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
April 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)
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits.
99.1 Woodward Governor Company Press Release dated April 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 second 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 April 21,
2003, reporting Woodward Governor Company's financial results for the
quarter ended March 31, 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: April 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 April 21, 2003.
Exhibit 99.1
FOR IMMEDIATE RELEASE
CONTACT: Angela Hartley
Director, Investor Relations
and Global Communications
1-815-639-6628
WOODWARD REPORTS SECOND FISCAL QUARTER AND SIX MONTHS RESULTS
Rockford, Ill., April 21, 2003--Woodward Governor Company (Nasdaq: WGOV) today
reported financial results for the second fiscal quarter and six months ended
March 31, 2003.
Net sales for the quarter were $146,159,000, down 16 percent from $174,864,000
in the second quarter a year ago. Sales levels reflect continued weakness in two
of our largest markets, large turbine power generation and aircraft engines. Net
earnings were $4,511,000, or $0.40 per share (all per share amounts are
diluted), down 67% percent from $13,623,000, or $1.18 per share in the same
quarter last year. The decrease in earnings is due primarily to the reverse
leverage effect of the significant drop in Industrial Controls sales volumes
versus fixed costs and development costs necessary to satisfy current and future
requirements of our core customers.
For the six months ended March 31, 2003, net sales were $290,984,000, down 18
percent from $355,517,000 for the corresponding six months a year ago. Earnings
before the cumulative effect of an accounting change were down 61% to
$10,776,000, or $.95 per share for the six-month period.
"It is essential that we maintain a balance between lowering costs and
maintaining leadership in key markets that are critical to Woodward's long-term
success," said Chairman and Chief Executive Officer John A. Halbrook. "While the
large turbine power generation and aircraft engine markets are currently in a
downturn, we and our customers believe that those markets will eventually
recover and present strong growth opportunities for Woodward. Our product
development strategy is driven by unprecedented demand from our customers
to provide them with new energy control solutions. We are responding to those
demands as an excellent means to preserve and capture additional market share
and generate attractive returns in the future.
"Improved productivity, lower costs, and outstanding quality have been an
integral part of our operations for many years, and have been recognized by our
customers. In view of current industry conditions, however, we are implementing
additional programs to further reduce operating costs and capitalize on the
synergies between Aircraft Engine Systems and Industrial Controls. We have begun
to consolidate our purchasing efforts and focus on worldwide sourcing. In
addition, we are consolidating our manufacturing processes across the company to
eliminate duplication and to align our capabilities and technologies. We are
also making targeted operating reductions across the company to better align
costs with our lower sales volumes. We believe these actions will result in a
reduction of our operating costs in 2004 of at least $20,000,000 on an
annualized basis."
Industrial Controls' net sales for the second quarter were $82,311,000, down 23
percent from $106,418,000 in the second quarter a year ago. Industrial Controls
incurred a loss of $1,848,000 compared with earnings of $12,384,000 in the
second quarter of last year. Expenses totaling
approximately $2,400,000 for workforce management activity and lease termination
costs were recognized in this year's second quarter. In last year's second
quarter, we expensed approximately $1,200,000 for workforce management activity.
Earnings fell significantly more than sales, reflecting the reverse leverage
effect and continuation of product development and engineering projects
associated with customer-driven programs.
Aircraft Engine Systems' second quarter net sales were $63,848,000, down 7
percent from $68,446,000 in the same period a year ago. Segment earnings were
$12,167,000, down 19 percent from $15,053,000 in the second quarter last year.
Expenses associated with workforce management activity totaled approximately
$500,000 in this year's second quarter and $400,000 in last year's second
quarter. Sales continue to reflect weakness in the production of new commercial
aircraft, which industry observers expect to continue beyond 2004. Commercial
aftermarket sales held up better than OEM sales, and military sales accounted
for a slightly increased proportion of segment sales. Cost management and
productivity initiatives begun in 2002 are helping maintain margins at levels
near those of last year.
