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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 December 31, 2023

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 February 1, 2024, 60,298,456 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

 

6

Item 2.

 

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

 

25

 

 

Forward Looking Statements

 

25

 

 

Overview

 

26

 

 

Results of Operations

 

27

 

 

Liquidity and Capital Resources

 

30

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

34

Item 4.

 

Controls and Procedures

 

34

PART II – OTHER INFORMATION

Item 1.

 

Legal Proceedings

 

35

Item 1A.

 

Risk Factors

 

35

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

35

Item 5.

 

Other Information

 

35

Item 6.

 

Exhibits

 

36

 

 

Signatures

 

36

 

 

 

 


 

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

 

 

 

December 31,

 

 

 

2023

 

 

2022

 

Net sales

 

$

786,730

 

 

$

618,619

 

Costs and expenses:

 

 

 

 

 

 

Cost of goods sold

 

 

582,381

 

 

 

492,663

 

Selling, general and administrative expenses

 

 

74,511

 

 

 

63,187

 

Research and development costs

 

 

30,794

 

 

 

28,634

 

Interest expense

 

 

11,436

 

 

 

11,142

 

Interest income

 

 

(1,473

)

 

 

(366

)

Other (income) expense, net

 

 

(20,639

)

 

 

(8,390

)

Total costs and expenses

 

 

677,010

 

 

 

586,870

 

Earnings before income taxes

 

 

109,720

 

 

 

31,749

 

Income tax expense

 

 

19,676

 

 

 

2,143

 

Net earnings

 

$

90,044

 

 

$

29,606

 

 

 

 

 

 

 

 

Earnings per share:

 

 

 

 

 

 

Basic earnings per share

 

$

1.50

 

 

$

0.50

 

Diluted earnings per share

 

$

1.46

 

 

$

0.49

 

 

 

 

 

 

 

 

Weighted Average Common Shares Outstanding:

 

 

 

 

 

 

Basic

 

 

60,021

 

 

 

59,667

 

Diluted

 

 

61,846

 

 

 

60,928

 

See accompanying Notes to Condensed Consolidated Financial Statements

1


 

WOODWARD, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS

(In thousands)

(Unaudited)

 

 

Three Months Ended

 

 

 

December 31,

 

 

 

2023

 

 

2022

 

Net earnings

 

$

90,044

 

 

$

29,606

 

 

 

 

 

 

 

 

Other comprehensive earnings:

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

23,841

 

 

 

30,227

 

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

 

 

(1,866

)

 

 

(3,625

)

Taxes on changes in foreign currency translation adjustments

 

 

(287

)

 

 

1,344

 

Foreign currency translation and transactions adjustments, net of tax

 

 

21,688

 

 

 

27,946

 

 

 

 

 

 

 

 

Unrealized (loss) on fair value adjustment of derivative instruments

 

 

(18,510

)

 

 

(32,588

)

Reclassification of net realized loss on derivatives to earnings

 

 

17,899

 

 

 

38,186

 

Taxes on changes in derivative transactions

 

 

 

 

 

(113

)

Derivative adjustments, net of tax

 

 

(611

)

 

 

5,485

 

 

 

 

 

 

 

Amortization of pension and other postretirement plan:

 

 

 

 

 

 

Net prior service cost

 

 

180

 

 

 

179

 

Net (gain)

 

 

(250

)

 

 

(199

)

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

 

 

322

 

 

 

441

 

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

 

 

(42

)

 

 

79

 

Pension and other postretirement benefit plan adjustments, net of tax

 

 

210

 

 

 

500

 

Total comprehensive earnings

 

$

111,331

 

 

$

63,537

 

See accompanying Notes to Condensed Consolidated Financial Statements

2


 

WOODWARD, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except per share amounts)

(Unaudited)

 

 

December 31,

 

 

September 30,

 

 

 

2023

 

 

2023

 

ASSETS

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

144,348

 

 

$

137,447

 

Accounts receivable, less allowance for uncollectible amounts of $5,777 and $5,847, respectively

 

 

778,065

 

 

 

749,859

 

Inventories

 

 

559,673

 

 

 

517,843

 

Income taxes receivable

 

 

11,348

 

 

 

14,120

 

Other current assets

 

 

52,723

 

 

 

50,183

 

Total current assets

 

 

1,546,157

 

 

 

1,469,452

 

Property, plant and equipment, net

 

 

931,253

 

 

 

913,094

 

Goodwill

 

 

803,487

 

 

 

791,468

 

Intangible assets, net

 

 

460,986

 

 

 

452,363

 

Deferred income tax assets

 

 

59,733

 

 

 

58,550

 

Other assets

 

 

329,189

 

 

 

325,276

 

Total assets

 

$

4,130,805

 

 

$

4,010,203

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Short-term debt

 

$

65,100

 

 

$

 

Current portion of long-term debt

 

 

745

 

 

 

75,817

 

Accounts payable

 

 

253,398

 

 

 

234,328

 

