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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, 2024

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 2, 2024, 60,919,845 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

 

29

 

 

Liquidity and Capital Resources

 

33

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

38

Item 4.

 

Controls and Procedures

 

38

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

 

39

Item 5.

 

Other Information

 

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,

 

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

Net sales

 

$

835,343

 

 

$

718,214

 

 

$

1,622,073

 

 

$

1,336,833

 

Costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Cost of goods sold

 

 

600,954

 

 

 

559,149

 

 

 

1,183,335

 

 

 

1,051,812

 

Selling, general and administrative expenses

 

 

81,447

 

 

 

75,578

 

 

 

155,958

 

 

 

138,765

 

Research and development costs

 

 

36,465

 

 

 

37,777

 

 

 

67,259

 

 

 

66,411

 

Restructuring charges

 

 

 

 

 

5,172

 

 

 

 

 

 

5,172

 

Interest expense

 

 

11,530

 

 

 

12,845

 

 

 

22,966

 

 

 

23,987

 

Interest income

 

 

(1,293

)

 

 

(508

)

 

 

(2,766

)

 

 

(874

)

Other (income) expense, net

 

 

(14,384

)

 

 

(12,040

)

 

 

(35,023

)

 

 

(20,430

)

Total costs and expenses

 

 

714,719

 

 

 

677,973

 

 

 

1,391,729

 

 

 

1,264,843

 

Earnings before income taxes

 

 

120,624

 

 

 

40,241

 

 

 

230,344

 

 

 

71,990

 

Income tax expense

 

 

23,068

 

 

 

4,730

 

 

 

42,744

 

 

 

6,873

 

Net earnings

 

$

97,556

 

 

$

35,511

 

 

$

187,600

 

 

$

65,117

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings per share

 

$

1.61

 

 

$

0.59

 

 

$

3.12

 

 

$

1.09

 

Diluted earnings per share

 

$

1.56

 

 

$

0.58

 

 

$

3.02

 

 

$

1.07

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted Average Common Shares Outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

60,427

 

 

 

59,807

 

 

 

60,223

 

 

 

59,736

 

Diluted

 

 

62,365

 

 

 

61,227

 

 

 

62,106

 

 

 

61,083

 

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,

 

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

Net earnings

 

$

97,556

 

 

$

35,511

 

 

$

187,600

 

 

$

65,117

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive earnings:

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

(11,759

)

 

 

8,495

 

 

 

12,082

 

 

 

38,722

 

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

 

 

978

 

 

 

(807

)

 

 

(888

)

 

 

(4,432

)

Taxes on changes in foreign currency translation adjustments

 

 

108

 

 

 

928

 

 

 

(179

)

 

 

2,272

 

Foreign currency translation and transactions adjustments, net of tax

 

 

(10,673

)

 

 

8,616

 

 

 

11,015

 

 

 

36,562

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

7,349

 

 

 

(2,096

)

 

 

(11,161

)

 

 

(34,684

)

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

 

 

(8,875

)

 

 

7,620

 

 

 

9,024

 

 

 

45,806

 

Taxes on changes in derivative transactions

 

 

414

 

 

 

(221

)

 

 

414

 

 

 

(334

)

Derivative adjustments, net of tax

 

 

(1,112

)

 

 

5,303

 

 

 

(1,723

)

 

 

10,788

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortization of pension and other postretirement plan:

 

 

 

 

 

 

 

 

 

 

 

 

Net prior service cost

 

 

180

 

 

 

181

 

 

 

360

 

 

 

360

 

Net (gain)

 

 

(254

)

 

 

(204

)

 

 

(504

)

 

 

(403

)

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

 

 

(243

)

 

 

70

 

 

 

79

 

 

 

511

 

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

 

 

85

 

 

 

48

 

 

 

43

 

 

 

127

 

Pension and other postretirement benefit plan adjustments, net of tax

 

 

(232

)

 

 

95

 

 

 

(22

)

 

 

595

 

Total comprehensive earnings

 

$

85,539

 

 

$

49,525

 

 

$

196,870

 

 

$

113,062

 

