported financial
results for its fourth quarter and fiscal year 2010. (All per share
amounts are presented on a fully diluted basis.)
Quarterly Highlights
-- Net sales for the fourth quarter of fiscal 2010 were $412.0 million, an
increase of 13 percent from $364.5 million in the fourth quarter of
last year.
-- Earnings per share(1) were $0.47 for the quarter as compared with $0.34
for the same quarter last year.
-- Total EBIT(2) for the quarter was $56.2 million compared to
$42.2 million in the fourth quarter of the prior year.
-- Free cash flow (defined as cash provided by operating activities less
capital expenditures) for the fourth quarter of fiscal 2010 was
$13.7 million.
"Earnings rose solidly for the quarter both sequentially and
compared to the prior year. This reflects the effects of revenue
increases driven by market recovery and share gains, as well as
improved operating profitability," said Thomas A. Gendron, Chairman
and Chief Executive Officer. "Our long-term strategic initiatives
with respect to share gains in our primary markets are being
realized."
Net sales for the fiscal 2010 fourth quarter were $412.0
million, an increase of 13 percent from $364.5 million for the 2009
fourth quarter. Foreign currency exchange rates had an unfavorable
impact on net sales of approximately $5 million for the 2010 fourth
quarter.
Net earnings(1) for the 2010 fourth quarter were $32.7 million,
or $0.47 per share, compared with $23.8 million, or $0.34 per
share, in the 2009 fourth quarter.
EBIT was $56.2 million for the fourth quarter of 2010 compared
to $42.2 million for the fourth quarter of 2009. The current
quarter EBIT was significantly impacted by sales volume increases
across almost all reported business segments, partially offset by
increased variable compensation. Foreign currency exchange rates
had a negative impact on EBIT of approximately $2 million for the
2010 fourth quarter.
Recent economic events have caused variable compensation
expense, which is tied to relative financial performance, to vary
significantly from period-to-period. For the fourth quarter of
2010, variable compensation expense increased $4.2 million from the
fourth quarter of 2009.
Quarterly Segment Results
"Three of our business segments achieved excellent financial
performance in the fourth quarter of fiscal 2010. Our Airframe
Systems segment continued to experience sales and earnings pressure
largely due to the current business environment," continued Mr.
Gendron. "Our earnings performance at both Turbine Systems and
Engine Systems, as well as exceptional sales growth at Electrical
Power Systems, indicate that our strategies are delivering improved
financial results, while Airframe Systems performance continues to
be a corporate priority."
Turbine Systems
Turbine Systems' segment net sales for the fourth quarter of
fiscal 2010, which include intersegment sales, were $170.1 million,
an increase of 15 percent from $148.4 million for the fourth
quarter a year ago. Segment earnings for the fourth quarter of 2010
increased to $42.6 million from $32.0 million for the same quarter
a year ago. Segment earnings as a percent of segment net sales were
25.1 percent this quarter compared to 21.6 percent in the same
quarter of the prior year.
The sales increase was attributable to broad improvements in
aerospace and industrial turbine demand and market share gains.
Segment earnings benefitted from the increased sales volumes and
improved operating leverage, price increases and favorable sales
mix, partially offset by increased variable compensation
expense.
Airframe Systems
Airframe Systems' segment net sales for the fourth quarter of
fiscal 2010, which include intersegment sales, were $102.6 million,
a decrease of 7 percent from $110.4 million in the fourth quarter a
year ago. In August 2009, the Fuel and Pneumatics product line was
sold, which contributed $3.7 million of net sales and $1.9 million
of segment earnings in the fourth quarter a year ago. Airframe
Systems' segment earnings for this quarter were $1.3 million
compared to $12.0 million in the fourth quarter of 2009. Segment
earnings as a percent of segment net sales were 1.3 percent this
quarter compared to 10.9 percent reported in the same quarter for
the prior year. Segment earnings excluding noncash amortization
associated with the acquisition were $8.4 million, or 8.2 percent
as a percent of segment net sales, compared to $18.3 million or
16.6 percent in the fourth quarter of 2009.
Sales remain at historically low levels for small business and
regional jets on which we have significant content. Earnings were
negatively impacted by the continued volume decline in sales, an
adverse mix of product margins, increased variable compensation
expense, and the effects of certain strategic refocusing
initiatives.
