FORM 8-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
July 21, 2003 Date
of Report (Date of earliest event
reported):
WOODWARD GOVERNOR COMPANY
(Exact name of registrant as specified in its charter)
Delaware 0-8408 36-1984010
(State or other jurisdiction or (Commission (I.R.S. Employer
Incorporation or Organization) File Number) Identification No.)
5001 North Second Street
Rockford, Illinois 61111
(Address of Principal Executive Office) (Zip Code)
Registrant's Telephone Number, including area code: (815) 877-7441
Not Applicable
(Former name or former address, if changed since last report)
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits.
99.1 Woodward Governor Company Press Release dated July 21, 2003
ITEM 9. REGULATION FD DISCLOSURE
The information contained in this Item 9 is being furnished pursuant to
Item 12, Disclosure of Results of Operations and Financial Condition of
Form 8-K in accordance with SEC Release Nos. 33-8216 and 34-47583.
The information, including exhibits attached hereto, in this Current
Report, or third quarter earnings release is being furnished and shall
not be deemed "filed" for the purposes of Section 18 of the Securities
and Exchange Act of 1934, as amended, or otherwise subject to the
liabilities of that Section. The information in this Current Report
shall not be incorporated by reference into any registration statement
or other document pursuant to the Securities Act of 1933, except as
otherwise expressly stated in such filing.
Attached and incorporated herein by reference as Exhibit 99.1 is a copy
of the press release of Woodward Governor Company, dated July 21, 2003,
reporting Woodward Governor Company's financial results for the quarter
ended June 30, 2003
Pursuant to the requirement of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: July 21, 2003 WOODWARD GOVERNOR COMPANY
By: /s/ Stephen P. Carter
Stephen P. Carter
Executive Vice President, Chief Financial
Officer and Treasurer
INDEX TO EXHIBITS
Exhibit Number Description
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99.1 News Release issued by Woodward Governor
Company, dated July 21, 2003.
Exhibit 99.1
FOR IMMEDIATE RELEASE
CONTACT: Stephen P. Carter
Executive Vice President,
Chief Financial Officer and Treasurer
1-815-639-6800
WOODWARD REPORTS THIRD FISCAL QUARTER AND NINE MONTHS RESULTS
Rockford, Ill., July 21, 2003--Woodward Governor Company (Nasdaq: WGOV) today
reported financial results for the third fiscal quarter and nine months ended
June 30, 2003.
Net sales for the quarter were $141,637,000, down 18 percent from $171,888,000
in the third quarter a year ago. Sales levels were lower in both Industrial
Controls and Aircraft Engine Systems due to continued adverse market conditions.
Woodward incurred a net loss for the quarter of $165,000, or $0.01 per share
(all per-share amounts are diluted), compared with net earnings of $14,611,000,
or $1.26 per share in the same quarter last year. The earnings decline is due
primarily to the continued reverse leverage effect of the drop in sales volumes
compared to fixed costs and development costs necessary to satisfy current and
future requirements of our core customers.
On May 30, 2003, we acquired Synchro-Start Products Inc. to expand our position
in the small, high-speed diesel engine market. Synchro-Start designs and
manufactures actuators, solenoids, and controls for industrial engines and
equipment. The acquired business is expected to add approximately $30,000,000 of
revenue in fiscal year 2004 and is expected to be accretive to earnings in the
first full year of operation.
For the nine months ended June 30, 2003, net sales were down 18 percent to
$432,621,000, compared to $527,405,000 for the corresponding nine months a year
ago. Earnings before the cumulative effect of an accounting change declined 75
percent to $10,611,000, or $.94 per share for the nine-month period.
"In sharp contrast to the lower financial results for the quarter and year to
date, we continue to make steady strategic progress in new product and business
development, and we have solidified our relationships with existing customers,"
said Chairman and Chief Executive Officer John A. Halbrook.
