Woodward, Inc. (NASDAQ:WWD) today reported financial results for
its second quarter of fiscal year 2018 ending March 31, 2018.
(All per share amounts are presented on a fully diluted basis.)
Second Quarter Fiscal 2018
Overview
- Net sales for the second quarter of fiscal 2018 were $548
million, an increase of 10 percent compared to $500 million for the
second quarter of last year.
- Net earnings were $38 million, or $0.60 per share for both the
second quarter of 2018 and 2017. Adjusted net earnings1 for the
second quarter of 2018 were $52 million, or $0.82 per share.
- Total EBIT1 for the second quarter of 2018 was $55 million,
compared to $57 million in the second quarter of the prior
year. Adjusted EBIT1 for the second quarter of 2018 was $73
million.
- Net cash generated from operating activities for the first half
of 2018 was $57 million, compared to $130 million for the prior
year period. Free cash flow1 was an outflow of $2 million for the
first half of 2018, compared to an inflow of $87 million for the
same period of the prior year.
“Strong sales growth in our Aerospace segment continued with the
narrowbody ramp up and a robust aftermarket,” said Thomas A.
Gendron, Chairman and Chief Executive Officer of Woodward. “While
we are seeing growth in some areas of our Industrial segment it
remains pressured given continued challenges in the industrial
turbomachinery market. Earlier this month, we announced the
transformative acquisition of L’Orange, which will significantly
strengthen our competitive position while improving our growth and
profitability profile in the Industrial segment.”
Company Results
Net sales for the second quarter of fiscal 2018 were $548
million, an increase of 10 percent compared to $500 million for the
same period of the prior year. Foreign currency exchange rates had
a favorable impact on sales of approximately $11 million for the
quarter.
Net earnings for the second quarter of 2018 were $38 million, or
$0.60 per share, compared to $38 million, or $0.60 per share, in
the second quarter of 2017.
As previously announced, beginning this second quarter of 2018,
Woodward will be providing certain financial measures on an
adjusted non-GAAP basis, as well as under U.S. GAAP. Adjusted
amounts will exclude restructuring charges, Duarte move related
costs, and M&A transaction and integration costs (collectively
“special charges”), as well as transition impacts of the change in
U.S. tax legislation.
For the second quarter of 2018, adjusted net earnings were $52
million, or $0.82 per share. Adjusted net earnings excludes $19
million of pre-tax special charges, or $0.22 per share, recorded in
the quarter, which includes the recently announced $17 million of
pre-tax restructuring charges.
The effective tax rate for the second quarter of 2018 was 20.9
percent, compared to 24.1 percent for the second quarter of
2017.
EBIT was $55 million for the second quarter of 2018, compared to
$57 million for the second quarter of 2017. Adjusted EBIT, which
excludes the $19 million of special charges for the current
quarter, was $73 million.
As previously announced, Woodward signed an agreement to acquire
L’Orange, with an anticipated closing in the third quarter of
fiscal 2018. This acquisition is expected to be accretive to
Woodward in fiscal 2019.
Segment Results
Aerospace Aerospace segment net sales for the
second quarter of fiscal 2018 were $386 million, compared to $321
million for the second quarter a year ago. Segment earnings for the
second quarter of 2018 were $73 million, compared to $58 million
for the same quarter last year. Segment earnings as a percent of
segment net sales were 18.9 percent this quarter, compared to 18.2
percent in the same quarter of the prior year.
Commercial aerospace sales growth was driven by the ongoing ramp
in production of next generation aircraft, robust commercial
aftermarket sales and continued strength in smart weapons. Segment
earnings benefited from the impact of the higher sales volume in
the quarter, which was partially offset by higher manufacturing
costs related to increasing production levels and learning curve
effects. Segment earnings were also negatively impacted by
increased investment in research and development.