Electrical Power Systems
Electrical Power Systems' segment net sales for the fourth
quarter of fiscal 2010, which include intersegment sales, were
$71.7 million, an increase of 34 percent from $53.7 million for the
fourth quarter a year ago. Segment earnings for this quarter were
$9.0 million compared to $5.1 million for the same quarter last
year. Segment earnings as a percent of segment net sales were 12.6
percent this quarter compared to 9.5 percent in the same quarter
for the prior year.
The sales increase was attributable to broad demand
improvements. The fourth quarter of 2010's results reflected strong
deliveries and increased share for our wind turbine inverter
business. We also experienced a significant increase in sales
related to our power station projects. The segment earnings
improvement reflected the increased sales volumes and improved
operating profitability, partially offset by sales mix and
increases in variable compensation. Foreign currency exchange rates
negatively impacted sales by approximately $4 million.
Engine Systems
Engine Systems' segment net sales for the fourth quarter of
fiscal 2010, which include intersegment sales, were $94.5 million
compared to $73.8 million for last year's fourth quarter, an
increase of 28 percent. Segment earnings for this quarter increased
to $8.8 million from $2.1 million for the same period a year ago.
Segment earnings as a percent of segment net sales were 9.3 percent
this quarter compared to 2.8 percent in the same quarter last
year.
Engine Systems' sales increased substantially across most
markets and product lines. Segment earnings improved due to the
increased volumes and improved operating leverage, partially offset
by increased variable compensation expense.
Nonsegment
Nonsegment expenses totaled $5.6 million for the fourth quarter
of fiscal 2010, compared to $8.9 million for the same quarter last
year. Nonsegment expenses were 1.4 percent of consolidated net
sales for the fourth quarter of 2010 compared to 2.5 percent in the
prior year quarter. The prior year quarter reflected approximately
$3 million in costs associated with a global manufacturing related
project impacting all business segments. Without these costs,
nonsegment expenses were 1.6 percent in the fourth quarter of
2009.
Full Year 2010 Results
Net sales for fiscal 2010 were $1.457 billion, an increase of 2
percent from $1.430 billion last year. Net sales for the first six
months of 2010 include sales of $117.3 million for Woodward HRT,
which we acquired on April 3, 2009, for which there were no
corresponding sales in the first six months of 2009.
Net earnings for fiscal 2010 were $110.8 million, or $1.59 per
share, compared with $94.4 million, or $1.37 per share, in the same
period last year. Earnings per share for fiscal 2010 included
special tax benefits of $0.09, while 2009 included special net
charges of $0.21 per share as detailed in the table below. Variable
compensation expense increased $6.0 million in 2010 when compared
to 2009, while foreign currency exchange rates had an insignificant
impact on both net sales and net earnings for 2010.
Full year segment results can be found in the tables included
herein.
Special Items
------------------------------------------
2010 Three Months Ended Year Ended
September 30, 2010 September 30, 2010
--------------------- --------------------
Per Share Per Share
---------- ---------
Favorable resolutions of prior
year tax matters $ - $ - $ 6,416 $ 0.09
========== ========== ========= =========
------------------------------------------
2009 Three Months Ended Year Ended
September 30, 2009 September 30, 2009
--------------------- --------------------
Per Share Per Share
---------- ---------
Purchase accounting - inventory
basis step-up charge $ - $ (12,500)
Less: income tax benefit - 4,500
---------- ---------
Net after income tax charge $ - $ - $ (8,000) $ (0.12)
---------- ---------- --------- ---------
Workforce management and other
charges $ - $ (16,605)
Less: income tax benefit - 5,762
---------- ---------
Net after income tax charge $ - $ - $ (10,843) $ (0.16)
---------- ---------- --------- ---------
---------- ---------
Favorable resolution of prior
year tax issues $ - $ - $ 4,992 $ 0.07
---------- ---------- --------- ---------
Total special charges $ - $ - $ (13,851) $ (0.21)
========== ========== ========= =========
Fiscal year 2010 EBIT was $183.8 million compared to $155.0
million in the prior year. Excluding pre-tax special charges of
$12.5 million related to the purchase accounting for inventory
basis step-up charge and $16.6 million related to workforce
management and other charges (both highlighted in the table above),
adjusted EBIT was $184.1 million in fiscal 2009. EBIT for the first
six months of 2010 includes $14.4 million related to Woodward HRT
for which there was no corresponding amount in the first six months
of 2009.
Cash Flow, Financial Position and Other Matters
Net cash generated from operating activities decreased to $184.6
million for 2010 compared with $219.2 million for 2009. Free cash
flow was $156.5 million for fiscal 2010 compared to $190.3 million
for 2009. Capital expenditures for 2010 were $28.1 million compared
with $28.9 million in 2009.
