SOURCE: Woodward, Inc.

Woodward, Inc.

November 12, 2013 16:00 ET

Woodward Reports Fourth Quarter and Fiscal Year 2013 Results

FORT COLLINS, CO--(Marketwired - Nov 12, 2013) -  Woodward, Inc. (NASDAQ: WWD) today reported financial results for its fourth quarter and fiscal year 2013. (All per share amounts are presented on a fully diluted basis.)

Fourth Quarter Fiscal 2013 Highlights

  • Net sales for the fourth quarter of 2013 were $558.4 million, including the Duarte business acquisition, compared to $528.7 million in the fourth quarter of last year, an increase of 6 percent.
  • Earnings per share were $0.76 in the fourth quarter of 2013, compared to $0.66 in the fourth quarter of last year, an increase of 15 percent.
  • Total EBIT1 for the quarter was $81.6 million, compared to $72.4 million in the fourth quarter of the prior year, an increase of 13 percent.
  • Free cash flow1 for the full year 2013 was $81.0 million, compared to $79.2 million for the prior year, including an increase of $76.7 million in capital expenditures. 

"Our continued focus on earnings and operational improvement opportunities delivered a strong fourth quarter, in line with our expectations," said Thomas A. Gendron, Chairman and Chief Executive Officer. 

Net sales for the 2013 fourth quarter were $558.4 million, compared to $528.7 million for the 2012 fourth quarter, an increase of 6 percent. Organic net sales, which excludes the Duarte business, were $516.9 million for the 2013 fourth quarter, a decrease of 2 percent, primarily due to a significant decrease in wind turbine converter sales and lower OEM defense sales, partially offset by strong defense aftermarket sales.

EBIT was $81.6 million for the fourth quarter of 2013, compared to $72.4 million for the fourth quarter of 2012, an increase of 13 percent. The current quarter EBIT was primarily impacted by favorable product price and mix and lower research and development expense, partially offset by increased variable compensation expense.

Net earnings for the 2013 fourth quarter were $52.5 million, or $0.76 per share, compared to $46.1 million, or $0.66 per share, in the 2012 fourth quarter. 

Quarterly Segment Results

Aerospace
Aerospace net sales for the fourth quarter of fiscal 2013 were $307.4 million, an increase of 16 percent from $264.0 million for the fourth quarter a year ago. Organic net sales for Aerospace were $265.9 million, a slight increase from the prior year fourth quarter. Segment earnings for the fourth quarter of 2013 were $54.4 million, compared to $47.9 million for the same quarter a year ago, an increase of 13 percent. Segment earnings as a percent of segment net sales were 17.7 percent this quarter, compared to 18.1 percent in the same quarter of the prior year.
The organic sales increase was due to strong defense aftermarket sales, partially offset by lower OEM defense sales. Segment earnings were positively impacted by favorable product pricing and mix and lower investments in research and development, partially offset by higher variable compensation expense.

Energy
Energy net sales for the fourth quarter of 2013 were $251.0 million, a decrease of 5 percent from $264.7 million for last year's fourth quarter. Segment earnings for the fourth quarter of 2013 were $38.4 million, compared to $34.2 million for last year's fourth quarter. Segment earnings as a percent of segment net sales were 15.3 percent this quarter compared to 12.9 percent in the same quarter of the prior year.

Wind turbine converter sales for the fourth quarter of 2013 declined approximately $13.0 million compared to the same period last year. Additionally, softness in other reciprocating engine and industrial turbine systems sales was partially offset by strong sales of compressed natural gas systems and aero-derivative gas turbine systems. Segment earnings were primarily impacted by favorable product pricing and mix and lower research and development expense, partially offset by the decreased wind turbine converter sales volume and higher variable compensation expense.

Nonsegment
Nonsegment expenses totaled $11.1 million for the fourth quarter of 2013, compared to $9.7 million for the same quarter last year. Nonsegment expenses were 2.0 percent of consolidated net sales for the fourth quarter of 2013, a slight increase from 1.8 percent for the same quarter of the prior year.

Full Year 2013 Results
Net sales for fiscal 2013 were $1,936.0 million, an increase of 4 percent from $1,865.6 million from last year. Organic sales were $1,824.7 million for 2013, a decrease of 2 percent over the prior year. Renewable power systems sales decreased approximately $95 million in 2013 compared to 2012. Net earnings for 2013 were $145.9 million, or $2.10 per share, compared with $141.6 million, or $2.01 per share, last year. Net earnings for 2013 included specific charges related to the renewable power business totaling $0.17 per share and a favorable $0.07 per share impact of the 2012 portion of the retroactive reinstatement of the U.S. research and experimentation credit.

