FORT COLLINS, Colo., Jan. 23, 2017 (GLOBE NEWSWIRE) -- Woodward, Inc. (NASDAQ:WWD) today reported financial results
for its first quarter of fiscal year 2017 ending December 31, 2016. (All per share amounts are presented on a fully diluted
basis.)
First Quarter Fiscal 2017 Highlights
- Net sales for the first quarter of 2017 were $443 million, compared to $445 million for the first quarter of last year. Both
Aerospace and Industrial segment sales were essentially flat with the prior year.
- Net earnings for the first quarter of 2017 were $47 million, or $0.73 per share, compared to $26 million, or $0.40 per share,
in the first quarter of 2016. The prior year first quarter included after-tax special charges totaling $10 million, or $0.16 per
share.
- Total EBIT1 for the first quarter of 2017 was $53 million, compared to $34 million in the first quarter of the
prior year. EBIT in the first quarter of fiscal 2016 included the special charges of $16 million pre-tax.
- Aerospace segment earnings as a percent of segment net sales increased to 17.6 percent for the first quarter of 2017,
compared to 16.2 percent in the prior year quarter. Industrial segment earnings as a percent of segment net sales decreased to
10.2 percent for the first quarter of 2017, compared to 12.2 percent in the prior year quarter.
- Net cash generated from operating activities for the first quarter of fiscal 2017 was $52 million, compared to $37 million
for the prior year. Free cash flow1 was $31 million for the first quarter of 2017, compared to $4 million for the same
period of the prior year.
“Our first quarter operating results were in line with our expectations for both segments. Aerospace continues to perform well
and our Industrial segment is showing signs of stabilization,” said Thomas A. Gendron, Chairman and Chief Executive Officer. “We
remain firmly on track to achieve our fiscal year expectations.”
Company Results
Net sales for the first quarter of fiscal 2017 were $443 million, compared to $445 million for the first quarter of fiscal
2016.
EBIT was $53 million for the first quarter of 2017, compared to $34 million for the first quarter of 2016. EBIT in the first
quarter of fiscal year 2016 included pre-tax special charges of $16 million related primarily to strategic actions to consolidate
facilities, reduce costs and address market conditions. EBIT in the first quarter of 2017 was favorably impacted by lower
costs resulting from the special charges taken last year and lower operating expenses.
The effective tax rate for the first quarter of 2017 was 1.1 percent, compared to 7.6 percent for the first quarter of 2016. The
2017 first quarter tax rate is attributable to the favorable impact of repatriating certain foreign earnings in the quarter. The
first quarter of 2016 included the benefit of the retroactive impact of the research and experimentation tax credit reinstatement.
The discrete item giving rise to the low tax rate this quarter was anticipated in our full year tax rate guidance of 25 percent,
which remains unchanged.
Net earnings for the first quarter of 2017 were $47 million, or $0.73 per share, compared to $26 million, or $0.40 per share in
the first quarter of 2016. The first quarter of 2016 included the special charges of $10 million after tax, or $0.16 per share.
Segment Results
Aerospace
Aerospace segment net sales for the first quarter of fiscal 2017 were $267
million, compared to $269 million for the first quarter a year ago. Segment earnings for the first quarter of 2017 were $47
million, compared to $43 million for the same quarter a year ago. Segment earnings as a percent of segment net sales were 17.6
percent this quarter, compared to 16.2 percent in the same quarter of the prior year.
Commercial aftermarket sales were lower on a comparative basis due to a strong first quarter in the prior year and the timing of
deliveries this quarter, but benefited from both the initial provisioning for the new platforms and increased utilization of
existing fleets. Next generation aircraft programs drove strong commercial OEM sales, partially offset by continuing weakness in
business jets and rotorcraft. Aerospace defense sales were strong for both OEM and aftermarket programs. The improvement in segment
earnings was primarily attributable to lower R&D expenses.
Industrial
Industrial segment net sales for the first quarter of fiscal 2017 were $176
million, comparable to the first quarter a year ago. Segment earnings for the first quarter of 2017 were $18 million, compared to
$22 million in the first quarter a year ago. Segment earnings as a percent of segment net sales were 10.2 percent in the first
quarter of 2017, compared to 12.2 percent in the same quarter of the prior year.