Industrial Industrial segment net sales for the
second quarter of fiscal 2018 were $162 million, compared to $180
million for the second quarter a year ago. Foreign currency
exchange rates had a favorable impact on sales of approximately $10
million for the quarter. On a constant currency basis sales would
have decreased 15 percent. Segment earnings for the second quarter
of 2018 were $10 million, compared to $17 million in the second
quarter a year ago. Segment earnings as a percent of segment net
sales were 6.3 percent in the second quarter of 2018, compared to
9.5 percent in the same quarter of the prior year.
Sales declined due to continued weakness in industrial gas
turbines and renewables, partially offset by improving demand for
large engines. The decrease in segment earnings was primarily
related to the lower sales volume.
Nonsegment Nonsegment expenses totaled $28
million for the second quarter of fiscal 2018, compared to $19
million for the same quarter last year. Adjusted nonsegment
expenses1 were $10 million, which excludes the impact of the $19
million of special charges. The decrease in adjusted nonsegment
expenses in the current quarter, compared to nonsegment expenses in
the same quarter of the prior year, was primarily due to the timing
of stock-based compensation expense. In 2018, the majority of
stock-based compensation expense was recorded in the first quarter,
whereas in the prior year this expense was recorded in the second
quarter.
Year-to-Date Results
Net sales for the first six months of fiscal 2018 were $1.018
billion, an increase of 8 percent from $943 million for the same
period last year. Foreign currency exchange rates had a favorable
impact on sales of approximately $17 million for the first six
months of 2018.
Net earnings for the first six months of 2018 were $57 million,
compared to $85 million in the same period last year. Earnings per
share for the first six months of 2018 were $0.89, compared to
$1.33 for the same period last year.
Adjusted net earnings for the first six months of 2018 were $85
million, or $1.34 per share, which excludes the $19 million of
pre-tax special charges, or $0.22 per share. Adjusted net earnings
also excludes $15 million of tax expense, or $0.23 per share,
related to the transition impacts of the change in U.S. tax
legislation recorded in the first quarter of 2018.
The effective tax rate for the first six months of 2018 was 34.1
percent, compared to 13.0 percent for the same period of the prior
year. The adjusted effective tax rate1 for the first six months of
2018, which removes the transition impacts of the change in U.S.
tax legislation, was 18.6 percent. The organic1 effective tax rate
for fiscal 2018 is still anticipated to be approximately 24
percent. The organic, adjusted effective tax rate1 for fiscal 2018
is anticipated to be approximately 18 percent.
Year-to-date EBIT for 2018 was $99 million, compared to $110
million for the same period last year. Adjusted year-to-date EBIT1
for the current year was $117 million, which excludes the $19
million of special charges.
Aerospace segment net sales for the first six months of 2018
were $692 million, an increase of 18 percent compared to $587
million for the same period last year. Aerospace segment earnings
as a percent of segment net sales for the first six months of 2018
was 16.8 percent, compared to 17.9 percent for the same period last
year.
Industrial segment net sales for the first six months of 2018
were $326 million, a decrease of 8 percent compared to $356 million
for the same period last year. Foreign currency exchange rates had
a favorable impact on sales of approximately $15 million for the
first six months. On a constant currency basis sales would have
decreased 13 percent. Industrial segment earnings as a percent of
segment net sales for the first six months of 2018 was 9.1 percent,
compared to 9.9 percent for the same period last year.
Nonsegment expenses totaled $47 million for the first six months
of 2018, compared to $30 million for the first six months of the
prior year. Adjusted nonsegment expenses were $29 million, or 2.9
percent of net sales, which excludes the impact of the $19 million
of special charges.
Cash Flow and Financial
Position
Net cash generated from operating activities for the first half
of fiscal 2018 was $57 million, compared to cash generated of $130
million for the first half of the prior year. The difference was
largely due to a decrease in payables, primarily resulting from the
timing of payments, and lower earnings. Free cash flow was an
outflow of $2 million for the first half of 2018, compared to an
inflow of $87 million for the same period of the prior year.
Organic free cash flow for fiscal year 2018 is now anticipated to
be $200 million. Payments for property, plant, and equipment for
the first half of 2018 were $58 million, compared to $43 million
for the first half of 2017.