Fiscal year 2013 EBIT was $226.0 million, including specific charges totaling $15.7 million related to the renewable power business, compared to $223.3 million in the same period of the prior year, a slight increase.

Cash Flow and Financial Position
Net cash generated from operating activities was $222.6 million for fiscal 2013, a 54 percent increase compared to $144.1 million for the prior year, primarily the result of improved working capital management and timing of sales during the year. Free cash flow was $81.0 million for 2013, largely consistent with $79.2 million for the prior year. Payments for property, plant, and equipment for 2013 were $141.6 million, compared with $64.9 million for the prior year. Share repurchases totaled $45.8 million for 2013, compared to $44.1 million for the prior year.

Total debt was $550.0 million at September 30, 2013, compared to $392.2 million at September 30, 2012. The ratio of debt to debt-plus-equity was 32.5 percent at September 30, 2013, compared to 28.0 percent at September 30, 2012.

The effective tax rate for fiscal 2013 was 26.9 percent, compared to 28.4 percent for the prior year. The decrease in income tax rate was primarily due to the favorable impact of the reinstatement of the research and experimentation tax credit. 

Outlook
"For the coming year, we expect growth in certain of our markets to be generally offset by weakness in others, reflecting continuing economic and political uncertainties. Our plan is to remain focused on execution and operational excellence throughout Woodward to drive further margin improvements and market share gains," said Mr. Gendron. "For fiscal 2014, we expect our sales to be between $1.95 and $2.05 billion, and earnings per share to be between $2.10 and $2.30 per share." 

1Non- 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 net cash provided by operating activities less payments for property, plant, and equipment, in reviewing the financial performance of Woodward's various business segments and evaluating cash generation 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 any 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. Because EBIT and EBITDA exclude certain financial information compared with net earnings, 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.

Conference Call
Woodward will hold an investor conference call at 4:30 p.m. EST, November 12, 2013 to provide an overview of the financial performance for the fourth quarter and fiscal year 2013, business highlights, and outlook for fiscal 2014. 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 1-866-793-1344 (domestic) or 1-703-639-1315 (international). Participants should call prior to the start time to allow for registration; the Conference ID is 1626043. An audio replay will be available by telephone from 7:30 p.m. EST on November 12, 2013 until 11:59 p.m. EST on November 26, 2013. The telephone number to access the replay is 1-888-266-2081 (domestic) or 1-703-925-2533 (international), reference access code 1626043.

A webcast presentation will be available on the website by clicking the Investors tab, then the Calendar of Events menu selection and associated webcast link. The call and presentation will remain accessible at the website for 14 days.

About Woodward, Inc.
Woodward is an independent designer, manufacturer, and service provider of control solutions for the aerospace and energy markets. The company's innovative fluid, combustion, electrical, 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 a global company headquartered in Fort Collins, Colorado, USA. Visit our website at www.woodward.com, and connect with us at www.facebook.com/woodwardinc.

Cautionary Statement
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, a decline in business with, or financial distress of, our significant customers; the continued global economic uncertainty and instability in the financial markets; Woodward's ability to obtain financing, on acceptable terms or at all, to implement its business plans, complete acquisitions, or otherwise take advantage of business opportunities or respond to business pressures; Woodward's long sales cycle, customer evaluation process, and implementation period of some of its products and services; Woodward's ability to implement and realize the intended effects of restructuring and alignment efforts; Woodward's ability to successfully manage competitive factors, including prices, promotional incentives, industry consolidation, and commodity and other input cost increases; Woodward's ability to manage expenses and product mix while responding to sales increases or decreases; the ability of Woodward's subcontractors and suppliers to meet their obligations; Woodward's ability to monitor its technological expertise and the success of, and/or costs associated with, its product development activities; Woodward's ability to integrate acquisitions and manage costs related thereto; Woodward's debt obligations, debt service requirements and ability to operate its business, pursue its business strategies and incur additional debt in light of restrictive covenants in its outstanding debt agreements; risks related to U.S. Government contracting activities, including liabilities resulting from legal and regulatory proceedings, inquiries, or investigations related to such activities; reductions in defense sales due to a decrease in the amount of U.S. Federal defense spending; changes in government spending patterns and/or priorities; future impairment charges resulting from changes in the estimates of fair value of reporting units or of long-lived assets; future subsidiary results; environmental liabilities; Woodward's continued access to a stable workforce and favorable labor relations; physical and other risks related to Woodward's operations and suppliers, including natural disasters, which could disrupt production; Woodward's ability to successfully manage regulatory, tax and legal matters; risks from operating internationally including the impact on reported earnings from fluctuations in foreign currency exchange rates, and compliance with and changes in the legal and regulatory environments of the United States and the countries in which Woodward operates; fair value of defined benefit plan assets and assumptions used in determining Woodward's retirement pension and other postretirement benefit obligations and related expenses; information systems interruptions or intrusions; and other risk factors described in Woodward's Annual Report on Form 10-K for the year ended September 30, 2013 which we expect to file shortly.