Industrial sales continued to stabilize this quarter. The decrease in segment earnings was primarily due to unfavorable product
mix.
Nonsegment
Nonsegment expenses totaled $11 million for the first quarter of fiscal 2017, compared to $31 million for the same quarter last
year. The decrease in nonsegment expenses was due to $16 million of special charges recorded in the first quarter of 2016 and
timing of certain expenses in the first quarter of 2017.
Cash Flow and Financial Position
Net cash generated from operating activities was $52 million for the first quarter of fiscal 2017, compared to $37 million for
the first quarter of fiscal 2016. Free cash flow was $31 million for the first quarter of 2017, compared to $4 million for the
first quarter of 2016. Payments for property, plant, and equipment for the first quarter of 2017 were $21 million, compared to $33
million for the first quarter of 2016.
Total debt was $720 million at December 31, 2016, compared to $727 million at September 30, 2016. The ratio of
debt-to-debt-plus-equity was 37.1 percent at December 31, 2016, compared to 37.5 percent at September 30, 2016.
Outlook
Fiscal year 2017 guidance is unchanged. Net sales are expected to increase by approximately 4 to 6 percent from the prior year
and earnings per share are expected to be between $2.95 and $3.25. Sales and earnings for both segments are anticipated to be in
line with original guidance.
Conference Call
Woodward will hold an investor conference call at 4:30 p.m. EST, January 23, 2017 to provide an overview of the financial
performance for the first quarter of fiscal year 2017, business highlights, and outlook for fiscal 2017. 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 1-877-231-2582 (domestic) or 1-478-219-0714 (international). Participants
should call prior to the start time to allow for registration; the Conference ID is 42772801. An audio replay will be available by
telephone from 7:30 p.m. EST on January 23, 2017 until 11:59 p.m. EST on February 6, 2017. The telephone number to access the
replay is 1-855-859-2056 (domestic) or 1-404-537-3406 (international), reference access code 42772801.
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 industrial
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.2
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 our expectations
related to the performance of our segments, our expectations regarding our financial performance and tax rate for the fiscal year,
our strategic actions and their proposed effect, our future sales, earnings, liquidity, tax rate, and relative profitability, and
expectations regarding our markets. 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, Woodward’s significant customers; global economic uncertainty and instability in the
financial markets; Woodward’s ability to manage product liability claims, product recalls or other liabilities associated with the
products and services that Woodward provides; 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 any restructuring and alignment efforts; Woodward’s ability to
successfully manage competitive factors, including prices, promotional incentives, competitor product development, 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 to perform contractual obligations and its suppliers to
provide Woodward with materials of sufficient quality or quantity required to meet Woodward’s production needs at favorable prices
or at all; Woodward’s ability to monitor its technological expertise and the success of, and/or costs associated with, its product
development activities; Woodward’s debt obligations, debt service requirements, and ability to operate its business, pursue its
business strategies and incur additional debt in light of covenants contained in its outstanding debt agreements; Woodward’s
ability to manage additional tax expense and exposures; risks related to Woodward’s U.S. Government contracting activities,
including liabilities resulting from legal and regulatory proceedings, inquiries, or investigations related to such activities; the
potential of a significant reduction in defense sales due to decreases in the amount of U.S. Federal defense spending or other
specific budget cuts impacting defense programs in which Woodward participates; changes in government spending patterns,
priorities, subsidy programs and/or regulatory requirements; future impairment charges resulting from changes in the estimates of
fair value of reporting units or of long-lived assets; future results of Woodward’s subsidiaries; environmental liabilities related
to manufacturing activities and/or real estate acquisitions; Woodward’s continued access to a stable workforce and favorable labor
relations with its employees; 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 related to
Woodward’s common stock, including changes in prices and trading volumes; 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; industry risks, including increases in natural gas prices, unforeseen events that may reduce commercial aviation and
increasing emissions standards; Woodward’s operations may be adversely affected by information systems interruptions or intrusions;
certain provisions of Woodward’s charter documents and Delaware law that could discourage or prevent others from acquiring the
company; and other risk factors described in Woodward's Annual Report on Form 10-K for the year ended September 30, 2016 and other
risks described in Woodward’s filings with the Securities and Exchange Commission.