Income taxes payable

 

 

51,914

 

 

 

44,435

 

Accrued liabilities

 

 

211,657

 

 

 

262,616

 

Total current liabilities

 

 

582,814

 

 

 

617,196

 

Long-term debt, less current portion

 

 

653,029

 

 

 

645,709

 

Deferred income tax liabilities

 

 

139,018

 

 

 

132,819

 

Other liabilities

 

 

565,882

 

 

 

543,490

 

Total liabilities

 

 

1,940,743

 

 

 

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

 

 

337,038

 

 

 

327,941

 

Accumulated other comprehensive losses

 

 

(49,384

)

 

 

(70,671

)

Deferred compensation

 

 

3,049

 

 

 

2,776

 

Retained earnings

 

 

2,985,409

 

 

 

2,908,574

 

 

 

3,276,218

 

 

 

3,168,726

 

Treasury stock at cost, 12,823 shares and 13,070 shares, respectively

 

 

(1,083,107

)

 

 

(1,094,961

)

Treasury stock held for deferred compensation, at cost, 54 shares and, 55 shares, respectively

 

 

(3,049

)

 

 

(2,776

)

Total stockholders' equity

 

 

2,190,062

 

 

 

2,070,989

 

Total liabilities and stockholders' equity

 

$

4,130,805

 

 

$

4,010,203

 

See accompanying Notes to Condensed Consolidated Financial Statements

3


 

WOODWARD, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

 

Three Months Ended December 31,

 

 

 

2023

 

 

2022

 

Cash flows from operating activities:

 

 

 

 

 

 

Net earnings

 

$

90,044

 

 

$

29,606

 

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

 

 

 

 

 

 

Depreciation and amortization

 

 

28,825

 

 

 

29,304

 

Net (gain) loss on sales of assets

 

 

(9

)

 

 

33

 

Stock-based compensation

 

 

4,937

 

 

 

11,316

 

Deferred income taxes

 

 

44

 

 

 

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Trade accounts receivable

 

 

6,430

 

 

 

31,318

 

Unbilled receivables (contract assets)

 

 

(27,154

)

 

 

(12,226

)

Costs to fulfill a contract

 

 

(1,580

)

 

 

(496

)

Inventories

 

 

(36,383

)

 

 

(50,559

)

Accounts payable and accrued liabilities

 

 

(31,654

)

 

 

(30,412

)

Contract liabilities

 

 

7,502

 

 

 

2,065

 

Income taxes

 

 

8,766

 

 

 

890

 

Retirement benefit obligations

 

 

(434

)

 

 

(664

)

Other

 

 

(2,545

)

 

 

(4,773

)

Net cash provided by operating activities

 

 

46,789

 

 

 

5,402

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

Payments for purchase of property, plant, and equipment

 

 

(41,812

)

 

 

(24,390

)

Proceeds from sale of assets and short-term investments

 

 

36

 

 

 

37

 

Business acquisition, net of cash acquired

 

 

 

 

 

878

 

Net cash (used in) investing activities

 

 

(41,776

)

 

 

(23,475

)

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

Cash dividends paid

 

 

(13,209

)

 

 

(11,355

)

Proceeds from sales of treasury stock

 

 

15,267

 

 

 

1,199

 

Payments for repurchases of common stock

 

 

 

 

 

(26,369

)

Borrowings on revolving lines of credit and short-term borrowings

 

 

728,600

 

 

 

413,700

 

Payments on revolving lines of credit and short-term borrowings

 

 

(663,500

)

 

 

(371,200

)

Payments of long-term debt and finance lease obligations

 

 

(75,249

)

 

 

(98

)

Net cash (used in) provided by financing activities

 

 

(8,091

)

 

 

5,877

 

Effect of exchange rate changes on cash and cash equivalents

 

 

9,979

 

 

 

3,687

 

Net change in cash and cash equivalents

 

 

6,901

 

 

 

(8,509

)

Cash and cash equivalents at beginning of year

 

 

137,447

 

 

 

107,844

 

Cash and cash equivalents at end of period

 

$

144,348

 

 

$

99,335

 

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 September 30, 2022

$

106

 

 

$

293,540

 

 

$

(86,494

)

 

$

(6,215

)

 

$

146

 

 

$

(92,563

)

 

$

6,781

 

 

$

2,727,233

 

 

$

(1,027,194

)

 

$

(6,781

)

 

$

1,901,122

 

Net earnings

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

29,606

 

 

 

 

 

 

 

 

 

29,606

 

Other comprehensive earnings (loss), net of tax

 

 

 

 

 

 

 

27,946

 

 

 

5,485

 

 

 

500

 

 

 

33,931

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

33,931

 

Cash dividends paid ($0.19 per share)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(11,355

)

 

 

 

 

 

 

 

 

(11,355

)

Sales of treasury stock

 

 

 

 

161

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

863

 

 

 

 

 

 

1,024

 

Purchase of treasury stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(26,369

)

 

 

 

 

