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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2022

or

  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____ to _____

Commission file number 000-08408

WOODWARD, INC.

(Exact name of registrant as specified in its charter)

 

Delaware

 

36-1984010

(State or other jurisdiction of incorporation or organization)

 

(I.R.S. Employer Identification No.)

 

 

 

1081 Woodward Way, Fort Collins, Colorado

 

80524

(Address of principal executive offices)

 

(Zip Code)

 

(970) 482-5811

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

 

 

 

Common Stock, par value $0.001455 per share

WWD

NASDAQ Global Select Market

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes   No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company.  See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer    Accelerated Filer     Non-accelerated Filer     Smaller Reporting Company

Emerging Growth Company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes No

As of May 4, 2022, 60,645,061 shares of the registrant’s common stock with a par value of $0.001455 per share were outstanding.

 

 

 

 

 


 

 

 

 

 

 

TABLE OF CONTENTS

 

 

 

 

 

Page

PART I – FINANCIAL INFORMATION

Item 1.

 

Financial Statements

 

1

 

 

Condensed Consolidated Statements of Earnings

 

1

 

 

Condensed Consolidated Statements of Comprehensive Earnings

 

2

 

 

Condensed Consolidated Balance Sheets

 

3

 

 

Condensed Consolidated Statements of Cash Flows

 

4

 

 

Condensed Consolidated Statements of Stockholders’ Equity

 

5

 

 

Notes to Condensed Consolidated Financial Statements

 

7

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

27

 

 

Forward Looking Statements

 

27

 

 

Overview

 

28

 

 

Results of Operations

 

30

 

 

Liquidity and Capital Resources

 

34

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

39

Item 4.

 

Controls and Procedures

 

39

PART II – OTHER INFORMATION

Item 1.

 

Legal Proceedings

 

39

Item 1A.

 

Risk Factors

 

39

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

40

Item 6.

 

Exhibits

 

40

 

 

Signatures

 

41

 

 

 

 


 

 

PART I – FINANCIAL INFORMATION

Item 1.

Financial Statements

WOODWARD, INC.

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

(In thousands, except per share amounts)

(Unaudited)

 

 

 

 

 

Three-Months Ended

 

 

Six-Months Ended

 

 

 

March 31,

 

 

March 31,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Net sales

 

$

586,839

 

 

$

581,321

 

 

$

1,128,425

 

 

$

1,118,940

 

Costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of goods sold

 

 

453,425

 

 

 

434,243

 

 

 

872,576

 

 

 

835,883

 

Selling, general and administrative expenses

 

 

44,124

 

 

 

44,329

 

 

 

106,430

 

 

 

100,440

 

Research and development costs

 

 

32,384

 

 

 

27,627

 

 

 

57,776

 

 

 

59,623

 

Interest expense

 

 

8,197

 

 

 

8,249

 

 

 

16,503

 

 

 

17,155

 

Interest income

 

 

(500

)

 

 

(283

)

 

 

(1,141

)

 

 

(778

)

Other (income) expense, net

 

 

(4,887

)

 

 

(11,331

)

 

 

(15,561

)

 

 

(19,454

)

Total costs and expenses

 

 

532,743

 

 

 

502,834

 

 

 

1,036,583

 

 

 

992,869

 

Earnings before income taxes

 

 

54,096

 

 

 

78,487

 

 

 

91,842

 

 

 

126,071

 

Income tax expense

 

 

6,190

 

 

 

10,174

 

 

 

13,631

 

 

 

16,188

 

Net earnings

 

$

47,906

 

 

$

68,313

 

 

$

78,211

 

 

$

109,883

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings per share

 

$

0.77

 

 

$

1.08

 

 

$

1.24

 

 

$

1.74

 

Diluted earnings per share

 

$

0.74

 

 

$

1.04

 

 

$

1.21

 

 

$

1.68

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted Average Common Shares Outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

62,550

 

 

 

63,278

 

 

 

62,825

 

 

 

63,043

 

Diluted

 

 

64,618

 

 

 

65,654

 

 

 

64,863

 

 

 

65,274

 

 

See accompanying Notes to Condensed Consolidated Financial Statements

1


 

WOODWARD, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS

(In thousands)

(Unaudited)

 

 

 

Three-Months Ended

 

 

Six-Months Ended

 

 

 

March 31,

 

 

March 31,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Net earnings

 

$

47,906

 

 

$

68,313

 

 

$

78,211

 

 

$

109,883

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive earnings:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

(4,621

)

 

 

(8,789

)

 

 

(7,059

)

 

 

8,539

 