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,

 

 

 

2024

 

 

2023

 

ASSETS

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

316,932

 

 

$

137,447

 

Accounts receivable, less allowance for uncollectible amounts of $7,126 and $5,847, respectively

 

 

831,777

 

 

 

749,859

 

Inventories

 

 

580,377

 

 

 

517,843

 

Income taxes receivable

 

 

32,816

 

 

 

14,120

 

Other current assets

 

 

50,072

 

 

 

50,183

 

Total current assets

 

 

1,811,974

 

 

 

1,469,452

 

Property, plant and equipment, net

 

 

921,355

 

 

 

913,094

 

Goodwill

 

 

796,706

 

 

 

791,468

 

Intangible assets, net

 

 

443,414

 

 

 

452,363

 

Deferred income tax assets

 

 

58,911

 

 

 

58,550

 

Other assets

 

 

333,899

 

 

 

325,276

 

Total assets

 

$

4,366,259

 

 

$

4,010,203

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Short-term debt

 

$

141,300

 

 

$

 

Current portion of long-term debt

 

 

699

 

 

 

75,817

 

Accounts payable

 

 

258,670

 

 

 

234,328

 

Income taxes payable

 

 

54,242

 

 

 

44,435

 

Accrued liabilities

 

 

236,944

 

 

 

262,616

 

Total current liabilities

 

 

691,855

 

 

 

617,196

 

Long-term debt, less current portion

 

 

649,039

 

 

 

645,709

 

Deferred income tax liabilities

 

 

135,022

 

 

 

132,819

 

Other liabilities

 

 

560,930

 

 

 

543,490

 

Total liabilities

 

 

2,036,846

 

 

 

1,939,214

 

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

 

 

374,278

 

 

 

327,941

 

Accumulated other comprehensive losses

 

 

(61,401

)

 

 

(70,671

)

Deferred compensation

 

 

3,032

 

 

 

2,776

 

Retained earnings

 

 

3,067,847

 

 

 

2,908,574

 

 

 

3,383,862

 

 

 

3,168,726

 

Treasury stock at cost, 12,185 shares and 13,070 shares, respectively

 

 

(1,051,417

)

 

 

(1,094,961

)

Treasury stock held for deferred compensation, at cost, 53 shares and 55 shares, respectively

 

 

(3,032

)

 

 

(2,776

)

Total stockholders' equity

 

 

2,329,413

 

 

 

2,070,989

 

Total liabilities and stockholders' equity

 

$

4,366,259

 

 

$

4,010,203

 

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,

 

 

 

2024

 

 

2023

 

Cash flows from operating activities:

 

 

 

 

 

 

Net earnings

 

$

187,600

 

 

$

65,117

 

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

 

 

 

 

 

 

Depreciation and amortization

 

 

58,050

 

 

 

59,257

 

Net (gain) loss on sales of assets and businesses

 

 

(872

)

 

 

890

 

Stock-based compensation

 

 

19,903

 

 

 

15,538

 

Deferred income taxes

 

 

43

 

 

 

545

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Trade accounts receivable

 

 

(40,619

)

 

 

(26,467

)

Unbilled receivables (contract assets)

 

 

(39,289

)

 

 

(18,015

)

Costs to fulfill a contract

 

 

(7,572

)

 

 

(4,193

)

Inventories

 

 

(59,841

)

 

 

(42,408

)

Accounts payable and accrued liabilities

 

 

12,131

 

 

 

5,426

 

Contract liabilities

 

 

26,748

 

 

 

9,769

 

Income taxes

 

 

(14,210

)

 

 

(34,886

)

Retirement benefit obligations

 

 

(1,240

)

 

 

(615

)

Other

 

 

3,286

 

 

 

10,192

 

Net cash provided by operating activities

 

 

144,118

 

 

 

40,150

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

Payments for purchase of property, plant, and equipment

 

 

(56,301

)

 

 

(44,046

)

Proceeds from sale of assets

 

 

51

 

 

 

199

 

Proceeds from business divestiture

 

 

600

 

 

 

 

Business acquisition, net of cash acquired

 

