Woodward Governor Company (NASDAQ: WGOV) today reported financial
results for its first quarter fiscal year 2011. (All per share
amounts are presented on a fully diluted basis.)
Quarterly Highlights
-- Net sales for the first quarter of fiscal 2011 were $365.1 million, an
increase of 8 percent from $339.3 million in the first quarter of last
year.
-- Earnings per share(1) were $0.32 in the first fiscal quarter of 2011,
which includes a charge of $0.03 per share related to a change in the
estimate of future workman's compensation costs. Earnings per share
were $0.32 in the first quarter of last year.
-- Total EBIT(2) for the quarter was $37.9 million compared to $39.6
million in the first quarter of the prior fiscal year. This year's
first quarter reflects a $3.6 million charge related to the workman's
compensation charge mentioned above.
-- Free cash flow(3) for the first fiscal quarter of fiscal 2011 was a
negative $3.0 million as a result of increased working capital
investments.
"Our first quarter reflected a continued recovery in our
markets, consistent with our previously stated expectations for
2011," said Thomas A. Gendron, Chairman and Chief Executive
Officer. "We continue to focus on our long-term strategies to gain
share in our markets, achieve operational improvements and deliver
improved financial results."
Net sales for the fiscal 2011 first quarter were $365.1 million,
an increase of 8 percent from $339.3 million for the 2010 first
quarter.
Net earnings(1) for the 2011 first quarter were $22.4 million,
or $0.32 per share, compared with $22.4 million, or $0.32 per
share, in the 2010 first quarter. Earnings per share in the current
quarter included a charge of $0.03 per share related to a change in
the estimate of future workman's compensation costs.
EBIT was $37.9 million for the first quarter of 2011 compared to
$39.6 million for the first quarter of 2010. The current quarter
EBIT was positively impacted by increased volumes, but more than
offset primarily by a reduction in Airframe Systems' customer
development funding and the workman's compensation charge mentioned
above. Research and development costs incurred in the first quarter
of 2011 increased by $5.4 million compared to the same quarter of
the prior year. This reflects increased investment related to
anticipated growth in most of our markets. Variable compensation
expense increased $1 million from the first quarter of 2010,
reflecting the improved results we anticipate for the full
year.
Quarterly Segment Results
Turbine Systems
Turbine Systems' segment net sales for the first quarter of
fiscal 2011, which include intersegment sales, were $153.7 million,
an increase of 8 percent from $142.4 million for the first quarter
a year ago. Segment earnings for the first quarter of 2011
increased to $36.5 million from $32.1 million for the same quarter
a year ago. Segment earnings as a percent of segment net sales were
23.7 percent this quarter compared to 22.5 percent in the same
quarter of the prior year.
The sales increase was attributable primarily to broad
improvements in aerospace and industrial turbine demand as well as
market share gains. Segment earnings benefitted primarily from the
increased sales volumes and improved levels of aftermarket sales,
partially offset by increased research and development costs.
Airframe Systems
Airframe Systems' segment net sales for the first quarter of
fiscal 2011, which include intersegment sales, were $83.6 million,
a decrease of 9 percent from $91.7 million in the first quarter a
year ago. Airframe Systems had a segment loss of $5.0 million
compared to earnings of $2.4 million, or 2.6 percent of net sales,
in the first quarter of 2010.
While commercial OEM sales increased in the current quarter
compared to the prior year, they were more than offset by
reductions in military sales and customer development funding.
Earnings were negatively impacted by the reduced sales, including
the reduced development funding of $5.3 million, costs associated
with new product launches, quarterly sales mix fluctuation,
operating inefficiencies, and a $2.2 million charge related to a
change in the estimate of future workman's compensation costs.
"While performance at Airframe Systems remains challenging, we
expect its financial results to begin improving based on signs of
strengthening in this segment's markets, more favorable sales mix
and better operational execution," said Robert F. Weber, Jr., Chief
Financial Officer and Treasurer.
Electrical Power Systems
Electrical Power Systems' segment net sales for the first
quarter of fiscal 2011, which include intersegment sales, were
$61.6 million, an increase of 8 percent from $56.8 million for the
first quarter a year ago. Segment earnings for this quarter were
$4.9 million compared to $7.3 million for the same quarter last
year. Segment earnings as a percent of segment net sales were 8.0
percent this quarter compared to 12.9 percent in the same quarter
for the prior year.
Sales volumes increased across most product lines, partially
offset by a decline in sales related to power station projects and
a $3 million negative impact of currency translation. Improved
earnings on the volume increase were more than offset by costs
associated with additional production capacity and research and
development costs associated with supporting market share
gains.
Engine Systems
Engine Systems' segment net sales for the first quarter of
fiscal 2011, which include intersegment sales, were $92.1 million,
an increase of 36 percent from $67.9 million for last year's first
quarter. Segment earnings for this quarter increased to $8.1
million from $3.2 million for the same period a year ago. Segment
earnings as a percent of segment net sales improved to 8.8 percent
this quarter compared to 4.8 percent in the same quarter last
year.