 

(26,369

)

Common shares issued for benefit plans

 

 

 

 

83

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

77

 

 

 

 

 

 

160

 

Stock-based compensation

 

 

 

 

11,316

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

11,316

 

Purchases of stock by deferred compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

70

 

 

 

 

 

 

 

 

 

(70

)

 

 

 

Distribution of stock from deferred compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(876

)

 

 

 

 

 

 

 

 

876

 

 

 

 

Balances as of December 31, 2022

$

106

 

 

$

305,100

 

 

$

(58,548

)

 

$

(730

)

 

$

646

 

 

$

(58,632

)

 

$

5,975

 

 

$

2,745,484

 

 

$

(1,052,623

)

 

$

(5,975

)

 

$

1,939,435

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances as of September 30, 2023

$

106

 

 

$

327,941

 

 

$

(67,393

)

 

$

(9,719

)

 

$

6,441

 

 

$

(70,671

)

 

$

2,776

 

 

$

2,908,574

 

 

$

(1,094,961

)

 

$

(2,776

)

 

 

2,070,989

 

Net earnings

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

90,044

 

 

 

 

 

 

 

 

 

90,044

 

Other comprehensive earnings (loss), net of tax

 

 

 

 

 

 

 

21,688

 

 

 

(611

)

 

 

210

 

 

 

21,287

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

21,287

 

Cash dividends paid ($0.22 per share)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(13,209

)

 

 

 

 

 

 

 

 

(13,209

)

Sales of treasury stock

 

 

 

 

4,160

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

11,854

 

 

 

 

 

 

16,014

 

Stock-based compensation

 

 

 

 

4,937

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,937

 

Purchases of stock by deferred compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

32

 

 

 

 

 

 

 

 

 

(32

)

 

 

 

Distribution of stock from deferred compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

241

 

 

 

 

 

 

 

 

 

(241

)

 

 

 

Balances as of December 31, 2023

$

106

 

 

$

337,038

 

 

$

(45,705

)

 

$

(10,330

)

 

$

6,651

 

 

$

(49,384

)

 

$

3,049

 

 

$

2,985,409

 

 

$

(1,083,107

)

 

$

(3,049

)

 

$

2,190,062

 

See accompanying Notes to Condensed Consolidated Financial Statements

 

5


 

WOODWARD, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share amounts)

(Unaudited)

Note 1. Basis of presentation

The Condensed Consolidated Financial Statements of Woodward, Inc. (“Woodward” or the “Company”) as of December 31, 2023 and for the three months ended December 31, 2023 and 2022, included herein, have not been audited by an independent registered public accounting firm. These unaudited Condensed Consolidated Financial Statements reflect all normal recurring adjustments that, in the opinion of management, are necessary to present fairly Woodward’s financial position as of December 31, 2023, and the statements of earnings, comprehensive earnings, cash flows, and changes in stockholders’ equity for the periods presented herein. The results of operations for the three months ended December 31, 2023 and 2022 are not necessarily indicative of the operating results to be expected for other interim periods or for the full fiscal year. Dollar and share amounts contained in these unaudited Condensed Consolidated Financial Statements are in thousands, except per share amounts, unless otherwise noted.

The unaudited Condensed Consolidated Financial Statements included herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim reporting. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been condensed or omitted pursuant to such rules and regulations. Accordingly, these unaudited Condensed Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and Notes thereto included in Woodward’s most recent Annual Report on Form 10-K filed with the SEC and other financial information filed with the SEC.

Management is required to use estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements, the reported revenues and expenses recognized during the reporting period, and certain financial statement disclosures, in the preparation of the unaudited Condensed Consolidated Financial Statements included herein. Significant estimates in these unaudited Condensed Consolidated Financial Statements include allowances for credit losses; net realizable value of inventories; variable consideration including customer rebates earned and payable and early payment discounts; warranty reserves; useful lives of property and identifiable intangible assets; the evaluation of impairments of property, intangible assets, and goodwill; the provision for income tax and related valuation reserves; the valuation of derivative instruments; assumptions used in the determination of the funded status and annual expense of pension and postretirement employee benefit plans; the valuation of stock compensation instruments granted to employees, board members and any other eligible recipients; estimates of incremental borrowing rates used when estimating the present value of future lease payments; assumptions used when including renewal options or non-exercise of termination options in lease terms; estimates of total lifetime sales used in the recognition of revenue of deferred material rights and balance sheet classification of the related contract liability; estimates of total sales contract costs when recognizing revenue under the cost-to-cost method; and contingencies. Actual results could vary from Woodward’s estimates.

Note 2. New accounting standards

From time to time, the Financial Accounting Standards Board (“FASB”) or other standards setting bodies issue new accounting pronouncements. Updates to the FASB Accounting Standards Codification (“ASC”) are communicated through issuance of an Accounting Standards Update (“ASU”).