"Our strategy, based on our competitive advantages and financial strength, is to
seize intermediate- and long-term opportunities for winning leading shares in
existing and future market niches. We believe that by committing resources now
for promising OEM product
development programs and complementary acquisitions, such as Synchro-Start, we
will create long-term shareholder value. Transforming our progress into earnings
growth will be evident as markets stabilize and improve.
"To preserve our position and implement our strategies, we took a series of
previously disclosed actions this year, including aligning capacity with sales
volume, integrating various Industrial Controls and Aircraft Engine Systems
processes, and consolidating global purchasing. We expect these actions to
reduce our 2004 operating costs by at least $20,000,000 and sharpen our focus on
core capabilities," said Mr. Halbrook.
"Given the adverse industry conditions in our largest markets, we anticipated
the second half of fiscal 2003 would be challenging," added Mr. Halbrook. "Yet,
we are gaining market share through new product introductions, component and
system applications, and acquisitions."
Industrial Controls' net sales were $83,122,000 for the third quarter, down 21
percent from the third quarter a year ago. Industrial Controls incurred a loss
of $4,479,000 compared to earnings of $12,145,000 for the third quarter last
year. Expenses totaling about $2,900,000 associated with workforce management
activity, a write-off of certain advance license fees, and the transfer of an
overseas pension to a different plan were recognized in this year's third
quarter.
Industrial Controls' performance reflected the continued investment in
customer-driven new product development, maintaining the activities and
functions necessary to sustain our present and future business, as well as the
charges mentioned above.
Aircraft Engine Systems net sales were $58,515,000 for the third quarter,
compared to $66,117,000 in the third quarter a year ago. This decline of 11
percent reflects fewer aircraft being built and the ongoing industry-wide
downturn in air travel, which was exacerbated by the war in Iraq as well as
concerns about Severe Acute Respiratory Syndrome (SARS).
Segment earnings were $8,824,000, compared to earnings of $15,288,000 for the
third quarter last year. Expenses related to the consolidation of Aircraft
Engine Systems' servovalve operations into its Rockford facilities totaled
approximately $1,900,000 in this year's third quarter.
Halbrook concluded, "With the outlook for our key target markets and the global
economy highly uncertain, forecasting near-term revenues and earnings is
inherently difficult. We plan to discuss the outlook for fiscal 2004 when we
report the full fiscal year 2003 in November. Currently, we continue to believe
that earnings for 2004 will exceed those of 2003, attributable to market share
gains, cost reductions achieved through actions this year, as well as
acquisitions."
Woodward will hold an investor conference call at 7:30 a.m. CT on Tuesday, July
22, 2003, to provide an overview of the third quarter's financial performance,
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 on our Web
site at www.woodward.com.
ABOUT WOODWARD
Woodward is the world's largest independent designer and manufacturer of energy
control solutions for aircraft and industrial engines, turbines and power
equipment. The company's innovative controls and fuel delivery systems help
manufacturers worldwide operate cleaner and more efficient power equipment.
Woodward's products and services are used in the aerospace, power generation,
oil and gas processing, and transportation markets, which include rail, marine
and many light and heavy industrial applications. Woodward is headquartered in
Rockford, Illinois, and serves global markets from locations worldwide. Visit
our Web site 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. Such risks include, but are not limited to, further decline in
sales levels in one or more of our markets, our ability to reduce expenses, and
the continued demand for and progress on our development programs. 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, 2002,
and Form 10-Q for the quarterly period ended June 30, 2003, expected to be
available by early August.
