Woodward Reports Fourth Quarter and Fiscal 2000 Results
21 November 2000
Woodward Reports Fourth Quarter and Fiscal 2000 Results
ROCKFORD, Ill.--Nov. 21, 2000--Woodward Governor Company today reported financial results for the fourth fiscal quarter and year ended September 30, 2000.During fiscal 2000, Woodward achieved strong performance in its core operations, took actions to intensify its focus on growth markets, and continued its relentless pursuit of quality and efficiency. As a result of the initiatives taken in 2000, some of which entailed higher short-term costs, Woodward has strengthened its competitiveness and its outlook for 2001 and beyond.
Due primarily to the sale of its turbine control retrofit business in this year's third quarter, Woodward's net sales for the fourth quarter were lower than those a year ago, down 5 percent to $159,212,000 this year from $168,349,000 last year. Expenses for the quarter included approximately $2,907,000 (after taxes), or $0.26 per share, of costs to streamline operations after the sale and the net of certain other items (all per share amounts are diluted). Net earnings for the quarter were $9,432,000, or $0.83 per share, compared with $15,482,000, or $1.37 per share in the same quarter last year. Last year's fourth quarter results included an after-tax gain on the sale of real estate of $1,153,000, or $0.10 per share.
For the full fiscal year, net sales were $597,385,000, compared with $596,904,000 in fiscal 1999. Net earnings were $46,976,000, or $4.15 per share this year, compared with $30,829,000, or $2.73 per share last year. Net earnings for 2000 included an after-tax gain from the sale of the retrofit business of $17,082,000, or $1.51 per share, and net earnings for 1999 included after-tax gains on the sales of real estate totaling $1,763,000, or $0.15 per share. Expenses for fiscal year 2000 were increased by approximately $6,660,000 (after taxes), or $0.59 per share, attributable to costs to streamline operations after the sale, costs associated with the realignment of our workforce, and the net of certain other items. Expenses for fiscal year 1999 were increased by approximately $4,754,000 (after taxes), or $0.42 per share, attributable to restructuring expense.
John A. Halbrook, Chairman and Chief Executive Officer, commented, "We responded to the strong outlook for power generation and other industrial markets by taking several strategic steps to concentrate our resources on the most attractive markets. First, having identified OEM markets as our most attractive platform for building shareholder value, we divested the turbine control retrofit business, enabling us to dedicate our design and production facilities to serve our OEM customers and reduce overhead worldwide. Second, we consolidated our growing industrial nozzle business into the Industrial Controls group, reinforcing our ability to deliver integrated systems, develop cross-selling opportunities, and enable more effective marketing. We expect the changes to benefit growth in sales and margins in fiscal 2001 and beyond."
Industrial Controls' fourth quarter sales fell 8 percent compared to a year ago, primarily as a result of the sale of the turbine control retrofit business. Segment earnings were down substantially for the fourth quarter 2000, as compared to an exceptionally strong and profitable fourth quarter in 1999. Segment earnings in this year's fourth quarter were impacted by the lower sales mentioned above, and by costs to streamline operations following the sale of the retrofit business, costs related to readying a production facility for anticipated increases of industrial nozzle shipments, and increases in product development expenses that are expected to benefit future periods. For the full year, net sales increased 7 percent over last year, despite the retrofit business sale. An increase in domestic sales more than offset decreases overseas that resulted from foreign currency translation effects and mixed Asian markets. Segment earnings for the year rose 15 percent from the fiscal 1999 level, which included a $1,914,000 gain on sale of real estate.
For the fourth quarter, Aircraft Engine Systems sales fell 2 percent compared to a strong fourth quarter last year. Segment earnings in the fourth quarter, benefiting from cost reductions and improved aftermarket results, rose 11 percent. Full-year net sales declined 7 percent, reflecting generally stable OEM demand, but uneven demand for maintenance, repair and overhaul services. Segment earnings for the year fell 30 percent as compared to last year, affected by lower revenues and relatively high costs in the first half of the year before we implemented our workforce realignment.