In November 2023, the FASB issued ASU 2023-07, "Improvements to Reportable Segment Disclosures." The purpose of ASU 2023-07 is to provide enhanced disclosures about significant segment expenses. The amendments in ASU 2023-07 are effective for fiscal years beginning after December 15, 2023 (fiscal year 2025 for Woodward), and interim periods within fiscal years beginning after December 15, 2024 (fiscal year 2026 for Woodward), with early adoption permitted, and are to be applied on a retrospective basis to all periods presented. Woodward is currently assessing the impact on its segment reporting disclosures.

In December 2023, the FASB issued ASU 2023-09, "Improvements to Income Tax Disclosures." The purpose of ASU 2023-09 is to provide enhanced disclosures surrounding income taxes by requiring, consistent categories and greater disaggregation of information in the rate reconciliation, the disaggregation of income taxes paid by jurisdiction, as well as several other changes to the income tax disclosure. The amendments in ASU 2023-09 are effective for fiscal years beginning after December 15, 2024 (fiscal year 2026 for Woodward), with early adoption permitted, and is required to be applied prospectively with the option of retrospective application. Woodward is currently assessing the impact on its income tax disclosures.

6


 

Note 3. Revenue

The amount of revenue recognized as point in time or over time follows:

 

 

Three Months Ended December 31, 2023

 

 

Three Months Ended December 31, 2022

 

 

 

Aerospace

 

 

Industrial

 

 

Consolidated

 

 

Aerospace

 

 

Industrial

 

 

Consolidated

 

Point in time

 

$

188,503

 

 

$

186,630

 

 

$

375,133

 

 

$

169,840

 

 

$

139,839

 

 

$

309,679

 

Over time

 

 

272,253

 

 

 

139,344

 

 

 

411,597

 

 

 

225,845

 

 

 

83,095

 

 

 

308,940

 

Total net sales

 

$

460,756

 

 

$

325,974

 

 

$

786,730

 

 

$

395,685

 

 

$

222,934

 

 

$

618,619

 

Accounts Receivable

Accounts receivable consisted of the following:

 

 

December 31, 2023

 

 

September 30, 2023

 

Billed receivables

 

 

 

 

 

 

Trade accounts receivable

 

$

426,598

 

 

$

434,287

 

Other (Chinese financial institutions)

 

 

57,098

 

 

 

50,940

 

Total billed receivables

 

 

483,696

 

 

 

485,227

 

Current unbilled receivables (contract assets)

 

 

300,146

 

 

 

270,479

 

Total accounts receivable

 

 

783,842

 

 

 

755,706

 

Less: Allowance for uncollectible amounts

 

 

(5,777

)

 

 

(5,847

)

Total accounts receivable, net

 

$

778,065

 

 

$

749,859

 

As of December 31, 2023, “Other assets” on the Condensed Consolidated Balance Sheets includes $6,945 of unbilled receivables not expected to be invoiced and collected within a period of twelve months, compared to $7,332 as of September 30, 2023.

Accounts receivable in Woodward’s Condensed Consolidated Financial Statements represent the net amount expected to be collected, and an allowance for uncollectible amounts related to credit losses is established based on expected losses. Expected losses are estimated by reviewing specific customer accounts, taking into consideration accounts receivable aging, credit risk of the customers, and historical payment history, as well as current and forecasted economic conditions and other relevant factors.

The allowance for uncollectible amounts and change in expected credit losses for trade accounts receivable and unbilled receivables (contract assets) consisted of the following:

 

 

Three Months Ended December 31,

 

 

 

2023

 

 

2022

 

Balance, beginning

 

$

5,847

 

 

$

3,922

 

Changes in estimates

 

 

298

 

 

 

344

 

Write-offs

 

 

(459

)

 

 

(83

)

Other1

 

 

91

 

 

 

20

 

Balance, ending

 

$

5,777

 

 

$

4,203

 

(1)
Includes effects of foreign exchange rate changes during the period.

Contract liabilities

Contract liabilities consisted of the following:

 

 

December 31, 2023

 

 

September 30, 2023

 

 

 

Current

 

 

Noncurrent

 

 

Current

 

 

Noncurrent

 

Deferred revenue from material rights from GE joint venture formation

 

$

6,255

 

 

$

232,553

 

 

$

6,147

 

 

$

233,997

 

Deferred revenue from advanced invoicing and/or prepayments from customers

 

 

9,638

 

 

 

4,196

 

 

 

6,868

 

 

 

2,196

 

Liability related to customer supplied inventory

 

 

14,357

 

 

 

 

 

 

14,543

 

 

 

 

Deferred revenue from material rights related to engineering and development funding

 

 

6,872

 

 

 

183,190

 

 

 

6,190

 

 

 

178,464

 

Net contract liabilities

 

$

37,122

 

 

$

419,939

 

 

$

33,748

 

 

$

414,657

 

 

7


 

Woodward recognized revenue of $13,033 in the three months ended December 31, 2023 from contract liabilities balances recorded as of October 1, 2023, compared to $8,885 in the three months ended December 31, 2022 from contract liabilities balances recorded as of October 1, 2022.