 

 

 

 

878

 

Payments for short-term investments

 

 

(3,723

)

 

 

 

Proceeds from sales of short-term investments

 

 

9,732

 

 

 

7,733

 

Net cash (used in) investing activities

 

 

(49,641

)

 

 

(35,236

)

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

Cash dividends paid

 

 

(28,327

)

 

 

(24,537

)

Proceeds from sales of treasury stock

 

 

43,087

 

 

 

14,067

 

Payments for repurchases of common stock

 

 

 

 

 

(26,369

)

Borrowings on revolving lines of credit and short-term borrowings

 

 

1,539,100

 

 

 

1,031,800

 

Payments on revolving lines of credit and short-term borrowings

 

 

(1,397,800

)

 

 

(968,100

)

Payments of debt financing costs

 

 

 

 

 

(2,236

)

Payments of long-term debt and finance lease obligations

 

 

(75,472

)

 

 

(288

)

Net cash provided by financing activities

 

 

80,588

 

 

 

24,337

 

Effect of exchange rate changes on cash and cash equivalents

 

 

4,420

 

 

 

(7,668

)

Net change in cash and cash equivalents

 

 

179,485

 

 

 

21,583

 

Cash and cash equivalents at beginning of year

 

 

137,447

 

 

 

107,844

 

Cash and cash equivalents at end of period

 

$

316,932

 

 

$

129,427

 

See accompanying Notes to Condensed Consolidated Financial Statements

4


 

WOODWARD, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands)

(Unaudited)

 

Stockholders' equity

 

 

 

 

 

 

 

 

Accumulated other comprehensive (loss) earnings

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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, 2023

$

106

 

 

$

305,100

 

 

$

(58,548

)

 

$

(730

)

 

$

646

 

 

$

(58,632

)

 

$

5,975

 

 

$

2,745,484

 

 

$

(1,052,623

)

 

$

(5,975

)

 

$

1,939,435

 

Net earnings

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

35,511

 

 

 

 

 

 

 

 

 

35,511

 

Other comprehensive earnings (loss), net of tax

 

 

 

 

 

 

 

8,616

 

 

 

5,303

 

 

 

95

 

 

 

14,014

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

14,014

 

Cash dividends paid ($0.22 per share)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(13,182

)

 

 

 

 

 

 

 

 

(13,182

)

Sales of treasury stock

 

 

 

 

1,259

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

11,488

 

 

 

 

 

 

12,747

 

Common shares issued for benefit plans

 

 

 

 

10,860

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

8,447

 

 

 

 

 

 

19,307

 

Stock-based compensation

 

 

 

 

4,222

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,222

 

Purchases of stock by deferred compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

42

 

 

 

 

 

 

 

 

 

(42

)

 

 

 

Distribution of stock from deferred compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,698

)

 

 

 

 

 

 

 

 

2,698

 

 

 

 

Balances as of March 31, 2023

$

106

 

 

$

321,441

 

 

$

(49,932

)

 

$

4,573

 

 

$

741

 

 

$

(44,618

)

 

$

3,319

 

 

$

2,767,813

 

 

$

(1,032,688

)

 

$

(3,319

)

 

$

2,012,054

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances as of January 1, 2024

$

106

 

 

$

337,038

 

 

$

(45,705

)

 

$

(10,330

)

 

$

6,651

 

 

$

(49,384

)

 

$

3,049

 

 

$

2,985,409

 

 

$

(1,083,107

)

 

$

(3,049

)

 

 

2,190,062

 

Net earnings

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

97,556

 

 

 

 

 

 

 

 

 

97,556

 

Other comprehensive earnings (loss), net of tax

 

 

 

 

 

 

 

(10,673

)

 

 

(1,112

)

 

 

(232

)

 

 

(12,017

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(12,017

)

Cash dividends paid ($0.25 per share)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(15,118

)

 

 

 

 

 

 

 

 

(15,118

)

Sales of treasury stock

 

 

 

 

8,308

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

23,769

 

 

 

 

 

 

32,077

 

Common shares issued for benefit plans

 

 

 

 

13,966