| |
|
|
|
|
| Woodward, Inc. and
Subsidiaries |
|
|
|
|
| CONDENSED
CONSOLIDATED STATEMENTS
OF EARNINGS |
|
|
|
|
| |
|
Three-Months Ended |
| |
|
December 31, |
| (Unaudited - in thousands except per share
amounts) |
|
2016
|
|
2015
|
| |
|
|
|
|
| Net sales |
|
$ |
442,894 |
|
|
$ |
445,110 |
|
| Costs and expenses: |
|
|
|
|
| Cost of goods sold |
|
|
327,194 |
|
|
|
333,377 |
|
| Selling, general, and administrative expenses |
|
|
33,796 |
|
|
|
40,782 |
|
| Research and development costs |
|
|
26,540 |
|
|
|
31,597 |
|
| Amortization of intangible assets |
|
|
6,458 |
|
|
|
6,946 |
|
| Interest expense |
|
|
6,840 |
|
|
|
6,908 |
|
| Interest income |
|
|
(405 |
) |
|
|
(447 |
) |
| Other (income) expense, net |
|
|
(4,588 |
) |
|
|
(2,009 |
) |
| Total costs and expenses |
|
|
395,835 |
|
|
|
417,154 |
|
| Earnings before income taxes |
|
|
47,059 |
|
|
|
27,956 |
|
| Income taxes |
|
|
511 |
|
|
|
2,136 |
|
| Net earnings |
|
$ |
46,548 |
|
|
$ |
25,820 |
|
| |
|
|
|
|
| Earnings per share amounts: |
|
|
|
|
| Basic earnings per share |
|
$ |
0.76 |
|
|
$ |
0.41 |
|
| Diluted earnings per share |
|
$ |
0.73 |
|
|
$ |
0.40 |
|
| Weighted average common shares outstanding: |
|
|
|
|
| Basic |
|
|
61,559 |
|
|
|
63,054 |
|
| Diluted |
|
|
63,671 |
|
|
|
64,452 |
|
| Cash dividends per share paid to Woodward common
stockholders |
|
$ |
0.11 |
|
|
$ |
0.10 |
|
| |
|
|
|
|
| |
|
|
|
|
| |
|
|
|
|
| |
|
|
|
|
| Woodward, Inc. and
Subsidiaries |
|
|
|
|
| CONDENSED
CONSOLIDATED BALANCE
SHEETS |
|
|
|
|
| |
|
December 31, |
|
September 30, |
| |
|
2016
|
|
2016
|
| (Unaudited - in thousands) |
|
|
|
|
| Assets |
|
|
|
|
| Current assets: |
|
|
|
|
| Cash and cash equivalents |
|
$ |
80,885 |
|
|
$ |
81,090 |
|
| Accounts receivable |
|
|
252,761 |
|
|
|
343,768 |
|
| Inventories |
|
|
493,764 |
|
|
|
461,683 |
|
| Income taxes receivable |
|
|
23,129 |
|
|
|
20,358 |
|
| Other current assets |
|
|
34,257 |
|
|
|
37,525 |
|
| Total current assets |
|
|
884,796 |
|
|
|
944,424 |
|
| Property, plant, and equipment, net |
|
|
877,077 |
|
|
|
876,350 |
|
| Goodwill |
|
|
553,300 |
|
|
|
555,684 |
|
| Intangible assets, net |
|
|
190,933 |
|
|
|
197,650 |
|
| Deferred income tax assets |
|
|
18,963 |
|
|
|
20,194 |
|
| Other assets |
|
|
51,146 |
|
|
|
48,060 |
|
| Total assets |
|
$ |
2,576,215 |
|
|
$ |
2,642,362 |
|
| |
|
|
|
|
| Liabilities and stockholders’ equity |
|
|
|
|
| Current liabilities: |
|
|
|
|
| Short-term borrowings and current portion of long-term debt |
|
$ |
150,000 |
|
|
$ |
150,000 |
|
| Accounts payable |
|
|
149,280 |
|
|
|
169,439 |
|
| Income taxes payable |
|
|
1,374 |
|
|
|
4,547 |