Remaining performance obligations

Remaining performance obligations related to the aggregate amount of the total contract transaction price of firm orders for which the performance obligation has not yet been recognized in revenue as of December 31, 2023 was $2,435,837, compared to $2,325,533 as of September 30, 2023, the majority of which relates to Woodward’s Aerospace segment in both periods. Woodward expects to recognize almost all of these remaining performance obligations within two years after December 31, 2023.

Remaining performance obligations related to material rights that have not yet been recognized in revenue as of December 31, 2023 was $472,957, compared to $457,391 as of September 30, 2023, of which $8,865 is expected to be recognized in the remainder of fiscal year 2024, $13,291 is expected to be recognized in fiscal year 2025, and the remaining balance is expected to be recognized thereafter. Woodward expects to recognize revenue from performance obligations related to material rights over the life of the underlying programs, which may be as long as forty years.

Disaggregation of Revenue

Woodward designs, produces, and services reliable, efficient, low-emission, and high-performance energy control products for diverse applications in markets throughout the world. Woodward reports financial results for each of its Aerospace and Industrial reportable segments. Woodward further disaggregates its revenue from contracts with customers by primary market as Woodward believes this best depicts how the nature, amount, timing, and uncertainty of its revenue and cash flows are affected by economic factors.

Revenue by primary market for the Aerospace reportable segment was as follows:

 

 

Three Months Ended December 31,

 

 

 

2023

 

 

2022

 

Commercial OEM

 

$

171,354

 

 

$

138,875

 

Commercial aftermarket

 

 

137,544

 

 

 

126,643

 

Defense OEM

 

 

93,425

 

 

 

89,762

 

Defense aftermarket

 

 

58,433

 

 

 

40,405

 

Total Aerospace segment net sales

 

$

460,756

 

 

$

395,685

 

Revenue by primary market for the Industrial reportable segment was as follows:

 

 

Three Months Ended December 31,

 

 

 

2023

 

 

2022

 

Power generation

 

$

98,106

 

 

$

81,577

 

Transportation

 

 

174,469

 

 

 

88,915

 

Oil and gas

 

 

53,399

 

 

 

52,442

 

Total Industrial segment net sales

 

$

325,974

 

 

$

222,934

 

During fiscal year 2023, for purposes of how we assess performance, we determined that certain revenue was better aligned with our markets consisting of power generation, transportation, and oil and gas, rather than the reciprocating engines and industrial turbines, as previously reported. For comparability, we have reclassified revenue for the three months ended December 31, 2022 to conform to the new presentation. This reclassification of revenue had no impact on our consolidated financial results.

The customers who each account for approximately 10% or more of net sales of each of Woodward’s reportable segments are as follows:

 

 

Three Months Ended December 31, 2023

 

Three Months Ended December 31, 2022

Aerospace

 

General Electric Company, RTX Corporation, The Boeing Company

 

RTX Corporation, General Electric Company, The Boeing Company

Industrial

 

Weichai Westport, Rolls-Royce PLC, Caterpillar, Inc.

 

Rolls-Royce PLC, Caterpillar, Inc., Wartsila, General Electric Company

 

8


 

Note 4. Earnings per share

Basic earnings per share is computed by dividing net earnings available to common stockholders by the weighted-average number of shares of common stock outstanding for the period.

Diluted earnings per share reflects the weighted-average number of shares outstanding after consideration of the dilutive effect of stock options and restricted stock.

The following is a reconciliation of net earnings to basic earnings per share and diluted earnings per share:

 

 

Three Months Ended December 31,

 

 

 

2023

 

 

2022

 

Numerator:

 

 

 

 

 

 

Net earnings

 

$

90,044

 

 

$

29,606

 

Denominator:

 

 

 

 

 

 

Basic shares outstanding

 

 

60,021

 

 

 

59,667

 

Dilutive effect of stock options and restricted stock

 

 

1,825

 

 

 

1,261

 

Diluted shares outstanding

 

 

61,846

 

 

 

60,928

 

Income per common share:

 

 

 

 

 

 

Basic earnings per share

 

$

1.50

 

 

$

0.50

 

Diluted earnings per share

 

$

1.46

 

 

$

0.49

 

The following stock option grants were outstanding but were excluded from the computation of diluted earnings per share because their inclusion would have been anti-dilutive:

 

 

Three Months Ended December 31,

 

 

 

2023

 

 

2022

 

Options

 

 

39

 

 

 

1,598

 

Weighted-average option price

 

$

114.53

 

 

$

101.18

 

The weighted-average shares of common stock outstanding for basic and diluted earnings per share included the weighted-average treasury stock shares held for deferred compensation obligations of the following:

 

 

Three Months Ended December 31,

 

 

 

2023

 

 

2022

 

Weighted-average treasury stock shares held for deferred compensation obligations

 

 

55

 

 

 

131

 

 

Note 5. Leases

Lessee arrangements

Woodward has entered into operating leases for certain facilities and equipment with terms in excess of one year under agreements that expire at various dates. Some leases require the payment of property taxes, insurance, maintenance costs, or other similar costs in addition to rental payments. Woodward has also entered into finance leases for equipment with terms in excess of one year under agreements that expire at various dates.