Net gain (loss) on foreign currency transactions designated as hedges of net investments in foreign subsidiaries

 

 

673

 

 

 

(2,329

)

 

 

1,744

 

 

 

(102

)

Taxes on changes in foreign currency translation adjustments

 

 

(463

)

 

 

(2,555

)

 

 

(1,449

)

 

 

(871

)

Foreign currency translation and transactions adjustments, net of tax

 

 

(4,411

)

 

 

(13,673

)

 

 

(6,764

)

 

 

7,566

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized gain/(loss) on fair value adjustment of derivative instruments

 

 

12,411

 

 

 

8,892

 

 

 

24,780

 

 

 

(21,766

)

Reclassification of net realized (gain)/loss on derivatives to earnings

 

 

(6,256

)

 

 

(20,683

)

 

 

(16,331

)

 

 

277

 

Taxes on changes in derivative transactions

 

 

(215

)

 

 

1,543

 

 

 

(295

)

 

 

203

 

Derivative adjustments, net of tax

 

 

5,940

 

 

 

(10,248

)

 

 

8,154

 

 

 

(21,286

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortization of pension and other postretirement plan:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net prior service cost

 

 

251

 

 

 

250

 

 

 

502

 

 

 

498

 

Net loss

 

 

187

 

 

 

377

 

 

 

374

 

 

 

747

 

Foreign currency exchange rate changes on pension and other postretirement benefit plan liabilities

 

 

592

 

 

 

453

 

 

 

622

 

 

 

(1,244

)

Taxes on changes in pension and other postretirement benefit plan liability adjustments, net of foreign currency exchange rate changes

 

 

(292

)

 

 

(284

)

 

 

(406

)

 

 

72

 

Pension and other postretirement benefit plan adjustments, net of tax

 

 

738

 

 

 

796

 

 

 

1,092

 

 

 

73

 

Total comprehensive earnings

 

$

50,173

 

 

$

45,188

 

 

$

80,693

 

 

$

96,236

 

 

See accompanying Notes to Condensed Consolidated Financial Statements

 

2


 

 

WOODWARD, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except per share amounts)

(Unaudited)

 

 

 

March 31,

 

 

September 30,

 

 

 

2022

 

 

2021

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents, including restricted cash of $522 and $1,907, respectively

 

$

208,355

 

 

$

448,462

 

Accounts receivable, less allowance for uncollectible amounts of $3,141 and $3,664, respectively

 

 

575,174

 

 

 

523,051

 

Inventories

 

 

484,933

 

 

 

419,971

 

Income taxes receivable

 

 

17,415

 

 

 

12,071

 

Other current assets

 

 

45,513

 

 

 

61,168

 

Total current assets

 

 

1,331,390

 

 

 

1,464,723

 

Property, plant and equipment, net

 

 

923,651

 

 

 

950,569

 

Goodwill

 

 

796,028

 

 

 

805,333

 

Intangible assets, net

 

 

522,502

 

 

 

559,289

 

Deferred income tax assets

 

 

13,798

 

 

 

14,066

 

Other assets

 

 

303,175

 

 

 

297,024

 

Total assets

 

$

3,890,544

 

 

$

4,091,004

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Current portion of long-term debt

 

$

459

 

 

$

728

 

Accounts payable

 

 

188,543

 

 

 

170,909

 

Income taxes payable

 

 

17,701

 

 

 

11,481

 

Accrued liabilities

 

 

162,343

 

 

 

183,139

 

Total current liabilities

 

 

369,046

 

 

 

366,257

 

Long-term debt, less current portion

 

 

728,247

 

 

 

734,122

 

Deferred income tax liabilities

 

 

155,092

 

 

 

157,936

 

Other liabilities

 

 

586,280

 

 

 

617,908

 

Total liabilities

 

 

1,838,665

 

 

 

1,876,223

 

Commitments and contingencies (Note 21)

 

 

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

 

 

Preferred stock, par value $0.003 per share, 10,000 shares authorized, no shares issued

 

 

 

 

 

 

Common stock, par value $0.001455 per share, 150,000 shares authorized, 72,960 shares issued

 

 

106

 

 

 

106

 

Additional paid-in capital

 

 

287,766

 

 

 

261,735

 

Accumulated other comprehensive losses

 

 

(63,137

)

 

 

(65,619

)

Deferred compensation

 

 

6,678

 

 

 

7,949

 

Retained earnings

 

 

2,656,590

 

 

 

2,600,513

 

 

 

 

2,888,003

 

 

 

2,804,684

 