|
| Accrued liabilities |
|
|
115,823 |
|
|
|
156,627 |
|
| Total current liabilities |
|
|
416,477 |
|
|
|
480,613 |
|
| Long-term debt, less current portion |
|
|
569,878 |
|
|
|
577,153 |
|
| Deferred income tax liabilities |
|
|
9,063 |
|
|
|
3,777 |
|
| Other liabilities |
|
|
358,429 |
|
|
|
368,224 |
|
| Total liabilities |
|
|
1,353,847 |
|
|
|
1,429,767 |
|
| Stockholders’ equity |
|
|
1,222,368 |
|
|
|
1,212,595 |
|
| Total liabilities and stockholders’
equity |
|
$ |
2,576,215 |
|
|
$ |
2,642,362 |
|
| |
|
|
|
|
| |
|
|
|
|
| |
|
|
|
|
| |
|
|
|
|
| Woodward, Inc. and
Subsidiaries |
|
|
|
|
| CONDENSED
CONSOLIDATED STATEMENTS
OF CASH FLOWS |
|
|
|
|
| |
|
Three-Months Ended |
| |
|
December 31, |
| (Unaudited - in thousands) |
|
|
2016 |
|
|
|
2015 |
|
| |
|
|
|
|
| Net cash provided by operating
activities |
|
$ |
52,351 |
|
|
$ |
37,360 |
|
| |
|
|
|
|
| Cash flows from investing activities: |
|
|
|
|
| Payments for property, plant, and equipment |
|
|
(21,058 |
) |
|
|
(33,131 |
) |
| Proceeds from sale of assets |
|
|
3,682 |
|
|
|
1,852 |
|
| Proceeds from sales of short-term investments |
|
|
758 |
|
|
|
- |
|
| Net cash used in investing
activities |
|
|
(16,618 |
) |
|
|
(31,279 |
) |
| |
|
|
|
|
| Cash flows from financing activities: |
|
|
|
|
| Cash dividends paid |
|
|
(6,779 |
) |
|
|
(6,321 |
) |
| Proceeds from sales of treasury stock |
|
|
4,843 |
|
|
|
1,252 |
|
| Payments for repurchases of common stock |
|
|
(24,004 |
) |
|
|
(30,712 |
) |
| Borrowings on revolving lines of credit and short-term borrowings |
|
|
316,650 |
|
|
|
220,000 |
|
| Payments on revolving lines of credit and short-term borrowings |
|
|
(312,800 |
) |
|
|
(135,598 |
) |
| Payments of long-term debt and capital lease obligations |
|
|
(102 |
) |
|
|
(50,000 |
) |
| Net cash used in financing
activities |
|
|
(22,192 |
) |
|
|
(1,379 |
) |
| Effect of exchange rate changes on cash and cash
equivalents |
|
|
(13,746 |
) |
|
|
(2,482 |
) |
| Net change in cash and cash equivalents |
|
|
(205 |
) |
|
|
2,220 |
|
| Cash and cash equivalents at beginning of period |
|
|
81,090 |
|
|
|
82,202 |
|
| Cash and cash equivalents at end of
period |
|
$ |
80,885 |
|
|
$ |
84,422 |
|
| |
|
|
|
|
| |
|
|
|
|
| |
|
|
|
|
| |
|
|
|
|
| Woodward, Inc. and
Subsidiaries |
|
|
|
|
| CONDENSED
CONSOLIDATED STATEMENTS
OF EARNINGS |
|
|
|
|
| |
|
Three-Months Ended |
| |
|
December 31, |
| (Unaudited - in
thousands) |
|
|
2016 |
|
|
|
2015 |
|
| Net sales: |
|
|
|
|
| Aerospace |
|
$ |
266,680 |
|
|
$ |
268,599 |
|
| Industrial |
|
|
176,214 |
|
|
|
176,511 |
|
| Total consolidated net
sales |
|
$ |
442,894 |
|
|
$ |
445,110 |