Total debt was $630 million at March 31, 2018, compared to $613
million at September 30, 2017. The ratio of
debt-to-debt-plus-equity was 30.2 percent at March 31, 2018,
compared to 30.9 percent at September 30, 2017.
Fiscal 2018 Full Year
Outlook
The outlook below is presented on an organic basis.
Net sales are expected to be approximately $2.2 billion for
fiscal year 2018, with Aerospace sales up approximately 12 percent
and Industrial sales down approximately 7 percent, both as compared
to the prior year.
Aerospace and Industrial segment earnings as a percent of net
sales are both expected to be approximately flat to slightly up as
compared to the prior year.
Earnings per share are now expected to be between $3.00 and
$3.20 based on approximately 64 million of fully diluted weighted
average shares outstanding.
Woodward’s overall outlook related to operational performance is
unchanged. Improved Aerospace performance is being offset by weaker
Industrial performance. The change from the previous outlook is due
to the impacts of the restructuring charges, Duarte move related
costs, higher anticipated outstanding shares and M&A
transaction costs. Adjusted earnings per share are expected to be
between $3.60 and $3.80.
|
|
|
|
|
Reconciliation of organic reported &
adjusted outlook |
|
|
As reported, |
|
|
|
U.S. GAAP |
|
Adjusted1 |
Previous full
year fiscal 2018 outlook |
|
$3.35 - $3.60 |
|
$3.35 - $3.60 |
|
|
|
|
|
Transition impact of U.S. tax legislation changes |
|
|
$ |
0.23 |
Restructuring
charges |
|
$ |
(0.20 |
) |
|
|
Duarte move, M&A costs and other anticipated items |
$ |
(0.17 |
) |
|
|
|
|
|
|
|
Full year fiscal
2018 outlook |
|
$3.00 - $3.20 |
|
$3.60 - $3.80 |
|
Conference Call
Woodward will hold an investor conference call at 4:30 p.m. EDT,
April 23, 2018, to provide an overview of the financial performance
for the second quarter of fiscal year 2018, business highlights,
and outlook for fiscal 2018. 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 84309909. An audio replay will be available by
telephone from 7:30 p.m. EDT on April 23, 2018 until 11:59 p.m. EDT
on May 7, 2018. The telephone number to access the replay is
1-855-859-2056 (domestic) or 1-404-537-3406 (international),
reference access code 84309909.
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
pending acquisition of L’Orange, including the expected closing
date and its effects on our business and financial results, our
expectations regarding the effects of the changes in the U.S. tax
legislation on our business, 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; risks associated with integrating the L’Orange
business, including diversion of management time and attention,
inability to meet our expectations, unexpected liabilities, loss of