Engine Systems' sales increased substantially across all markets
and product lines. Segment earnings improved largely due to the
increased volumes, partially offset by increased investments in
product development.
Nonsegment
Nonsegment expenses totaled $6.6 million for the first quarter
of fiscal 2011, compared to $5.4 million for the same quarter last
year. Nonsegment expenses were 1.8 percent of consolidated net
sales for the first quarter of 2011 compared to 1.6 percent in the
prior year quarter. The increase resulted primarily from increased
eliminations of intersegment profits.
Cash Flow, Financial Position and Other Matters
Net cash generated from operating activities decreased to $7.2
million for the first quarter of 2011 compared with $61.3 million
for the same quarter of the prior year. Free cash flow was a
negative $3.0 million for the first quarter of 2011 compared to
positive free cash flow of $52.3 million for the same quarter in
2010. Cash flow for the 2011 first quarter reflects increased
investments in working capital in anticipation of higher levels of
business activity in the balance of 2011. Capital expenditures for
the first quarter of 2011 were $10.2 million compared with $9.0
million in same quarter of 2010.
The ratio of debt-to-debt-plus-equity was 34.5 percent at
December 31, 2010 compared to 36.7 percent at September 30, 2010.
Total debt was reduced by $34.7 million during the first quarter of
2011. Open market share repurchases totaled $6.8 million for the
same period.
Outlook
"Our markets showed signs of recovery as anticipated and we
continue to believe that our fiscal 2011 sales will be between
$1.55 billion and $1.65 billion and our diluted earnings per share
will be between $1.75 and $1.90," continued Mr. Gendron.
This outlook continues to reflect 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), 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 operating performance
without the impacts of financing and tax related considerations.
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, 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 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, 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.
(3) Free cash flow is defined as cash provided by operating
activities less capital expenditures.
Conference Call
Woodward will hold an investor conference call at 4:30 p.m. EST
on Monday, January 24, 2011 to provide an overview of the financial
performance for the first quarter, business highlights, and outlook
for the remainder of 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 1-866-219-5631
(domestic) or 1-703-639-1122 (international). Participants should
call prior to the start time to allow for registration; the
Conference ID is 1505153. An audio replay will be available by
telephone from 7:30 p.m. EST on January 24, 2011 until 11:59 p.m.
EST on January 28, 2011. The telephone number to access the replay
is 1-888-266-2081 (domestic) or 1-703-925-2533 (international),
reference access code 1505153.
A webcast presentation will be available on the website by
clicking the Investor Relations tab, then the
Presentations/Conference Calls menu selection and associated
webcast link. The call and presentation will remain accessible at
the website for 14 days.
About Woodward
Woodward is an independent designer, manufacturer, and service
provider of energy control and optimization solutions used in
global infrastructure equipment. We serve the aerospace and
defense, power generation and distribution, and transportation
markets. Our systems and components optimize the performance of
commercial aircraft; military aircraft, ground vehicles and other
equipment; gas and steam turbines; wind turbines; reciprocating
engines; and electrical power systems. The company's innovative
fluid energy, combustion control, electrical energy, and motion
control systems help customers offer cleaner, more reliable, and
more efficient 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 and any subsequently
filed Quarterly Report Form 10-Q.
Woodward Governor Company and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
Three-Months Ending
December 31,
----------------------
(Unaudited - in thousands except per share amounts) 2010 2009
---------- ----------
Net sales $ 365,075 $ 339,308
---------- ----------
Costs and expenses:
Cost of goods sold 261,177 239,552
Selling, general, and administrative expenses 32,666 32,835
Research and development costs 23,738 18,314
Amortization of intangible assets 8,543 9,181
Interest expense 6,501 8,251
Interest income (123) (110)
Other (income) expense, net 1,098 (205)
---------- ----------
Total costs and expenses 333,600 307,818
---------- ----------
Earnings before income taxes 31,475 31,490
Income tax expense 9,076 9,044
---------- ----------
Net earnings 22,399 22,446
Net earnings attributable to noncontrolling
interests, net of tax - (90)
---------- ----------
Net earnings attributable to Woodward $ 22,399 $ 22,356
========== ==========
Earnings per share amounts:
Basic earnings per share attributable to Woodward $ 0.33 $ 0.33
Diluted earnings per share attributable to Woodward $ 0.32 $ 0.32
========== ==========
Weighted average common shares outstanding:
Basic 68,811 68,361
Diluted 70,181 69,710
========== ==========
Cash dividends per share paid to Woodward common
stockholders $ 0.060 $ 0.060
========== ==========
Woodward Governor Company and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
December 31, September 30,
(Unaudited - in thousands) 2010 2010
------------- -------------