|
| Segment earnings*: |
|
|
|
|
| Aerospace |
|
$ |
46,877 |
|
|
$ |
43,486 |
|
| As a percent of segment sales |
|
|
17.6 |
% |
|
|
16.2 |
% |
| Industrial |
|
|
17,998 |
|
|
|
21,551 |
|
| As a percent of segment sales |
|
|
10.2 |
% |
|
|
12.2 |
% |
| Total segment earnings |
|
|
64,875 |
|
|
|
65,037 |
|
| Nonsegment expenses |
|
|
(11,381 |
) |
|
|
(30,620 |
) |
| EBIT |
|
|
53,494 |
|
|
|
34,417 |
|
| Interest expense, net |
|
|
(6,435 |
) |
|
|
(6,461 |
) |
|
Consolidated earnings before income taxes |
|
$ |
47,059 |
|
|
$ |
27,956 |
|
| |
|
|
|
|
| Payments for property, plant and equipment |
|
$ |
21,058 |
|
|
$ |
33,131 |
|
| Depreciation expense |
|
$ |
12,455 |
|
|
$ |
10,116 |
|
| *This schedule reconciles segment earnings, which exclude certain
costs, to consolidated earnings before taxes. |
|
|
|
| |
|
|
|
|
| |
|
|
|
|
| |
|
|
|
|
| |
|
|
|
|
| Woodward, Inc. and
Subsidiaries |
|
|
|
|
| RECONCILIATION
OF NET
EARNINGS TO EBIT
1 AND EBITDA
1 |
|
|
|
|
| |
|
Three-Months Ended |
| |
|
December 31, |
| (Unaudited - in thousands) |
|
|
2016 |
|
|
|
2015 |
|
| Net earnings (U.S. GAAP) |
|
$ |
46,548 |
|
|
$ |
25,820 |
|
| Income taxes |
|
|
511 |
|
|
|
2,136 |
|
| Interest expense |
|
|
6,840 |
|
|
|
6,908 |
|
| Interest income |
|
|
(405 |
) |
|
|
(447 |
) |
| EBIT (Non-U.S. GAAP) |
|
|
53,494 |
|
|
|
34,417 |
|
| Amortization of intangible assets |
|
|
6,458 |
|
|
|
6,946 |
|
| Depreciation expense |
|
|
12,455 |
|
|
|
10,116 |
|
| EBITDA (Non-U.S. GAAP) |
|
$ |
72,407 |
|
|
$ |
51,479 |
|
| |
|
|
|
|
| |
|
|
|
|
| |
|
|
|
|
| |
|
|
|
|
| Woodward, Inc. and
Subsidiaries |
|
|
|
|
|
RECONCILIATION OF
CASH FLOW PROVIDED BY OPERATING
ACTIVITIES TO FREE CASH FLOW |
| |
|
Three-Months Ended |
| |
|
December 31, |
| (Unaudited - in thousands) |
|
|
2016 |
|
|
|
2015 |
|
| Net cash provided by operating activities (U.S. GAAP) |
|
$ |
52,351 |
|
|
$ |
37,360 |
|
| Payments for property, plant, and equipment |
|
|
(21,058 |
) |
|
|
(33,131 |
) |
| Free cash flow (Non-U.S. GAAP) |
|
|
31,293 |
|
|
|
4,229 |
|
| |
|
|
|
|
1Non-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). We have also presented certain financial measures net of special charges taken in the quarter. 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.
2Website, Facebook, Twitter:
Woodward has used, and intends to continue to use, its Investor Relations website, its Facebook page and its Twitter handle as
means of disclosing material non-public information and for complying with its disclosure obligations under Regulation
FD.
CONTACT: Don Guzzardo Director, Investor Relations & Treasury 970-498-3580 Don.Guzzardo@woodward.com