Mr. Halbrook concluded, "Many variables are impacting all of our markets and it
has become increasingly difficult to anticipate future sales levels. Given the
sustained decline in our primary markets, however, we now anticipate the decline
in full year earnings from 2002 to 2003 will be at least 50 percent. Final
results could be impacted if there are unanticipated further declines in sales
and if additional cost savings measures become necessary. We believe the steps
we are taking now to reduce costs will enable us both to serve our customers
well and to deliver improved annual financial performance in 2004 and beyond."
Woodward will hold an investor conference call at 7:30 a.m. CT on Tuesday, April
22, 2003, to provide an overview of the second 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 at our Web
site, 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 March 31, 2003, expected to be
available by mid-May.
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 SIX MONTHS ENDED
MARCH 31, MARCH 31,
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(IN THOUSANDS EXCEPT PER SHARE AMOUNTS) 2003 2002 2003 2002
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NET SALES $146,159 $174,864 $290,984 $355,517
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Costs and expenses:
Cost of goods sold 122,114 136,294 240,380 277,662
Sales, general, and administrative expenses 15,289 15,800 30,086 30,728
Amortization of intangible assets 1,029 766 2,046 1,534
Interest expense 951 1,330 2,145 2,709
Interest income (383) (245) (492) (358)
Other expense (income)--net (259) 642 (703) 838
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Total costs and expenses 138,741 154,587 273,462 313,113
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EARNINGS BEFORE INCOME TAXES AND CUMULATIVE EFFECT OF ACCOUNTING
CHANGE 7,418 20,277 17,522 42,404
Income taxes 2,907 6,654 6,746 15,062
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EARNINGS BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE 4,511 13,623 10,776 27,342
Cumulative effect of accounting change, net of income taxes - - - (2,489)
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NET EARNINGS $ 4,511 $13,623 $ 10,776 $24,853
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BASIC PER SHARE AMOUNTS:
Earnings before cumulative effect of accounting change $ 0.40 $ 1.20 $ 0.96 $ 2.41
Cumulative effect of accounting change, net of income taxes - - - (0.22)
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Net earnings $ 0.40 $ 1.20 $ 0.96 $ 2.19
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DILUTED PER SHARE AMOUNTS:
Earnings before cumulative effect of accounting change $ 0.40 $ 1.18 $ 0.95 $ 2.36
Cumulative effect of accounting change, net of income taxes - - - (0.21)
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Net earnings $ 0.40 $ 1.18 $ 0.95 $ 2.15
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WEIGHTED-AVERAGE NUMBER OF SHARES OUTSTANDING:
Basic 11,151 11,324 11,229 11,323
Diluted 11,270 11,591 11,366 11,572
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-MORE-
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 MARCH 31, AT SEPTEMBER 30,
(IN THOUSANDS) 2003 2002
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ASSETS
Current assets:
Cash and cash equivalents $30,852 $29,828
Accounts receivable 74,335 76,406
Inventories 124,944 127,112
Deferred income taxes 13,645 15,340
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Total current assets 243,776 248,686
Property, plant, and equipment-net 117,562 123,622
Goodwill 115,747 115,265
Other intangibles-net 64,987 66,762
Other assets 10,610 10,175
Deferred income taxes 14,486 17,885
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TOTAL ASSETS $567,168 $582,395
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term borrowings $12,068 $ 16,185
Current portion of long-term debt 2,000 2,000
Accounts payable and accrued expenses 61,901 74,995
Income taxes payable 2,350 3,194
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Total current liabilities 78,319 96,374
Long-term debt, less current portion 78,222 78,192
Other liabilities 53,277 52,928
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Total liabilities 209,818 227,494
Shareholders' equity 357,350 354,901
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $567,168 $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 SIX MONTHS ENDED
MARCH 31, MARCH 31,
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(IN THOUSANDS) 2003 2002 2003 2002
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EXTERNAL NET SALES:
Industrial Controls $82,311 $106,418 $160,840 $212,151
Aircraft Engine Systems 63,848 68,446 130,144 143,366
SEGMENT EARNINGS (LOSSES):
Industrial Controls (1,848) 12,384 (178) 25,395
Aircraft Engine Systems 12,167 15,053 24,998 29,965
CAPITAL EXPENDITURES 4,016 5,517 6,881 10,737
DEPRECIATION EXPENSE 6,883 7,096 13,606 14,125
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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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