employees and difficulties integrating and retaining customers,
suppliers and partners; 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, 2017, and other risks described in Woodward’s filings with the
Securities and Exchange Commission.
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|
|
|
|
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|
Woodward, Inc. and Subsidiaries |
CONDENSED
CONSOLIDATED
STATEMENTS
OF
EARNINGS |
|
|
|
|
|
|
|
|
|
|
Three-Months Ended |
|
Six-Months Ended |
|
|
|
March 31, |
|
March 31, |
(Unaudited - in thousands except per share
amounts) |
|
|
2018 |
|
|
|
2017 |
|
|
|
2018 |
|
|
|
2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
sales |
|
|
|
|
$ |
548,249 |
|
|
$ |
500,381 |
|
|
$ |
1,018,397 |
|
|
$ |
943,275 |
|
Costs
and expenses: |
|
|
|
|
|
|
|
|
|
|
|
Cost of
goods sold |
|
|
|
|
|
401,331 |
|
|
|
367,099 |
|
|
|
748,115 |
|
|
|
696,247 |
|
Selling,
general, and administrative expenses |
|
|
|
|
|
39,486 |
|
|
|
47,660 |
|
|
|
85,762 |
|
|
|
85,960 |
|
Research
and development costs |
|
|
|
|
|
37,169 |
|
|
|
30,385 |
|
|
|
71,955 |
|
|
|
56,925 |
|
Restructuring charges |
|
|
|
|
|
17,013 |
|
|
|
- |
|
|
|
17,013 |
|
|
|
- |
|
Interest
expense |
|
|
|
|
|
6,687 |
|
|
|
6,790 |
|
|
|
13,437 |
|
|
|
13,630 |
|
Interest
income |
|
|
|
|
|
(471 |
) |
|
|
(474 |
) |
|
|
(834 |
) |
|
|
(879 |
) |
Other
(income) expense, net |
|
|
|
|
|
(1,613 |
) |
|
|
(1,315 |
) |
|
|
(3,185 |
) |
|
|
(5,903 |
) |
Total costs and expenses |
|
|
|
|
|
499,602 |
|
|
|
450,145 |
|
|
|
932,263 |
|
|
|
845,980 |
|
Earnings before income taxes |
|
|
|
48,647 |
|
|
|
50,236 |
|
|
|
86,134 |
|
|
|
97,295 |
|
Income
taxes |
|
|
|
|
10,158 |
|
|
|
12,131 |
|
|
|
29,385 |
|
|
|
12,642 |
|
Net earnings |
|
|
|
|
$ |
38,489 |
|
|
$ |
38,105 |
|
|
$ |
56,749 |
|
|
$ |
84,653 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share amounts: |
|
|
|
|
|
|
|
|
|
Basic
earnings per share |
|
|
|
$ |
0.63 |
|
|
$ |
0.62 |
|
|
$ |
0.93 |
|
|
$ |
1.38 |
|
Diluted earnings per share |
|
|
$ |
0.60 |
|
|
$ |
0.60 |
|
|
$ |
0.89 |
|
|
$ |
1.33 |
|
Weighted average common shares outstanding: |
|
|
|
|
|
|
|
|
Basic |
|
|
|
|
|
61,401 |
|
|
|
61,310 |
|
|
|
61,323 |
|
|
|
61,436 |
|
Diluted |
|
|
|
|
|
63,750 |
|
|
|
63,499 |
|
|
|
63,730 |
|
|
|
63,593 |
|
Cash dividends per share paid to Woodward common
stockholders |
$ |
0.1425 |
|
|
$ |
0.1250 |
|
|
$ |
0.2675 |
|
|
$ |
0.2350 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Woodward, Inc. and Subsidiaries |
|
|
|
|
|
CONDENSED
CONSOLIDATED
BALANCE
SHEETS |
|
|
|
|
|
|
|
|
|
March 31, |
|
September 30, |
|
|
|
|
|
2018 |
|
2017 |
(Unaudited - in thousands) |
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
Current
assets: |
|
|
|
|
|
|
|
Cash and