Lease-related assets and liabilities were as follows:

 

 

Classification on the Condensed Consolidated Balance Sheets

 

December 31, 2023

 

 

September 30, 2023

 

Assets:

 

 

 

 

 

 

 

 

Operating lease

 

Other assets

 

$

24,280

 

 

$

24,680

 

Finance lease

 

Property, plant, and equipment, net

 

 

3,089

 

 

 

3,337

 

Total lease assets

 

 

 

 

27,369

 

 

 

28,017

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Operating lease

 

Accrued liabilities

 

 

4,657

 

 

 

4,594

 

Finance lease

 

Current portion of long-term debt

 

 

745

 

 

 

817

 

Noncurrent liabilities:

 

 

 

 

 

 

 

 

Operating lease

 

Other liabilities

 

 

20,250

 

 

 

20,685

 

Finance lease

 

Long-term debt, less current portion

 

 

2,559

 

 

 

2,733

 

Total lease liabilities

 

 

 

$

28,211

 

 

$

28,829

 

 

9


 

Lease-related expenses were as follows:

 

 

Three Months Ended December 31,

 

 

 

2023

 

 

2022

 

Operating lease expense

 

$

1,632

 

 

$

1,487

 

Amortization of finance lease assets

 

 

248

 

 

 

256

 

Interest on finance lease liabilities

 

 

41

 

 

 

34

 

Variable lease expense

 

 

228

 

 

 

210

 

Short-term lease expense

 

 

38

 

 

 

57

 

Total lease expense

 

$

2,187

 

 

$

2,044

 

Lease-related supplemental cash flow information was as follows:

 

 

Three Months Ended December 31,

 

 

 

2023

 

 

2022

 

Cash paid for amounts included in the measurement of lease liabilities:

 

 

 

 

 

 

Operating cash flows for operating leases

 

$

1,316

 

 

$

1,360

 

Operating cash flows for finance leases

 

 

41

 

 

 

34

 

Financing cash flows for finance leases

 

 

249

 

 

 

99

 

Right-of-use assets obtained in exchange for recorded lease obligations:

 

 

 

 

 

Operating leases

 

 

477

 

 

 

411

 

Finance leases

 

 

 

 

 

27

 

Lessor arrangements

Woodward has assessed its manufacturing contracts and concluded that certain of the contracts for the manufacture of customer products met the criteria to be considered a leasing arrangement (“embedded leases”) with Woodward as the lessor. The specific manufacturing contracts that met the criteria were those that utilized Woodward property, plant, and equipment and which are substantially (more than 90%) dedicated to the manufacturing of the product(s) for a single customer. Woodward has dedicated manufacturing lines with four of its customers representing embedded leases, all of which qualified as operating leases with undefined quantities of future customer purchase commitments.

Although Woodward expects to allocate some portion of future net sales to these customers to embedded lessor arrangements, it cannot provide expected future undiscounted lease payments from property, plant, and equipment leased to customers as of December 31, 2023. If, in the future, customers reduce purchases of related products from Woodward, the Company believes it will derive additional value from the underlying equipment by repurposing its use to support other customer arrangements.

Revenue from contracts with customers that included embedded operating leases, which is included in “Net sales” in the Condensed Consolidated Statements of Earnings, was $1,364 for the three months ended December 31, 2023, compared to $1,388 for the three months ended December 31, 2022.

The carrying amount of property, plant, and equipment leased to others through embedded leasing arrangements, included in “Property, plant, and equipment, net” on the Condensed Consolidated Balance Sheets, follows:

 

 

December 31, 2023

 

 

September 30, 2023

 

Property, plant, and equipment

 

$

46,835

 

 

$

45,766

 

Less accumulated depreciation

 

 

(29,472

)

 

 

(28,128

)

Property, plant, and equipment, net

 

$

17,363

 

 

$

17,638

 

 

Note 6. Joint venture

In fiscal year 2016, Woodward and General Electric Company (“GE”), acting through its GE Aviation business unit at the time, consummated the formation of a strategic joint venture between Woodward and GE (the “JV”) to develop, manufacture, and support fuel systems for specified existing and all future GE commercial aircraft engines that produce thrust in excess of fifty thousand pounds.

Unamortized deferred revenue from material rights in connection with the JV formation included:

 

 

December 31, 2023

 

 

September 30, 2023

 

Accrued liabilities

 

$

6,255

 

 

$

6,147

 

Other liabilities

 

 

232,553

 

 

 

233,997

 

 

10


 

Amortization of the deferred revenue (material right) recognized as an increase to sales was $1,335 for the three months ended December 31, 2023, and $831 for the three months ended December 31, 2022.

