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Woodward Reports Second Quarter and Six-Month Fiscal Year 2012 Results

Monday, April 23, 2012 4:00 PM


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FORT COLLINS, CO -- (Marketwire) -- 04/23/12 -- Woodward, Inc. (NASDAQ: WWD) today reported financial results for its second quarter of fiscal 2012. (All per share amounts are presented on a fully diluted basis.)

Second Quarter Fiscal 2012 Highlights

  • Net sales for the second quarter of 2012 were $468.8 million, an increase of 12 percent from $418.9 million in the second quarter of last year.
  • Earnings per share were $0.55 in the second quarter of 2012, up 20 percent from $0.46 in the second quarter of last year.
  • Total EBIT(1) for the quarter was $60.5 million compared to $52.7 million in the second quarter of the prior year, an increase of 15 percent.
  • Free cash flow(2) for the second quarter of 2012 was a net outflow of $3.4 million.

"Market share gains, including strength in our wind business along with anticipated growth in other markets, resulted in solid sales for the quarter," said Thomas A. Gendron, Chairman and Chief Executive Officer. "We experienced earnings growth while absorbing a significant increase in new product and systems development primarily on recently awarded programs."

Net sales for the fiscal 2012 second quarter were $468.8 million, an increase of 12 percent from $418.9 million for the 2011 second quarter. Foreign currency exchange rates had an insignificant impact on net sales for the second quarter of 2012.

EBIT(1) was $60.5 million for the second quarter of 2012 compared to $52.7 million for the second quarter of 2011. Foreign currency exchange rates had an insignificant impact on EBIT for the second quarter of 2012. The current quarter EBIT was positively impacted by the increased sales volume. Research and development costs increased in the second quarter of 2012 by $10.4 million, or 38 percent, compared to the same quarter of the prior year, reflecting increased investment in awarded programs. Variable compensation expense for the second quarter this year was $7.7 million less than the second quarter of 2011.

Net earnings for the 2012 second quarter increased to $38.8 million, from $32.1 million in the 2011 second quarter. Earnings per share increased 20 percent to $0.55 per share from $0.46 in the prior year's second quarter. The effective tax rate for the second quarter of 2012 was 28.3 percent.

Quarterly Segment Results

Aerospace

Aerospace net sales for the second quarter of fiscal 2012 were $224.3 million, an increase of 9 percent from $204.9 million for the second quarter a year ago. Segment earnings for the second quarter of 2012 increased to $33.7 million from $33.2 million for the same quarter a year ago, an increase of 1 percent. Segment earnings as a percent of segment net sales were 15.0 percent this quarter compared to 16.2 percent in the same quarter of the prior year.

Aerospace sales benefited from strength in demand for both commercial and military aftermarket, as well as demand for commercial original equipment, and price increases. Sales strength in the quarter was partially offset by reduced demand for military related systems. Segment earnings benefited from the increased sales volume, price increases, and reduced variable compensation expense. These were largely offset by increased research and development and higher than anticipated manufacturing costs associated with sales growth and investments to improve manufacturing productivity.

Energy

Energy net sales for the second quarter of fiscal 2012 were $244.5 million, an increase of 14 percent from $213.9 million for last year's second quarter. Segment earnings for the second quarter of 2012 increased to $34.3 million, up 27 percent from $26.9 million for last year's second quarter. Segment earnings as a percent of segment net sales were 14.0 percent for the second quarter of 2012 compared to 12.6 percent in the same quarter of the prior year.

The Energy sales increase was greatest in control systems for wind turbines and industrial gas turbines. Segment earnings were positively impacted by sales volume and reduced variable compensation expense, partially offset by unfavorable product mix impacts.

Nonsegment

Nonsegment expenses totaled $7.5 million for the second quarter of fiscal 2012, which was flat compared to the same quarter last year. Nonsegment expenses were 1.6 percent of consolidated net sales for the second quarter of 2012, down from 1.8 percent in the same quarter of the prior year.

Year-to-Date Results

Net sales for the first six months of fiscal 2012 were $876.7 million, an increase of 12 percent from $783.9 million from the six-month period last year.

Net earnings for the first six months of 2012 were $67.2 million, or $0.95 per share, compared with $54.5 million, or $0.78 per share, in the same period last year.

Foreign currency exchange rates had an insignificant impact on both sales and earnings for the first six months of 2012.

Year-to-date EBIT was $106.9 million compared to $90.6 million in the same period of the prior year.

Cash Flow, Financial Position and Other Matters

Net cash generated from operating activities was $12.2 million for the first six months of fiscal 2012, compared to $20.2 million for the same period of the prior year. Free cash flow was a net outflow of $18.3 million for the first six months of fiscal 2012, compared to a net inflow of $0.1 million for the same period of the prior year. Cash flow for the first six months of 2012 reflected increased variable compensation payments and payments for property, plant, and equipment. Payments for property, plant, and equipment for the first six months of 2012 were $30.5 million compared with $20.1 million for the same period of the prior year.

Total debt increased to $443.2 million at March 31, 2012 from $425.2 million at September 30, 2011. The ratio of debt-to-debt-plus-equity was 31.0 percent at March 31, 2012 compared to 31.6 percent at September 30, 2011.

The effective tax rate this quarter was 28.3 percent compared to 31.0 percent for the second quarter of the prior year. This reduction contributed $0.02 to earnings per share when compared to the second quarter of the prior year. The tax rate was primarily impacted by reduced expenses related to potential repatriation of international earnings to the United States, largely offset by the expiration of the U.S. research and development credit and usual quarterly variability. We now anticipate a full year effective tax rate of approximately 31 percent.

Outlook

"Our fiscal 2012 outlook remains unchanged. We believe our markets remain relatively stable, although macroeconomic uncertainty has increased somewhat," said Mr. Gendron. "We expect our sales to be between $1.85 billion and $1.95 billion and earnings per share to be between $2.20 and $2.35 per share for fiscal 2012."

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 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.


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