For the year ended September 30, 2010, total debt was reduced by
$106.5 million. As a result, the ratio of debt-to-debt-plus-equity
was 36.7 percent at September 30, 2010 compared to 44.6 percent at
September 30, 2009.
Our effective tax rate for the full year 2010 was 28.2 percent
compared to 22.9 percent for 2009. The difference in tax rate is
largely the result of the impact of the U.S. research credit in
2009.
Outlook
"We expect that the recovery of our markets and expansion of our
market share will continue into fiscal 2011," continued Mr.
Gendron. "For 2011, we expect our sales to be between $1.55 billion
and $1.65 billion. We also expect our diluted earnings per share to
be between $1.75 and $1.90."
This outlook reflects a projected increase from 2010 of
approximately $26 million or $0.25 per share in variable
compensation expense at targeted levels.
Non-U.S. GAAP Financial Measures: EBIT (earnings before interest
and taxes), adjusted EBIT, EBITDA (earnings before interest, taxes,
depreciation and amortization) and free cash flow are financial
measures not prepared and presented in accordance with accounting
principles generally accepted in the United States of America (U.S.
GAAP). Management uses EBIT to evaluate Woodward's performance
without financing and tax related considerations, as these elements
may not fluctuate with operating results. Management uses adjusted
EBIT to evaluate Woodward's performance after eliminating certain
special items that are of sufficient magnitude to make comparisons
between years difficult. Management uses EBITDA in evaluating
Woodward's operating performance, making business decisions,
including developing budgets, managing expenditures, forecasting
future periods, and evaluating capital structure impacts of various
strategic scenarios. Management uses free cash flow, which is
derived from cash flows provided by operating activities, in
reviewing the financial performance of Woodward's various business
segments and evaluating cash levels. Securities analysts,
investors, and others frequently use EBIT, adjusted EBIT, EBITDA
and free cash flow in their evaluation of companies, particularly
those with significant property, plant, and equipment, and
intangible assets that are subject to amortization. The use of
these non-U.S. GAAP financial measures is not intended to be
considered in isolation of, or as a substitute for, the financial
information prepared and presented in accordance with U.S. GAAP. As
EBIT, adjusted EBIT and EBITDA exclude certain financial
information compared with net income, the most comparable U.S. GAAP
financial measure, users of this financial information should
consider the information that is excluded. Free cash flow does not
necessarily represent funds available for discretionary use and is
not necessarily a measure of our ability to fund our cash needs.
Management's calculations of EBIT, adjusted EBIT, EBITDA and free
cash flow may differ from similarly titled measures used by other
companies, limiting their usefulness as comparative measures.
(1) Represents net earnings or earnings per share (as applicable)
attributable to Woodward Governor Company (i.e., excluding any
non-controlling interests).
(2) EBIT is defined as net earnings attributable to both Woodward Governor
Company and any noncontrolling interest before interest and taxes.
Conference Call
Woodward will hold an investor conference call at 4:30 p.m. EST
on Tuesday, November 16, 2010 to provide an overview of the
financial performance for the fourth quarter and fiscal 2010,
business highlights, and outlook for fiscal 2011. 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 1-866-256-9239
(domestic) or 1-703-639-1213 (international). Participants should
call prior to the start time to allow for registration; the
Conference ID is 1492430. An audio replay will be available by
telephone from 8:00 p.m. EST on November 16, 2010 until 11:59 p.m.
EST on November 18, 2010. The telephone number to access the replay
is 1-888-266-2081 (domestic) or 1-703-925-2533 (international),
reference access code 1492430.
About Woodward
Woodward is an independent designer, manufacturer, and service
provider of energy control and optimization solutions. We are a
global leader in energy control within the aerospace & defense
and energy markets that we serve. Our components and integrated
systems optimize performance of commercial aircraft, military
aircraft, ground vehicles and other equipment, gas and steam
turbines, wind turbines, including converters and grid related
equipment, industrial diesel, gas and alternative fuel
reciprocating engines, and electrical power systems. Our innovative
fluid energy, combustion control, electrical energy, and motion
control systems help customers offer more efficient, cleaner, and
more reliable equipment. Our customers include leading original
equipment manufacturers and end users of their products. Woodward
is headquartered in Fort Collins, Colo., USA. Visit our website at
www.woodward.com.