cash equivalents |
|
|
|
|
$ |
100,147 |
|
$ |
87,552 |
Accounts
receivable |
|
|
|
|
|
365,351 |
|
|
402,182 |
Inventories |
|
|
|
|
|
508,971 |
|
|
473,505 |
Income
taxes receivable |
|
|
|
|
|
24,269 |
|
|
19,376 |
Other current assets |
|
|
|
|
|
30,512 |
|
|
38,574 |
Total
current assets |
|
|
|
|
|
1,029,250 |
|
|
1,021,189 |
Property,
plant, and equipment, net |
|
|
|
|
|
943,433 |
|
|
922,043 |
Goodwill |
|
|
|
|
|
557,981 |
|
|
556,545 |
Intangible assets, net |
|
|
|
|
|
159,448 |
|
|
171,882 |
Deferred
income tax assets |
|
|
|
|
|
20,705 |
|
|
19,950 |
Other assets |
|
|
|
|
|
74,934 |
|
|
65,500 |
Total assets |
|
|
|
|
$ |
2,785,751 |
|
$ |
2,757,109 |
|
|
|
|
|
|
|
|
Liabilities and
stockholders’ equity |
|
|
|
|
|
|
|
Current
liabilities: |
|
|
|
|
|
|
|
Short-term borrowings |
|
|
$ |
41,930 |
|
$ |
32,600 |
Accounts
payable |
|
|
|
|
|
195,917 |
|
|
232,788 |
Income
taxes payable |
|
|
|
|
|
2,691 |
|
|
6,774 |
Accrued liabilities |
|
|
|
|
|
111,442 |
|
|
155,072 |
Total
current liabilities |
|
|
|
|
|
351,980 |
|
|
427,234 |
Long-term
debt, less current portion |
|
|
|
|
|
588,461 |
|
|
580,286 |
Deferred
income tax liabilities |
|
|
|
|
|
22,254 |
|
|
33,408 |
Other liabilities |
|
|
|
|
|
366,146 |
|
|
344,798 |
Total
liabilities |
|
|
|
|
|
1,328,841 |
|
|
1,385,726 |
Stockholders’ equity |
|
|
|
|
|
1,456,910 |
|
|
1,371,383 |
Total liabilities and stockholders’ equity |
|
|
|
|
$ |
2,785,751 |
|
$ |
2,757,109 |
|
|
|
|
|
|
|
Woodward, Inc. and Subsidiaries |
|
|
|
|
|
CONDENSED
CONSOLIDATED
STATEMENTS
OF CASH
FLOWS |
|
|
|
|
|
|
|
|
Six-Months Ended |
|
|
|
|
|
March 31, |
(Unaudited
- in thousands) |
|
|
2018 |
|
2017 |
|
|
|
|
|
|
|
|
Net cash provided by operating activities |
|
|
|
|
$ |
56,718 |
|
|
$ |
129,994 |
|
|
|
|
|
|
|
|
|
Cash flows
from investing activities: |
|
|
|
|
|
Payments
for property, plant, and equipment |
|
|
(58,478 |
) |
|
|
(43,053 |
) |
Net
proceeds from sale of assets |
|
|
|
1,198 |
|
|
|
3,682 |
|
Proceeds
from sales of short-term investments |
|
|
8,970 |
|
|
|
4,994 |
|
Payments
for purchases of short-term investments |
|
|
(808 |
) |
|
|
- |
|
Net cash used in investing
activities |
|
|
|
(49,118 |
) |
|
|
(34,377 |
) |
|
|
|
|
|
|
|
|
Cash flows
from financing activities: |
|
|
|
|
|
Cash
dividends paid |
|
|
|
|
(16,422 |
) |
|
|
(14,415 |
) |
Proceeds
from sales of treasury stock |
|
|
|
3,560 |
|
|
|
11,223 |
|
Payments
for repurchases of common stock |
|
|
- |
|
|
|
(61,782 |
) |
Borrowings
on revolving lines of credit and short-term borrowings |
|
809,680 |
|
|
|
684,200 |
|
Payments on
revolving lines of credit and short-term borrowings |
|
(800,350 |
) |
|
|
(706,600 |
) |
Payments of
long-term debt and capital lease obligations |
|
(210 |
) |
|
|
(204 |
) |