   
Woodward, Inc. and Subsidiaries  
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS  
    Three-Months Ended     Year Ended  
    September 30,     September 30,  
(Unaudited - in thousands except per share amounts)   2013     2012     2013     2012  
                         
Net sales   $ 558,365     $ 528,697     $ 1,935,976     $ 1,865,627  
Costs and expenses:                                
  Cost of goods sold     389,116       366,991       1,376,271       1,303,344  
  Selling, general, and administrative expenses     47,726       45,527       168,097       164,512  
  Research and development costs     30,745       36,077       130,250       143,274  
  Amortization of intangible assets     9,730       8,118       36,979       32,809  
  Interest expense     6,507       6,532       26,703       26,003  
  Interest income     (68 )     (67 )     (273 )     (542 )
  Other (income) expense, net     (592 )     (366 )     (1,622 )     (1,580 )
Total costs and expenses     483,164       462,812       1,736,405       1,667,820  
Earnings before income taxes     75,201       65,885       199,571       197,807  
Income taxes     22,736       19,765       53,629       56,218  
Net earnings   $ 52,465     $ 46,120     $ 145,942     $ 141,589  
                                 
Earnings per share amounts:                                
Basic earnings per share   $ 0.77     $ 0.67     $ 2.13     $ 2.06  
Diluted earnings per share   $ 0.76     $ 0.66     $ 2.10     $ 2.01  
Weighted average common shares outstanding:                                
Basic     68,056       68,604       68,392       68,880  
Diluted     69,288       69,878       69,602       70,307  
Cash dividends per share paid to Woodward common stockholders   $ 0.08     $ 0.08     $ 0.32     $ 0.31  
                                 
 
Woodward, Inc. and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
    September 30,   September 30,
(Unaudited - in thousands)   2013   2012
         
Assets            
  Current assets:            
    Cash and cash equivalents   $ 48,556   $ 61,829
    Accounts receivable     381,065     354,386
    Inventories     431,744     398,229
    Income taxes receivable     14,071     7,485
    Deferred income tax assets     43,027     40,277
    Other current assets     38,650     41,271
      Total current assets     957,113     903,477
  Property, plant, and equipment - net     350,048     234,505
  Goodwill     551,624     461,374
  Intangible assets - net     285,775     235,563
  Deferred income tax assets     13,926     9,129
  Other assets     47,198     15,916
Total assets   $ 2,205,684   $ 1,859,964
             
Liabilities and stockholders' equity            
  Current liabilities:            
    Short-term borrowings   $ -   $ 329
    Current portion of long-term debt     100,000     7,500
    Accounts payable     145,307     124,914
    Income taxes payable     7,848     14,141
    Deferred income tax liabilities     800     800
    Accrued liabilities     159,141     132,184
      Total current liabilities     413,096     279,868
  Long-term debt, less current portion     450,000     384,375
  Deferred income tax liabilities     104,533     78,163
  Other liabilities     95,510     109,443
  Total liabilities     1,063,139     851,849
  Stockholders' equity     1,142,545     1,008,115
Total liabilities and stockholders' equity   $ 2,205,684   $ 1,859,964
             
   
Woodward, Inc. and Subsidiaries  
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS  
    Year Ended  
    September 30,  
(Unaudited - in thousands)   2013     2012  
Net cash provided by operating activities   $ 222,592     $ 144,113  
                 
Cash flows from investing activities:                
Payments for property, plant, and equipment     (141,600 )     (64,900 )
Business acquisitions, net of cash acquired     (198,860 )     -  
Proceeds from sale of other assets     418       283  
Net cash used in investing activities     (340,042 )     (64,617 )
                 