Information in this press release contains forward-looking
statements within the meaning of the Private Securities Litigation
Reform Act of 1995 that involve risks and uncertainties, including,
but not limited to, statements regarding future sales, earnings,
liquidity, relative profitability, and the impact of economic
conditions and downturns on Woodward. Readers are cautioned that
these forward-looking statements are only predictions and are
subject to risks, uncertainties, and assumptions that are difficult
to predict. Factors that could cause actual results and the timing
of certain events to differ materially from the forward-looking
statements include, but are not limited to, the recent instability
of the credit markets and other adverse economic and industry
conditions; any failure to fully comply with the U.S. Government's
satisfaction, with any of the terms of the civil and criminal
settlements related to the U.S. Department of Justice's prior
investigation of the pre-June 2005 government contract pricing
practices of MPC Products Corporation and the related
administrative agreement with the U.S. Department of Defense;
Woodward's ability to implement and realize the intended effects of
its restructuring efforts; Woodward's ability to manage its
expenses relative to sales; the ability of Woodward's suppliers to
meet their obligations; Woodward's ability to integrate
acquisitions and manage the costs related thereto; Woodward's debt
obligations, debt service requirements, and any limitations
regarding its ability to operate its business and pursue business
strategies and incur additional debt in light of certain
restrictive covenants in its outstanding debt documents; unforeseen
events that significantly reduce commercial airline travel; risks
from operating internationally, including the impact on reported
earnings from fluctuations in foreign currency exchange rates, and
other risk factors described in Woodward's Annual Report on Form
10-K for the year ended September 30, 2010, to be filed
shortly.
Woodward Governor Company and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
Three Months Ended Year Ended
September 30, September 30,
------------------ ----------------------
(Unaudited - in thousands
except per share amounts) 2010 2009 2010 2009
-------- -------- ---------- ----------
Net sales $412,003 $364,527 $1,457,030 $1,430,125
-------- -------- ---------- ----------
Costs and expenses:
Cost of goods sold 287,682 262,176 1,021,516 1,029,095
Selling, general, and
administrative expenses 37,521 33,947 135,880 128,682
Research and development costs 23,129 19,980 82,560 78,536
Amortization of intangible
assets 8,643 7,951 35,114 26,120
Restructuring and other
charges - - - 15,159
Interest expense 6,861 9,499 29,385 33,629
Interest income (182) (229) (509) (1,131)
Other income (1,170) (2,106) (2,004) (3,081)
Other expense 4 403 213 640
-------- -------- ---------- ----------
Total costs and expenses 362,488 331,621 1,302,155 1,307,649
-------- -------- ---------- ----------
Earnings before income taxes 49,515 32,906 154,875 122,476
Income taxes (16,840) (8,976) (43,713) (28,060)
-------- -------- ---------- ----------
Net earnings 32,675 23,930 111,162 94,416
Net earnings attributable to
noncontrolling interests, net
of tax - (113) (318) (64)
-------- -------- ---------- ----------
Net earnings attributable to
Woodward $ 32,675 $ 23,817 $ 110,844 $ 94,352
======== ======== ========== ==========
Earnings per share amounts:
Basic earnings per share
attributable to Woodward $ 0.48 $ 0.35 $ 1.62 $ 1.39
Diluted earnings per share
attributable to Woodward $ 0.47 $ 0.34 $ 1.59 $ 1.37
======== ======== ========== ==========
Weighted average common shares
outstanding:
Basic 68,601 68,068 68,472 67,891
Diluted 69,929 69,264 69,864 69,103
======== ======== ========== ==========
Cash dividends per share paid
to Woodward common
stockholders $ 0.060 $ 0.060 $ 0.240 $ 0.240
======== ======== ========== ==========
Woodward Governor Company and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
At September 30,
(Unaudited - in thousands) 2010 2009
---------- ----------
Assets
Current assets:
Cash and cash equivalents $ 105,579 $ 100,863
Accounts receivable 248,513 209,626
Inventories 295,034 302,339
Income taxes receivable 18,170 16,302
Deferred income tax assets 33,689 45,413
Other current assets 18,157 21,701
---------- ----------
Total current assets 719,142 696,244
Property, plant, and equipment-net 193,524 208,885
Goodwill 438,594 442,802
Intangible assets - net 292,149 327,773
Deferred income tax assets 8,623 8,200
Other assets 11,201 12,518