Other income related to Woodward’s equity interest in the earnings of the JV was as follows:

 

 

Three Months Ended December 31,

 

 

 

2023

 

 

2022

 

Other income

 

$

10,155

 

 

$

4,573

 

Cash distributions to Woodward from the JV, recognized in “Other, net” in “Net cash provided by operating activities” on the Condensed Consolidated Statements of Cash Flows, were as follows:

 

 

Three Months Ended December 31,

 

 

 

2023

 

 

2022

 

Cash distributions

 

$

6,500

 

 

$

4,500

 

Net sales to the JV were as follows:

 

 

Three Months Ended December 31,

 

 

 

2023

 

 

2022

 

Net sales1

 

$

20,272

 

 

$

6,477

 

(1)
Net sales included a reduction of $14,539 for the three months ended December 31, 2023 related to royalties owed to the JV by Woodward on sales by Woodward directly to third party aftermarket customers, compared to a reduction to sales of $7,570 for the three months ended December 31, 2022.

The Condensed Consolidated Balance Sheets include “Accounts receivable” related to amounts the JV owed Woodward, “Accounts payable” related to amounts Woodward owed the JV, and “Other assets” related to Woodward’s net investment in the JV, as follows:

 

 

December 31, 2023

 

 

September 30, 2023

 

Accounts receivable

 

$

3,978

 

 

$

3,666

 

Accounts payable

 

 

8,025

 

 

 

6,276

 

Other assets

 

 

19,683

 

 

 

16,028

 

 

Note 7. Financial instruments and fair value measurements

The table below presents information about Woodward’s financial assets and liabilities that are measured at fair value on a recurring basis and indicates the fair value hierarchy of the valuation techniques Woodward utilized to determine such fair value as defined by the U.S. GAAP fair value hierarchy.

 

 

At December 31, 2023

 

 

At September 30, 2023

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Financial assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investments in banks and financial institutions

 

$

45,257

 

 

$

 

 

$

 

 

$

45,257

 

 

$

28,560

 

 

$

 

 

$

 

 

$

28,560

 

Equity securities

 

 

28,969

 

 

 

 

 

 

 

 

 

28,969

 

 

 

24,913

 

 

 

 

 

 

 

 

 

24,913

 

Cross-currency interest rate swaps

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5,389

 

 

 

 

 

 

5,389

 

Total financial assets

 

$

74,226

 

 

$

 

 

$

 

 

$

74,226

 

 

$

53,473

 

 

$

5,389

 

 

$

 

 

$

58,862

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cross-currency interest rate swaps

 

$

 

 

$

12,362

 

 

$

 

 

$

12,362

 

 

$

 

 

$

 

 

$

 

 

$

 

Total financial liabilities

 

$

 

 

$

12,362

 

 

$

 

 

$

12,362

 

 

$

 

 

$

 

 

$

 

 

$

 

Investments in banks and financial institutions: Woodward and its subsidiaries sometimes invest excess cash in various highly liquid financial instruments that Woodward believes are with creditworthy financial institutions. Such investments are reported in “Cash and cash equivalents” at fair value, with realized gains from interest income recognized in earnings. The carrying value of Woodward’s investments in term deposits with foreign banks are considered equal to the fair value given the highly liquid nature of the investments.

Equity securities: Woodward holds marketable equity securities, through investments in various mutual funds, related to its deferred compensation program. Based on Woodward’s intentions regarding these instruments, marketable equity

11


 

securities are classified as trading securities. The trading securities are reported at fair value, with realized gains and losses recognized in “Other (income) expense, net” on the Condensed Consolidated Statements of Earnings. The trading securities are included in “Other assets” in the Condensed Consolidated Balance Sheets. The fair values of Woodward’s trading securities are based on the quoted market prices for the net asset value of the various mutual funds.

Cross-currency interest rate swaps: Woodward holds cross-currency interest rate swaps, which are accounted for at fair value. The swaps in an asset position are included in “Other current assets” and “Other assets,” and swaps in a liability position are included in “Accrued liabilities” and “Other liabilities” in the Condensed Consolidated Balance Sheets. The fair values of Woodward’s cross-currency interest rate swaps are determined using a market approach that is based on observable inputs other than quoted market prices, including contract terms, interest rates, currency rates, and other market factors.

Cash, trade accounts receivable, accounts payable, and short-term borrowings are not remeasured to fair value, as the carrying cost of each approximates its respective fair value.