Net cash used in financing
activities |
|
|
|
(3,742 |
) |
|
|
(87,578 |
) |
Effect of exchange rate changes on cash and cash
equivalents |
|
8,737 |
|
|
|
(10,176 |
) |
Net
change in cash and cash equivalents |
|
|
|
12,595 |
|
|
|
(2,137 |
) |
Cash and
cash equivalents at beginning of year |
|
|
87,552 |
|
|
|
81,090 |
|
Cash and cash equivalents at end of period |
|
$ |
100,147 |
|
|
$ |
78,953 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Woodward, Inc. and Subsidiaries |
|
|
|
|
|
|
|
|
|
SEGMENT NET SALES AND EARNINGS |
|
|
|
|
|
|
|
|
|
|
|
|
Three-Months Ended |
|
Six-Months Ended |
|
|
|
March 31, |
|
March 31, |
(Unaudited - in thousands) |
|
|
|
|
2018 |
|
|
|
2017 |
|
|
|
2018 |
|
|
|
2017 |
|
Net
sales: |
|
|
|
|
|
|
|
|
|
|
|
Aerospace |
|
|
|
|
$ |
386,343 |
|
|
$ |
320,526 |
|
|
$ |
692,248 |
|
|
$ |
587,206 |
|
Industrial |
|
|
|
|
|
161,906 |
|
|
|
179,855 |
|
|
|
326,149 |
|
|
|
356,069 |
|
Total consolidated net sales |
|
|
|
|
$ |
548,249 |
|
|
$ |
500,381 |
|
|
$ |
1,018,397 |
|
|
$ |
943,275 |
|
Segment
earnings*: |
|
|
|
|
|
|
|
|
|
|
|
Aerospace |
|
|
|
|
$ |
72,969 |
|
|
$ |
58,227 |
|
|
$ |
116,522 |
|
|
$ |
105,104 |
|
As a percent of segment
sales |
|
|
|
|
|
18.9 |
% |
|
|
18.2 |
% |
|
|
16.8 |
% |
|
|
17.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Industrial |
|
|
|
|
|
10,237 |
|
|
|
17,089 |
|
|
|
29,581 |
|
|
|
35,087 |
|
As a percent of segment
sales |
|
|
|
|
|
6.3 |
% |
|
|
9.5 |
% |
|
|
9.1 |
% |
|
|
9.9 |
% |
Total segment earnings |
|
|
|
|
|
83,206 |
|
|
|
75,316 |
|
|
|
146,103 |
|
|
|
140,191 |
|
Nonsegment
expenses |
|
|
|
|
|
(28,343 |
) |
|
|
(18,764 |
) |
|
|
(47,366 |
) |
|
|
(30,145 |
) |
EBIT |
|
|
|
|
|
54,863 |
|
|
|
56,552 |
|
|
|
98,737 |
|
|
|
|
110,046 |
|
Interest expense,
net |
|
|
|
|
|
(6,216 |
) |
|
|
(6,316 |
) |
|
|
(12,603 |
) |
|
|
(12,751 |
) |
Consolidated earnings before income taxes |
|
|
|
|
$ |
48,647 |
|
|
$ |
50,236 |
|
|
$ |
86,134 |
|
|
|
$ |
97,295 |
|
*This
schedule reconciles segment earnings, which exclude certain costs,
to consolidated earnings before taxes. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments for property, plant and equipment |
|
$ |
30,028 |
|
|
$ |
21,995 |
|
|
$ |
58,478 |
|
|
$ |
43,053 |
|
Depreciation expense |
|
|
|
|
$ |
15,754 |
|
|
$ |
13,663 |
|
|
$ |
30,581 |
|
|
$ |
26,118 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Woodward, Inc. and Subsidiaries |
|
|
|
|
|
|
|
|
|
|
RECONCILIATION
OF EARNINGS TO ADJUSTED EARNINGS
1 |
|
|
Three-Months Ended |
|
Six-Months Ended |
|
|
March 31, 2018 |
|
March 31, 2018 |
(Unaudited - in thousands) |
|
|
Before Income Tax |
|
Net of Income Tax |
|
Per Share, Net of Income Tax |
|
Before Income Tax |
|
Net of Income Tax |
Per Share, Netof Income Tax |
Earnings (U.S.