---------- ----------
Total assets $1,663,233 $1,696,422
========== ==========
Liabilities and stockholders' equity
Current liabilities:
Short-term borrowings $ 22,099 $ -
Current portion of long-term debt 18,493 45,569
Accounts payable 107,468 81,108
Income taxes payable 5,453 8,084
Accrued liabilities 109,052 127,317
---------- ----------
Total current liabilities 262,565 262,078
Long-term debt, less current portion 425,250 526,771
Deferred income tax liabilities 88,249 86,048
Other liabilities 83,975 110,010
---------- ----------
Total liabilities 860,039 984,907
Stockholders' equity 803,194 711,515
---------- ----------
Total liabilities and stockholders' equity $1,663,233 $1,696,422
========== ==========
Woodward Governor Company and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended
September 30,
--------------------
(Unaudited - in thousands) 2010 2009
--------- ---------
Net cash provided by operating activities $ 184,572 $ 219,227
--------- ---------
Cash flows from investing activities:
Business acquisitions, net of cash acquired (25,000) (749,820)
Payments for purchase of property, plant, and
equipment (28,104) (28,947)
Proceeds from sale of other assets 312 16,637
Disposal of Fuel and Pneumatics product line 660 48,000
--------- ---------
Net cash used in investing activities (52,132) (714,130)
--------- ---------
Cash flows from financing activities:
Cash dividends paid (17,085) (16,864)
Proceeds from sales of treasury stock 1,999 4,631
Payments for repurchases of common stock (4,513) (866)
Excess tax benefits from stock compensation 5,115 2,695
Purchase of noncontrolling interest (8,120) -
Proceeds from issuance of long-term debt - 620,000
Payments of long-term debt (128,420) (92,392)
Borrowings on revolving lines of credit and
short-term borrowings 106,019 145,702
Payments on revolving lines of credit and short-term
borrowings (83,980) (149,731)
Payment of long-term debt assumed in MPC acquisition - (18,610)
Payment for cash flow hedge - (1,308)
Debt issuance costs - (5,892)
--------- ---------
Net cash provided by (used in) financing activities (128,985) 487,365
--------- ---------
Effect of exchange rate changes on cash and cash
equivalents 1,261 (1,432)
--------- ---------
Net change in cash and cash equivalents 4,716 (8,970)
Cash and cash equivalents at beginning of period 100,863 109,833
--------- ---------
Cash and cash equivalents at end of period $ 105,579 $ 100,863
========= =========
Woodward Governor Company and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
Three Months Ended Year Ended
September 30, September 30,
---------------------- ----------------------
(Unaudited - in thousands) 2010 2009 2010 2009
---------- ---------- ---------- ----------
Segment net sales *:
Turbine Systems $ 170,136 $ 148,353 $ 610,833 $ 632,222
Airframe Systems 102,557 110,352 379,284 321,956
Electrical Power Systems 71,721 53,718 230,331 243,146
Engine Systems 94,500 73,838 326,668 340,995
---------- ---------- ---------- ----------
Total segment net sales $ 438,914 $ 386,261 $1,547,116 $1,538,319
========== ========== ========== ==========
Intersegment net sales:
Turbine Systems $ (2,313) $ (3,149) $ (9,457) $ (14,272)
Airframe Systems (1,202) (785) (3,102) (2,947)
Electrical Power Systems (13,622) (9,176) (43,540) (48,146)
Engine Systems (9,774) (8,624) (33,987) (42,829)
---------- ---------- ---------- ----------
Total consolidated net
sales $ 412,003 $ 364,527 $1,457,030 $1,430,125
========== ========== ========== ==========
Segment earnings**:
Turbine Systems $ 42,630 $ 31,978 $ 142,993 $ 136,120
As a percent of segment
sales 25.1% 21.6% 23.4% 21.5%
Airframe Systems 1,341 11,979 11,578 11,023
As a percent of segment
sales 1.3% 10.9% 3.1% 3.4%
Electrical Power Systems 9,014 5,087 24,268 35,891
As a percent of segment
sales 12.6% 9.5% 10.5% 14.8%
Engine Systems 8,833 2,074 27,346 18,454
As a percent of segment
sales 9.3% 2.8% 8.4% 5.4%
---------- ---------- ---------- ----------
Total segment earnings 61,818 51,118 206,185 201,488
Nonsegment expenses (5,624) (8,942) (22,434) (46,514)
---------- ---------- ---------- ----------
EBIT 56,194 42,176 183,751 154,974
Interest expense and
income, net (6,679) (9,270) (28,876) (32,498)
---------- ---------- ---------- ----------
Consolidated earnings
before income taxes $ 49,515 $ 32,906 $ 154,875 $ 122,476
========== ========== ========== ==========
Capital expenditures $ 9,270 $ 11,032 $ 28,104 $ 28,947
Depreciation expense 10,518 9,931 40,502 37,828
========== ========== ========== ==========
* This schedule reconciles segment sales, which include intersegment
sales, with consolidated external sales.