WOODWARD GOVERNOR COMPANY AND SUBSIDIARIES
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S T A T E M E N T S O F C O N S O L I D A T E D E A R N I N G S
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THREE MONTHS ENDED NINE MONTHS ENDED
JUNE 30, JUNE 30,
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(UNAUDITED--IN THOUSANDS EXCEPT PER SHARE AMOUNTS) 2003 2002 2003 2002
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NET SALES $141,637 $171,888 $432,621 $527,405
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Costs and expenses:
Cost of goods sold 121,343 133,642 361,723 411,304
Sales, general, and administrative expenses 16,958 13,684 47,044 44,412
Amortization of intangible assets 1,043 768 3,089 2,302
Interest expense 1,349 1,214 3,494 3,923
Interest income (135) (119) (627) (477)
Other expense (income)--net 1,487 (867) 784 (29)
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Total costs and expenses 142,045 148,322 415,507 461,435
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EARNINGS (LOSS) BEFORE INCOME TAXES AND CUMULATIVE EFFECT OF
ACCOUNTING CHANGE (408) 23,566 17,114 65,970
Income taxes (243) 8,955 6,503 24,017
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EARNINGS (LOSS) BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE (165) 14,611 10,611 41,953
Cumulative effect of accounting change, net of income taxes - - - (2,489)
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NET EARNINGS (LOSS) $ (165) $14,611 $10,611 $39,464
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BASIC PER SHARE AMOUNTS:
Earnings (loss) before cumulative effect of accounting change $ (0.01) $ 1.29 $ 0.95 $ 3.70
Cumulative effect of accounting change, net of income taxes - - - (0.22)
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NET EARNINGS (LOSS) $ (0.01) $ 1.29 $ 0.95 $ 3.48
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DILUTED PER SHARE AMOUNTS:
Earnings (loss) before cumulative effect of accounting change $ (0.01) $ 1.26 $ 0.94 $ 3.62
Cumulative effect of accounting change, net of income taxes - - - (0.21)
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Net earnings (loss) $ (0.01) $ 1.26 $ 0.94 $ 3.41
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WEIGHTED-AVERAGE NUMBER OF SHARES OUTSTANDING:
Basic 11,112 11,327 11,190 11,325
Diluted 11,112 11,618 11,325 11,590
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WOODWARD GOVERNOR COMPANY AND SUBSIDIARIES
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C O N D E N S E D C O N S O L I D A T E D B A L A N C E S H E E T S
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AT JUNE 30, AT SEPTEMBER 30,
(UNAUDITED--IN THOUSANDS) 2003 2002
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ASSETS
Current assets:
Cash and cash equivalents $26,015 $29,828
Accounts receivable 77,793 76,406
Inventories 131,408 127,112
Deferred income taxes 13,309 15,340
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Total current assets 248,525 248,686
Property, plant, and equipment-net 120,711 123,622
Goodwill 157,147 115,265
Other intangibles-net 64,398 66,762
Other assets 10,566 10,175
Deferred income taxes 12,216 17,885
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TOTAL ASSETS $613,563 $582,395
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LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES:
Short-term borrowings $14,921 $ 16,185
Current portion of long-term debt 2,000 2,000
Accounts payable and accrued expenses 65,387 74,995
Income taxes payable 2,213 3,194
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Total current liabilities 84,521 96,374
Long-term debt, less current portion 113,581 78,192
Other liabilities 57,006 52,928
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Total liabilities 255,108 227,494
Shareholders' equity 358,455 354,901
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $613,563 $582,395
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WOODWARD GOVERNOR COMPANY AND SUBSIDIARIES
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OTHER SELECTED INFORMATION
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THREE MONTHS ENDED NINE MONTHS ENDED
JUNE 30, JUNE 30,
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(UNAUDITED--IN THOUSANDS) 2003 2002 2003 2002
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External net sales:
Industrial Controls $83,122 $105,771 $243,962 $317,922
Aircraft Engine Systems 58,515 66,117 188,659 209,483
Segment earnings (loss):
Industrial Controls (4,479) 12,145 (4,657) 37,540
Aircraft Engine Systems 8,824 15,288 33,822 45,253
Capital Expenditures 5,268 5,562 12,149 16,289
Depreciation Expense 7,291 7,115 20,897 21,240
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SEGMENT EARNINGS IN THE TABLE ABOVE DO NOT REFLECT INTEREST, CORPORATE EXPENSES,
INCOME TAXES, AND CUMULATIVE EFFECT OF ACCOUNTING CHANGE.
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