JOHN HALBROOK - WOODWARD GOVERNOR CO. (WGOV)
CEO Interview - published 06/18/2001

DOCUMENT # MAM608

JOHN A. HALBROOK is Chairman and Chief Executive Officer of Woodward
Governor Company. Prior to his appointment in 1995, Mr. Halbrook was
Chief Executive Officer and President. He has served in various
executive positions with the company including Chief Operating Officer
and President. He has also held positions with Worthington Pumps,
McGraw-Edison, Turbodyne, General Electric, and General Dynamics. Mr.
Halbrook received his Bachelor's degree in Electrical Engineering from
Purdue University and his Master's degree in Business Administration
from the University of Rochester. 

Sector: aerospace/defense

TWST: Let's start out with a brief history of Woodward Governor Company
and a general description of what you see as your business today. Then
introduce yourself, tell us about your experience and involvement with
the company.

Mr. Halbrook: As the CEO of Woodward, I've been in this job for six
years. I've been with the company 15 plus years. The company was started
in 1870, so we've been around a long time. It began with an innovation
to control the flow of water over a water wheel with the fly ball
governor. From that humble beginning, we are where we are today. As a
company, we design, manufacture and service both components and systems
for aerospace and industrial engines and turbines. Our products address
fuel delivery, combustion and some related systems that are necessary
for the engine to perform its job effectively. We have accumulated in
Woodward a broad range of technologies and products so we can do this.
Our basic business model is to take these products and technologies,
combine them, mix them, match them, and come up with a very effective
fuel delivery and combustion product line that is tailored for different
engines and turbines. The range of engines can go from a diesel engine
to a natural gas engine, aerospace gas turbine engine or an industrial
gas turbine engine, steam turbines, fuel cells and microturbines. We
also make a range of products that help control the electric power
produced by a generator set. The business model we have also forms our
expansion and growth strategies. As we acquire, develop or form
alliances with other companies to add different or new technologies to
our portfolio, we become better at delivering fuel and controlling the
combustion process of an engine. It's really the model of how we go to
market. We sell to the manufacturers of these turbines and engines, our
primary customers. Our business model then describes our growth strategy
as well as how we go to the marketplace.

TWST: What about the competitive landscape? Who are the head-to-head
competitors and what differentiates Woodward?

Mr. Halbrook: About 45% of our business today is the aerospace market '
primarily commercial and general aviation aircraft and some military
aircraft. Our competitors in that sector of our business are the big
names in the industry'Hamilton Sundstrand, which is a division of United
Technologies Company. Honeywell is another big player as is TRW. We
compete with those major companies. All of those companies have roughly
an equal market share. We are certainly the smallest company. I think
maybe the way we compete with them is that this business is our only
focus. We really get close to our customers and understand their needs,
then just apply extreme focus to solving that problem, or helping the
customer in that situation. I think it may be a little bit of an
advantage over these larger competitors of ours, whose focus and
intensity might not be quite as sharp as ours. It's a fairly narrow
niche for us. It's a piece of a bigger puzzle for our competitors. The
other side of our business, about 55%, is selling into the industrial
market. In that marketplace, there are very few large name customers
that we compete with across the board. As a matter of fact, we are
probably the largest, with the most extensive product offering, and in a
slang sort of way, I would describe ourselves as the big dog on the
block in that industrial sector. The competitive landscape is very
fragmented, and we're dealing primarily with component suppliers. None
of our competitors really has the capability to put a whole system
together, which is really our strength on the industrial side.

TWST: Is cash or capital a limitation as you look to grow, or perhaps
meet demand from some of these large customers that you do have?

Mr. Halbrook: It certainly is an objective to expand our product
offerings through acquisitions and development. We have ample financial
capacity for anything we see on the horizon that we would need to do.

TWST: Give us an insight into your top management team. Do you have the
bench strength, the skill sets onboard for the next three- to five-year
run?

Mr. Halbrook: We are pretty satisfied. It's a combination of veterans
and some younger folks, so I think we do have a good combination. The
skill sets are very good. Even the younger folks are mature and
understand this business exceptionally well. I'm very pleased with our
top management team. Certainly, we do succession planning. We try to do
the things that keep the next layer of leadership and development
progressing and ready to step in whenever there is a need. But I would
describe us as a very strong management team.