Treasury stock at cost, 11,427 shares and 9,702 shares, respectively

 

 

(829,446

)

 

 

(581,954

)

Treasury stock held for deferred compensation, at cost, 140 shares and 167 shares, respectively

 

 

(6,678

)

 

 

(7,949

)

Total stockholders' equity

 

 

2,051,879

 

 

 

2,214,781

 

Total liabilities and stockholders' equity

 

$

3,890,544

 

 

$

4,091,004

 

 

See accompanying Notes to Condensed Consolidated Financial Statements

3


 

WOODWARD, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

 

 

Six-Months Ended March 31,

 

 

 

2022

 

 

2021

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net earnings

 

$

78,211

 

 

$

109,883

 

Adjustments to reconcile net earnings to net cash provided by operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

61,331

 

 

 

65,556

 

Net (gain) on sales of assets and businesses

 

 

(1,541

)

 

 

(1,942

)

Stock-based compensation

 

 

13,957

 

 

 

16,438

 

Deferred income taxes

 

 

(55

)

 

 

1,622

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Trade accounts receivable

 

 

(1,562

)

 

 

(10,565

)

Unbilled receivables (contract assets)

 

 

(48,742

)

 

 

(32,565

)

Costs to fulfill a contract

 

 

(10,884

)

 

 

(9,226

)

Inventories

 

 

(67,263

)

 

 

16,877

 

Accounts payable and accrued liabilities

 

 

15,454

 

 

 

53,555

 

Contract liabilities

 

 

9,779

 

 

 

14,370

 

Income taxes

 

 

(725

)

 

 

4,700

 

Retirement benefit obligations

 

 

(2,495

)

 

 

(3,450

)

Other

 

 

4,643

 

 

 

(6,256

)

Net cash provided by operating activities

 

 

50,108

 

 

 

218,997

 

 

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Payments for purchase of property, plant, and equipment

 

 

(24,150

)

 

 

(13,313

)

Proceeds from sale of assets

 

 

5

 

 

 

86

 

Payments for purchases of short-term investments

 

 

(8

)

 

 

(2,750

)

Proceeds from sales of short-term investments

 

 

11,305

 

 

 

16,566

 

Net cash (used in) provided by investing activities

 

 

(12,848

)

 

 

589

 

 

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Cash dividends paid

 

 

(22,134

)

 

 

(15,404

)

Proceeds from sales of treasury stock

 

 

19,399

 

 

 

28,454

 

Payments for repurchases of common stock

 

 

(273,535

)

 

 

 

Borrowings on revolving lines of credit and short-term borrowings

 

 

11,500

 

 

 

74,400

 

Payments on revolving lines of credit and short-term borrowings

 

 

(11,500

)

 

 

(74,400

)

Payments of long-term debt and finance lease obligations

 

 

(564

)

 

 

(100,835

)

Net cash used in financing activities

 

 

(276,834

)

 

 

(87,785

)

Effect of exchange rate changes on cash and cash equivalents

 

 

(533

)

 

 

2,524

 

Net change in cash and cash equivalents

 

 

(240,107

)

 

 

134,325

 

Cash and cash equivalents, including restricted cash, at beginning of year

 

 

448,462

 

 

 

153,270

 

Cash and cash equivalents, including restricted cash, at end of period

 

$

208,355

 

 

$

287,595

 

 

See accompanying Notes to Condensed Consolidated Financial Statements

 

4


 

 

WOODWARD, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands)

(Unaudited)

 

 

 

Number of shares

 

 

Stockholders' equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated other comprehensive (loss) earnings

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common

stock

 

 

Treasury

stock

 

 

Treasury

stock held for

deferred

compensation

 

 

Common

stock

 

 

Additional

paid-in

capital

 

 

Foreign

currency

translation

adjustments

 

 

Unrealized

derivative

gains

(losses)

 

 

Minimum

retirement

benefit

liability

adjustments

 

 

Total

accumulated

other

comprehensive

(loss) earnings

 

 

Deferred

compensation

 

 

Retained

earnings

 

 

Treasury

stock at

cost

 

 

Treasury

stock held for

deferred

compensation

 

 

Total

stockholders'

equity

 

Balances as of January 1, 2021

 

 

72,960

 

 

 

(9,992

)

 

 

(201

)

 

$

106

 

 

$

244,394

 

 

$

(19,452

)

 

$

(31,495

)

 

$

(29,369

)

 

$

(80,316

)

 

$

9,485

 

 

$

2,464,373

 

 

$

(565,095

)

 

$

(9,485

)

 

$

2,063,462

 

Net earnings

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

68,313