** This schedule reconciles segment earnings, which excludes certain costs,
to consolidated earnings before taxes.
Woodward Governor Company and Subsidiaries
RECONCILIATION OF NET EARNINGS TO EBIT AND EBITDA
Three Months Ended Year Ended
September 30, September 30,
------------------ ------------------
(Unaudited - in thousands) 2010 2009 2010 2009
-------- -------- -------- --------
Net earnings $ 32,675 $ 23,930 $111,162 $ 94,416
Income taxes 16,840 8,976 43,713 28,060
Interest expense 6,861 9,499 29,385 33,629
Interest income (182) (229) (509) (1,131)
-------- -------- -------- --------
EBIT 56,194 42,176 183,751 154,974
Amortization of intangible assets 8,643 7,951 35,114 26,120
Depreciation expense 10,518 9,931 40,502 37,828
-------- -------- -------- --------
EBITDA $ 75,355 $ 60,058 $259,367 $218,922
======== ======== ======== ========
EBIT $ 56,194 $ 42,176 $183,751 $154,974
Purchase accounting - inventory
basis step-up charge - - - 12,500
Workforce management and other
charges - - - 16,605
-------- -------- -------- --------
ADJUSTED EBIT $ 56,194 $ 42,176 $183,751 $184,079
======== ======== ======== ========
EBIT (earnings before interest and taxes), adjusted EBIT and
EBITDA (earnings before interest, taxes, depreciation, and
amortization) are non-U.S. GAAP financial measures. Management uses
EBIT to evaluate Woodward's performance without financing and tax
related considerations, as these elements may not fluctuate with
operating results. Management uses adjusted EBIT to evaluate
Woodward's performance after eliminating certain special items that
are of sufficient magnitude to make comparisons between years
difficult. Management uses EBITDA in evaluating Woodward's
operating performance, making business decisions, including
developing budgets, managing expenditures, forecasting future
periods, and evaluating capital structure impacts of various
strategic scenarios. Securities analysts, investors, and others
frequently use EBIT, adjusted EBIT and EBITDA in their evaluation
of companies, particularly those with significant property, plant,
and equipment, and intangible assets that are subject to
amortization. The use of these non-U.S. GAAP financial measures is
not intended to be considered in isolation of, or as a substitute
for, the financial information prepared and presented in accordance
with U.S. GAAP. As EBIT, adjusted EBIT and EBITDA exclude certain
financial information compared with net income, the most comparable
U.S. GAAP financial measure, users of this financial information
should consider the information that is excluded. Management's
calculations of EBIT, adjusted EBIT and EBITDA may differ from
similarly titled measures used by other companies, limiting their
usefulness as comparative measures.
Woodward Governor Company and Subsidiaries
RECONCILIATION OF CASH FLOW FROM OPERATIONS TO FREE CASH FLOW
Three Months Ended Year Ended
September 30, September 30,
------------------ ------------------
(Unaudited - in thousands) 2010 2009 2010 2009
-------- -------- -------- --------
Net cash provided by operating
activities $ 22,963 $103,495 $184,572 $219,227
Capital expenditures (9,270) (11,032) (28,104) (28,947)
-------- -------- -------- --------
Free cash flow $ 13,693 $ 92,463 $156,468 $190,280
======== ======== ======== ========
Free cash flow is a non-U.S. GAAP financial measure. Management
uses free cash flow, which is derived from cash flows provided by
operating activities, in reviewing the financial performance of
Woodward's various business segments and evaluating cash levels.
Securities analysts, investors, and others frequently use free cash
flow in their evaluation of companies, particularly those with
significant property, plant, and equipment, and intangible assets
that are subject to amortization. The use of this non-U.S. GAAP
financial measure is not intended to be considered in isolation of,
or as a substitute for, the financial information prepared and
presented in accordance with U.S. GAAP. Free cash flow does not
necessarily represent funds available for discretionary use and is
not necessarily a measure of our ability to fund our cash needs.
Management's calculation of free cash flow may differ from
similarly titled measures used by other companies, limiting its
usefulness as a comparative measure.
CONTACT: Robert F. Weber, Jr. Chief Financial Officer and
Treasurer 970-498-3112
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