Cash flows from financing activities:                
Cash dividends paid     (21,866 )     (21,351 )
Proceeds from sales of treasury stock     8,370       6,286  
Payments for repurchases of common stock     (45,754 )     (44,110 )
Excess tax benefits from stock compensation     5,154       3,990  
Proceeds from the issuance of long-term debt     200,000       -  
Payments of long-term debt     (41,875 )     (33,365 )
Borrowings on revolving lines of credit and short-term borrowings     179,072       187,865  
Payments on revolving lines of credit and short-term borrowings     (179,484 )     (187,591 )
Proceeds from cash flow hedge     507       -  
Payment of debt financing costs     (1,651 )     (2,185 )
Net cash provided by (used in) financing activities     102,473       (90,461 )
Effect of exchange rate changes on cash and cash equivalents     1,704       (1,745 )
Net change in cash and cash equivalents     (13,273 )     (12,710 )
Cash and cash equivalents at beginning of period     61,829       74,539  
Cash and cash equivalents at end of period   $ 48,556     $ 61,829  
                 
   
Woodward, Inc. and Subsidiaries  
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS  
    Three-Months Ended     Year Ended  
    September 30,     September 30,  
(Unaudited - in thousands)   2013     2012     2013     2012  
Net sales:                        
Aerospace   $ 307,377     $ 264,046     $ 1,061,477     $ 896,083  
Energy     250,988       264,651       874,499       969,544  
Total consolidated net sales   $ 558,365     $ 528,697     $ 1,935,976     $ 1,865,627  
Segment earnings*:                                
Aerospace   $ 54,382     $ 47,915     $ 166,122     $ 130,192  
As a percent of segment sales     17.7 %     18.1 %     15.7 %     14.5 %
Energy     38,367       34,177       98,940       126,441  
As a percent of segment sales     15.3 %     12.9 %     11.3 %     13.0 %
Total segment earnings     92,749       82,092       265,062       256,633  
Nonsegment expenses     (11,109 )     (9,742 )     (39,061 )     (33,365 )
EBIT     81,640       72,350       226,001       223,268  
Interest expense, net     (6,439 )     (6,465 )     (26,430 )     (25,461 )
  Consolidated earnings before income taxes   $ 75,201     $ 65,885     $ 199,571     $ 197,807  
                                 
Payments for property, plant and equipment   $ 63,085     $ 20,676     $ 141,600     $ 64,900  
Depreciation expense     8,283       6,629       37,254       35,808  

*This schedule reconciles segment earnings, which exclude certain costs, to consolidated earnings before taxes.

   
Woodward, Inc. and Subsidiaries  
RECONCILIATION OF NET EARNINGS TO EBIT AND EBITDA  
    Three-Months Ended     Year Ended  
    September 30,     September 30,  
(Unaudited - in thousands)   2013     2012     2013     2012  
Net earnings   $ 52,465     $ 46,120     $ 145,942     $ 141,589  
Income taxes     22,736       19,765       53,629       56,218  
Interest expense     6,507       6,532       26,703       26,003  
Interest income     (68 )     (67 )     (273 )     (542 )
EBIT     81,640       72,350       226,001       223,268  
Amortization of intangible assets     9,730       8,118       36,979       32,809  
Depreciation expense     8,283       6,629       37,254       35,808  
EBITDA   $ 99,653     $ 87,097     $ 300,234     $ 291,885  
                                 
   
Woodward, Inc. and Subsidiaries  
RECONCILIATION OF CASH FLOW FROM OPERATIONS TO FREE CASH FLOW  
    Three-Months Ended     Year Ended  
    September 30,     September 30,  
(Unaudited - in thousands)   2013     2012     2013     2012  
                         
Net cash provided by operating activities   $ 89,575     $ 80,460     $ 222,592     $ 144,113  
Payments for property, plant, and equipment     (63,085 )     (20,676 )     (141,600 )     (64,900 )
Free cash flow   $ 26,490     $ 59,784     $ 80,992     $ 79,213  
                                 

Contact Information

  • CONTACT:
    Don Guzzardo
    Director, Investor Relations & Treasury
    970-498-3580

    Woodward, Inc.
    1000 East Drake Road
    Fort Collins, Colorado 80525, USA
    Tel: 970-482-5811
    Fax: 970-498-3058