TWST: What misperceptions do you encounter as you work with your current
investors, your current customers or potential strategic partners? In
what areas perhaps do they voice concerns?

Mr. Halbrook: We don't really have any legacy issues to overcome but
there is a misperception that, just like you have pigeonholed us, we are
an aerospace company. That's not a negative. We do a lot of aerospace
business, but really, we are an engine fuel delivery company. Aerospace
happens to be one of the places where these engines are used. I think we
are categorized oftentimes strictly as only an aerospace business, when
quite frankly the fastest growth in our business is on the industrial
side. Let me tell you just a little bit about the markets and
characterize them, which I think will give you a better appreciation for
the state of our business. I'm sure you are probably fairly familiar
with the aerospace side. It's very steady, probably a 3% to 5% long-term
growth rate. Our business is very healthy and we think we can maintain
our share in that relatively modest growth marketplace and continue to
pour off the cash that we currently do. However, on the industrial side
of the business, the area really providing very strong growth for us is
in the power generation area. That was 35% of our total business last
year ' providing components and fuel systems to engines and turbines
that are used to make electricity. That business is just growing hand
over fist. Last year we secured a long-term contract with General
Electric Power Systems that's worth in excess of $500 million over the
next five years. We also have secured contracts with other major engine
and turbine makers. The power generation market where we participate
consists of large, 100 to 200 megawatt natural gas fired turbine
generator sets, down to microturbines that are used to generate
electricity and everything in between. The smaller end is called
distributed power and that is where a user, in essence, buys his own
generating equipment to use for his own needs. That whole business from
the small end to the very large gas turbines is growing at an
unprecedented rate today. Our ability to put together cost-effective,
high-performance systems for these engine makers is really giving us
huge opportunities for very strong growth of our business.

TWST: What is the agenda then when you look out over the next 12-24
months? What would make that time frame a success at Woodward?

Mr. Halbrook: Execution. The market is strong. Our product line has
every other competitor beaten by a wide margin because we can do so many
different things to put a system together. In essence, the stars are
lined up for us. We've got great products and robust markets. Our
challenge is to execute ' to deliver the increase in business that we
are capturing. I think the risk is very small. We are focused intensely
on achieving our goals.

TWST: What would be the key summary points then that you would give an
investor audience today to convince them to buy in?

Mr. Halbrook: The marketplace has proven and demonstrated our product
strategy to be a roaring success. Customers are buying our products very
handily. With our system strategy, our content per engine is growing.
We've got market share improvement, and it's very strong for us. The
aerospace market is steady. That business is a high cash flow business
for us, and the industrial part of our business is growing at double-
digit rates. We are able to take market share in robust markets. The
bottom line is we have extremely strong prospects. We are confident that
we can produce and have healthy sustainable growth for the next several
years.

TWST: Thank you. (DA)

JOHN A. HALBROOK
Chairman & CEO
 Woodward Governor Company
 5001 North Second Street
 Rockford, IL 61111
 (815) 877-7441
 (815) 877-9547 - FAX
 www.woodward.com
 e-mail: coirp_stock@woodward.com
 Investor Relations Contact:
 investorrelations@woodward.com

Each Executive who is the featured subject of a TWST Interview is
offered the opportunity to include an Investors Brief or other highlight
material to be provided and sponsored by and for the company.

Copyright 2001 The Wall Street Transcript Corporation
All Rights Reserved


The Wall Street Transcript (TWST) interviews are published verbatim, and TWST does not in any way endorse or guarantee the accuracy of any information or opinions expressed herein and all opinions are subject to change without notice. Nothing herein constitutes a solicitation to buy or sell any securities. TWST interviews with CEOs may include include "forward-looking statements", which are based on factors that involve risks and uncertainties. Actual results may differ materially from those expressed or implied. TWST shall have no liability whatsoever for any trading losses arising out of use of this information. Copyright 1999 Wall Street Transcript Corporation. All Rights Reserved.