SOURCE: Woodward Governor Company

January 21, 2008 19:17 ET

Woodward Reports First Quarter Fiscal 2008 Results

FORT COLLINS, CO--(Marketwire - 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."

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 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 at www.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 quarter ended December 31, 2007, to be filed shortly.

Woodward Governor Company and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
                                                       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)
                                                      ---------  ---------
   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.






Woodward Governor Company and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
                                                 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
                                                 ============ ============





Woodward Governor Company and Subsidiaries
CONDENSED CONSOLIDATED 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
                                                      =========  =========



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.






Woodward Governor Company and Subsidiaries
RECONCILIATION OF NET EARNINGS TO EBITDA
                                                       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.

Contact Information

  • CONTACT:
    Robert F. Weber, Jr.
    Chief Financial Officer and Treasurer
    970-498-3112

    Woodward Governor Company
    1000 East Drake Road
    Fort Collins, Colorado 80525
    Tel: 970-482-5811