GAAP) |
|
|
$ |
48,647 |
|
$ |
38,489 |
|
$ |
0.60 |
|
$ |
86,134 |
|
$ |
56,749 |
$ |
0.89 |
Non-U.S. GAAP
adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring charges |
|
|
|
17,013 |
|
|
12,667 |
|
|
0.20 |
|
|
17,013 |
|
|
12,667 |
|
0.20 |
Other
charges* |
|
|
|
1,535 |
|
|
1,201 |
|
|
0.02 |
|
|
1,535 |
|
|
1,201 |
|
0.02 |
Non-U.S. GAAP adjustments to arrive at
adjusted EBIT |
|
18,548 |
|
|
13,868 |
|
|
0.22 |
|
|
18,548 |
|
|
13,868 |
|
0.22 |
Transition impact of
U.S. tax legislation |
|
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
14,778 |
|
0.23 |
Total Non-U.S. GAAP adjustments |
|
18,548 |
|
|
13,868 |
|
|
0.22 |
|
|
18,548 |
|
|
28,646 |
|
0.45 |
Adjusted earnings (Non-U.S. GAAP) |
|
|
$ |
67,195 |
|
$ |
52,357 |
|
$ |
0.82 |
|
$ |
104,682 |
|
$ |
85,395 |
$ |
1.34 |
* Other
charges includes Duarte move related costs, and merger and
acquisition transaction and integration costs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Woodward, Inc. and Subsidiaries |
|
|
|
|
|
|
|
|
|
RECONCILIATION
OF NONSEGMENT
EXPENSES
TO ADJUSTED
NONSEGMENT EXPENSES 1 |
|
|
|
|
|
|
|
|
|
Three-Months Ended |
|
Six-Months Ended |
|
|
|
|
|
March 31, |
|
March 31, |
(Unaudited - in thousands) |
|
|
|
|
|
2018 |
|
|
|
2017 |
|
|
|
2018 |
|
|
|
2017 |
|
Nonsegment expenses
(U.S. GAAP) |
|
|
|
|
$ |
28,343 |
|
|
$ |
18,764 |
|
|
$ |
47,366 |
|
|
$ |
30,145 |
|
Restructuring and other
charges |
|
|
|
|
|
(18,548 |
) |
|
|
- |
|
|
|
(18,548 |
) |
|
|
- |
|
Adjusted nonsegment expenses (Non-U.S. GAAP) |
|
|
|
|
$ |
9,795 |
|
|
$ |
18,764 |
|
|
$ |
28,818 |
|
|
$ |
30,145 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Woodward, Inc. and Subsidiaries |
|
|
|
|
|
|
|
|
|
|
|
RECONCILIATION OF EBIT 1 TO ADJUSTED EBIT
1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three-Months Ended |
|
Six-Months Ended |
|
|
|
|
|
March 31, |
|
March 31, |
(Unaudited - in thousands) |
|
|
|
|
|
2018 |
|
|
|
2017 |
|
|
|
2018 |
|
|
|
2017 |
|
Net earnings (U.S.
GAAP) |
|
|
|
|
$ |
38,489 |
|
|
$ |
38,105 |
|
|
$ |
56,749 |
|
|
$ |
84,653 |
|
Income taxes |
|
|
|
|
|
10,158 |
|
|
|
12,131 |
|
|
|
29,385 |
|
|
|
12,642 |
|
Interest expense |
|
|
|
|
|
6,687 |
|
|
|
6,790 |
|
|
|
13,437 |
|
|
|
13,630 |
|
Interest
income |
|
|
|
|
|
(471 |
) |
|
|
(474 |
) |
|
|
(834 |
) |
|
|
(879 |
) |
EBIT
(Non-U.S. GAAP) |
|
|
|
|
|
54,863 |
|
|
|
56,552 |
|
|
|
98,737 |
|
|
|
110,046 |
|
Restructuring and other charges |
|
|
|
|
|
18,548 |
|
|
|
- |
|
|
|
18,548 |
|
|
|
- |
|
Adjusted EBIT (Non-U.S. GAAP) |
|
|
|
|
$ |
73,411 |
|
|
$ |
56,552 |
|
|
$ |
117,285 |
|
|
$ |
110,046 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Woodward, Inc. and Subsidiaries |
|
|
|
|
|
|
|
|
|
|
|
RECONCILIATION OF EBITDA 1 TO
ADJUSTED EBITDA 1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three-Months Ended |
|
Six-Months Ended |
|
|
|
|
|
March 31, |
|
March 31, |
(Unaudited - in thousands) |
|
|
|
|
|
2018 |
|
|
|
2017 |
|
|
|
2018 |
|
|
|
2017 |
|
Net earnings (U.S.