Assets
Current assets:
Cash and cash equivalents $ 61,308 $ 105,579
Accounts receivable 222,241 248,513
Inventories 325,964 295,034
Income taxes receivable 13,633 18,170
Deferred income tax assets 32,741 33,689
Other current assets 23,966 18,157
------------- -------------
Total current assets 679,853 719,142
Property, plant, and equipment-net 191,800 193,524
Goodwill 438,099 438,594
Intangible assets - net 283,504 292,149
Deferred income tax assets 6,328 8,623
Other assets 10,349 11,201
------------- -------------
Total assets $ 1,609,933 $ 1,663,233
============= =============
Liabilities and stockholders' equity
Current liabilities:
Short-term borrowings $ - $ 22,099
Current portion of long-term debt 18,473 18,493
Accounts payable 94,054 107,468
Income taxes payable 5,845 5,453
Accrued liabilities 86,340 109,052
------------- -------------
Total current liabilities 204,712 262,565
Long-term debt, less current portion 412,656 425,250
Deferred income tax liabilities 88,052 88,249
Other liabilities 86,482 83,975
------------- -------------
Total liabilities 791,902 860,039
Stockholders' equity 818,031 803,194
------------- -------------
Total liabilities and stockholders' equity $ 1,609,933 $ 1,663,233
============= =============
Woodward Governor Company and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Three-Months Ending
December 31,
----------------------
(Unaudited - in thousands) 2010 2009
---------- ----------
Net cash provided by operating activities $ 7,177 $ 61,269
---------- ----------
Cash flows from investing activities:
Business acquisitions, net of cash acquired - (25,000)
Payments for property, plant, and equipment (10,213) (8,980)
Proceeds from sale of other assets 2 66
---------- ----------
Net cash used in investing activities (10,211) (33,914)
---------- ----------
Cash flows from financing activities:
Cash dividends paid (4,136) (4,102)
Proceeds from sales of treasury stock 1,095 809
Payments for repurchases of common stock (6,837) -
Excess tax benefits from stock compensation 2,230 288
Payments of long-term debt (12,589) (47,589)
Borrowings on revolving lines of credit and
short-term borrowings 26,693 30,610
Payments on revolving lines of credit and
short-term borrowings (46,275) (30,610)
---------- ----------
Net cash used in financing activities (39,819) (50,594)
---------- ----------
Effect of exchange rate changes on cash and cash
equivalents (1,418) (1,004)
---------- ----------
Net change in cash and cash equivalents (44,271) (24,243)
Cash and cash equivalents at beginning of period 105,579 100,863
---------- ----------
Cash and cash equivalents at end of period $ 61,308 $ 76,620
========== ==========
Woodward Governor Company and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
Three-Months Ending
December 31,
----------------------
(Unaudited - in thousands) 2010 2009
---------- ----------
Segment net sales *:
Turbine Systems $ 153,664 $ 142,416
Airframe Systems 83,639 91,727
Electrical Power Systems 61,627 56,803
Engine Systems 92,059 67,879
---------- ----------
Total segment net sales $ 390,989 $ 358,825
========== ==========
Intersegment net sales:
Turbine Systems $ (2,710) $ (2,330)
Airframe Systems (912) (678)
Electrical Power Systems (13,401) (7,922)
Engine Systems (8,891) (8,587)
---------- ----------
Total consolidated net sales $ 365,075 $ 339,308
========== ==========
Segment earnings**:
Turbine Systems $ 36,466 $ 32,074
As a percent of segment sales 23.7% 22.5%
Airframe Systems (5,021) 2,409
As a percent of segment sales -6.0% 2.6%
Electrical Power Systems 4,910 7,323
As a percent of segment sales 8.0% 12.9%
Engine Systems 8,062 3,235
As a percent of segment sales 8.8% 4.8%
---------- ----------
Total segment earnings 44,417 45,041
Nonsegment expenses (6,564) (5,410)
---------- ----------
EBIT 37,853 39,631
Interest expense and income, net (6,378) (8,141)
---------- ----------
Consolidated earnings before income taxes $ 31,475 $ 31,490
========== ==========
Capital expenditures $ 10,213 $ 8,980
Depreciation expense 10,354 9,755
========== ==========
*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 Ending
December 31,
----------------------
(Unaudited - in thousands) 2010 2009
---------- ----------
Net earnings $ 22,399 $ 22,446
Income tax expense 9,076 9,044
Interest expense 6,501 8,251
Interest income (123) (110)
---------- ----------
EBIT 37,853 39,631
Amortization of intangible assets 8,543 9,181
Depreciation expense 10,354 9,755
---------- ----------
EBITDA $ 56,750 $ 58,567
========== ==========
EBIT (earnings before interest and taxes) and EBITDA (earnings
before interest, taxes, depreciation, and amortization) are
non-U.S. GAAP financial measures. Management uses EBIT to evaluate
Woodward's operating performance without the impacts of financing
and tax related considerations. 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 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 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 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 Ending
December 31,
----------------------
(Unaudited - in thousands) 2010 2009
---------- ----------
Net cash provided by operating activities $ 7,177 $ 61,269
Capital expenditures (10,213) (8,980)
---------- ----------
Free cash flow $ (3,036) $ 52,289
========== ==========
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
Grafico Azioni Woodward Governor Company (MM) (NASDAQ:WGOV)
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Grafico Azioni Woodward Governor Company (MM) (NASDAQ:WGOV)
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