Woodward Reports Fourth Quarter and Fiscal Year 2013 Results

Woodward Reports Fourth Quarter and Fiscal Year 2013 Results 
FORT COLLINS, CO -- (Marketwired) -- 11/12/13 --  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 EBIT(1) 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 flow(1) 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."  
(1)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 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 
                             ==========  ==========  ==========  ========== 
his 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: 
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 


 
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