GAAP) |
|
|
|
|
$ |
38,489 |
|
|
$ |
38,105 |
|
|
$ |
56,749 |
|
|
$ |
84,653 |
|
Income taxes |
|
|
|
|
|
10,158 |
|
|
|
12,131 |
|
|
|
29,385 |
|
|
|
12,642 |
|
Interest expense |
|
|
|
|
|
6,687 |
|
|
|
6,790 |
|
|
|
13,437 |
|
|
|
13,630 |
|
Interest income |
|
|
|
|
|
(471 |
) |
|
|
(474 |
) |
|
|
(834 |
) |
|
|
(879 |
) |
Amortization of
intangible assets |
|
|
|
|
|
6,258 |
|
|
|
6,431 |
|
|
|
12,501 |
|
|
|
12,889 |
|
Depreciation expense |
|
|
|
|
|
15,754 |
|
|
|
13,663 |
|
|
|
30,581 |
|
|
|
26,118 |
|
EBITDA
(Non-U.S. GAAP) |
|
|
|
|
|
76,875 |
|
|
|
76,646 |
|
|
|
141,819 |
|
|
|
149,053 |
|
Restructuring and other charges |
|
|
|
|
|
18,548 |
|
|
|
- |
|
|
|
18,548 |
|
|
|
- |
|
Adjusted EBITDA (Non-U.S. GAAP) |
|
|
|
|
$ |
95,423 |
|
|
$ |
76,646 |
|
|
$ |
160,367 |
|
|
$ |
149,053 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Woodward, Inc. and Subsidiaries |
|
|
|
|
|
|
|
|
|
RECONCILIATION OF CASH FLOW FROM OPERATING
ACTIVITIES TO FREE CASH FLOW1 |
|
|
|
Three-Months Ended |
|
Six-Months Ended |
|
|
|
March 31, |
|
March 31, |
(Unaudited - in thousands) |
|
|
|
|
|
2018 |
|
|
|
2017 |
|
|
|
2018 |
|
|
|
2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash
provided by operating activities |
|
$ |
59,251 |
|
|
$ |
77,643 |
|
|
$ |
56,718 |
|
|
$ |
129,994 |
|
Payments for property, plant, and equipment |
|
|
(30,028 |
) |
|
|
(21,995 |
) |
|
|
(58,478 |
) |
|
|
(43,053 |
) |
Free cash inflow (outflow) (Non-U.S. GAAP) |
|
|
|
|
|
29,223 |
|
|
|
55,648 |
|
|
|
(1,760 |
) |
|
|
86,941 |
|
|
|
|
|
|
|
|
|
|
|
|
|
1 Adjusted and Non-U.S. GAAP Financial
Measures: Adjusted net earnings, adjusted earnings per share,
adjusted EBIT and EBITDA, adjusted effective tax rate, and adjusted
nonsegment expenses exclude, as applicable, (i) restructuring
charges, (ii) move costs associated with the relocation of our
Duarte, California operations to the Company’s newly renovated
Drake Campus in Fort Collins, Colorado (“Duarte move related
costs”), (iii) L'Orange M&A transaction and integration costs
and (iv) the transition impacts of the change in U.S. federal tax
legislation. Woodward believes that these items are short-term
costs, not related to the ongoing operations of the business and
therefore, uses them to illustrate more clearly how the underlying
business of Woodward is performing. Organic financial measures
excludes all impacts related to the anticipated L’Orange
acquisition.
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 or used in 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. We refer to certain financial measures excluding the
impact of currency exchange rate fluctuations as “constant currency
basis”. We calculate financial measures on a constant
currency basis by removing any realized or unrealized currency
gains or losses on working capital from the particular measure in
the current period and then converting our current period local
currency financial results using the foreign currency exchange
rates in effect during the prior year period. The financial
measures, when calculated on a constant currency basis, are
intended to supplement our reported operating results and, when
considered in conjunction with the corresponding U.S. GAAP
measures, facilitate a better understanding of changes in the
metrics from period to period and the core operations of the
Company.
2 Website, 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 GuzzardoCorporate Director, Investor
Relations & Treasury
970-498-3580Don.Guzzardo@woodward.com
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