Halbrook continued, "While the overall commercial aircraft controls market has been fairly stable, the business and regional jet sectors, in which we are well represented, are growth markets for Woodward. In addition, we believe that we are focused on increasing Woodward's presence on our customers' engines by broadening the scope of our systems to include additional components and functionality. We are also concentrating on expanding the range and market penetration of our aftermarket product support offerings."
In conclusion, Halbrook stated, "Our strategy is to become the premier supplier of energy control systems and components to leading engine and turbine manufacturers worldwide. Increasingly, these manufacturers and their end users are recognizing that innovative engine and turbine controls are essential to achieving targeted reliability, fuel and operating efficiencies, and low emissions. In addition to market growth, Woodward will pursue market share gains through new product introductions, customer and marketing alliances, and carefully selected acquisitions. Looking ahead to fiscal 2001, we expect the investments made this year to pay off in the form of revenue increases and margin gains, leading to earnings growth."
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SCHEDULE OF SELECTED SEGMENT INFORMATION
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Three months ended Year ended
September 30, September 30,
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(In thousands) 2000 1999 2000 1999
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External net sales:
Industrial Controls $83,026 $90,332 $330,962 $310,038
Aircraft Engine
Systems 76,186 78,018 266,423 286,866
Segment earnings:
Industrial Controls $ 6,064 $17,878 $41,258 $35,959
Aircraft Engine
Systems 18,503 16,648 38,150 54,260
Segment earnings (losses) reflected in the table above do not
reflect restructuring expense, interest, corporate expenses, gain on
sale of business, and income taxes. Portions of Industrial Controls
were previously reported as Aircraft Engine Systems or other
operations. Amounts for 1999 in the information above have been
restated to be consistent with the current composition of our
segments.
Woodward Governor Company and Subsidiaries
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STATEMENTS OF CONSOLIDATED EARNINGS
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Three months ended Year ended
September 30, September 30,
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(In thousands except
per share amounts) 2000 1999 2000 1999
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Net sales $159,212 $168,349 $597,385 $596,904
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Costs and expenses:
Cost of goods sold 120,828 119,297 453,538 437,121
Selling, general,
and administrative
expenses 18,814 19,432 77,463 79,043
Amortization of
intangible assets 1,612 1,665 6,418 6,769
Restructuring expense - (285) - 7,889
Interest expense 2,170 3,367 10,897 12,746
Interest income (217) (134) (770) (827)
Other expense
(income)--net 648 (1,095) 976 865
Gain on sale of business (256) - (25,500) -
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Total costs and
expenses, net
of gain 143,599 142,247 523,022 543,606
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Earnings before income
taxes and equity in
loss of unconsolidated
affiliate 15,613 26,102 74,363 53,298
Income taxes 6,099 10,312 27,215 21,182
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Earnings before equity
in loss of
unconsolidated
affiliate 9,514 15,790 47,148 32,116
Equity in loss of
unconsolidated
affiliate, net of tax 82 308 172 1,287
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Net earnings $ 9,432 $15,482 $46,976 $ 30,829
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Basic earnings
per share $ .84 $ 1.37 $ 4.17 $ 2.74
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Diluted earnings
per share $ .83 $ 1.37 $ 4.15 $ 2.73
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Weighted-average number
of basic shares
outstanding 11,288 11,264 11,263 11,272
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Weighted-average number
of diluted shares
outstanding 11,400 11,231 11,318 11,292
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CONDENSED CONSOLIDATED BALANCE SHEETS
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At September 30, At September 30
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(In thousands) 2000 1999
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Assets
Total current assets $234,293 $247,444
Property, plant, and
equipment-net 122,458 124,122
Intangibles and other assets 158,568 161,089
Deferred income taxes 18,404 18,009
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Total assets $533,723 $550,664
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Liabilities and shareholders'
equity
Total current liabilities $133,457 $123,052
Long-term debt, less current
portion 74,500 139,000
Other liabilities 50,142 46,620
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Total liabilities 258,099 308,672
Shareholders' equity 275,624 241,992
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Total liabilities and
shareholders' equity $533,723 $550,664
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