The estimated fair values and carrying costs of other financial instruments that are not required to be remeasured at fair value in the Condensed Consolidated Balance Sheets were as follows:

 

 

 

 

At December 31, 2023

 

 

At September 30, 2023

 

 

 

Fair Value
Hierarchy
Level

 

Estimated
Fair Value

 

 

Carrying
Cost

 

 

Estimated
Fair Value

 

 

Carrying
Cost

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Notes receivable from municipalities

 

2

 

$

7,861

 

 

$

7,333

 

 

$

7,794

 

 

$

7,688

 

Investments in short-term time deposits

 

2

 

 

6,099

 

 

 

6,101

 

 

 

6,095

 

 

 

6,107

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Long-term debt

 

2

 

 

619,230

 

 

 

654,876

 

 

 

661,507

 

 

 

722,671

 

In connection with certain economic incentives related to Woodward’s development of a second campus in the greater-Rockford, Illinois area for its Aerospace segment and Woodward’s development of a new campus at its corporate headquarters in Fort Collins, Colorado, Woodward received long-term notes from municipalities within the states of Illinois and Colorado. The fair value of the long-term notes was estimated based on a model that discounted future principal and interest payments received at an interest rate available to Woodward at the end of the period for similarly rated municipal notes of similar maturity, which is a level 2 input as defined by the U.S. GAAP fair value hierarchy. The interest rates used to estimate the fair value of the long-term notes were 2.4% at December 31, 2023 and 3.6% at September 30, 2023.

From time to time, certain of Woodward’s foreign subsidiaries will invest excess cash in short-term time deposits with a fixed maturity date of longer than three months but less than one year from the date of the deposit. Woodward believes that the investments are with creditworthy financial institutions. The fair value of the investments in short-term time deposits was estimated based on a model that discounted future principal and interest payments to be received at an interest rate available to the foreign subsidiary entering into the investment for similar short-term time deposits of similar maturity. This was determined to be a level 2 input as defined by the U.S. GAAP fair value hierarchy. The interest rates used to estimate the fair value of the short-term time deposits were 6.6% at December 31, 2023 and 6.8% at September 30, 2023.

The fair value of long-term debt was estimated based on the prices of debt of comparable type and maturity available to Woodward at the end of the period, which is a level 2 input as defined by the U.S. GAAP fair value hierarchy. The weighted-average interest rates used to estimate the fair value of long-term debt were 4.9% at December 31, 2023 and 5.9% at September 30, 2023.

Woodward does not have expected credit losses related to any financial assets that are not required to be remeasured at fair value.

Note 8. Derivative instruments and hedging activities

Derivative instruments not designated or qualifying as hedging instruments

In May 2020, Woodward entered into a floating-rate cross-currency interest rate swap (the “2020 Floating-Rate Cross-Currency Swap”), with a notional value of $45,000, and five fixed-rate cross-currency interest rate swap agreements (the “2020 Fixed-Rate Cross-Currency Swaps”), with an aggregate notional value of $400,000, which effectively reduced the interest rates on the underlying fixed and floating-rate debt, respectively, under the 2018 Notes (as defined in Note 14, Credit Facilities, short-term borrowings and long-term debt, in the Notes to the Consolidated Financial Statements included

12


 

in Part II, Item 8 of Woodward’s most recently filed Form 10-K) and Woodward’s then existing revolving credit agreement.

The net interest income of the cross-currency interest rate swaps is recorded as a reduction to “Interest expense” in Woodward’s Condensed Consolidated Statements of Earnings. The 2020 Floating-Rate Cross-Currency Swap expired on May 31, 2023 and, as such, is no longer recorded on the Condensed Consolidated Balance Sheets. As of December 31, 2023, the total notional value of the 2020 Fixed-Rate Cross-Currency Swaps was $400,000. See Note 7, Financial Instruments and fair value measurements for the related fair value of the derivative instruments as of December 31, 2023.

Derivatives instruments in fair value hedging relationships

In May 2020, Woodward entered into a US dollar denominated intercompany loan payable with identical terms and notional value as the 2020 Floating-Rate Cross-Currency Swap, together with a reciprocal intercompany floating-rate cross-currency interest rate swap. The agreements were entered into by Woodward Barbados Euro Financing SRL (“Euro Barbados”), a wholly owned subsidiary of Woodward. The US dollar denominated intercompany loan and reciprocal intercompany floating-rate cross-currency interest rate swap are designated as a fair value hedge under the criteria prescribed in ASC 815. The objective of the derivative instrument is to hedge against the foreign currency exchange risk attributable to the spot remeasurement of the US dollar denominated intercompany loan, as Euro Barbados maintains a Euro functional currency.

For each floating-rate intercompany cross-currency interest rate swap, only the change in the fair value related to the cross-currency basis spread, or excluded component, of the derivative instrument is recognized in accumulated other comprehensive income (“OCI”). The remaining change in the fair value of the derivative instrument is recognized in foreign currency transaction gain or loss included in “Selling, general and administrative costs” in Woodward’s Condensed Consolidated Statements of Earnings. The change in the fair value of the derivative instrument in foreign currency transaction gain or loss offsets the change in the spot remeasurement of the intercompany Euro and US dollar denominated loans. Hedge effectiveness is assessed based on the fair value changes of the derivative instrument, after excluding any fair value changes related to the cross-currency basis spread. The initial cost of the cross-currency basis spread is recorded in earnings each period through the swap accrual process. There are no credit-risk-related contingent features associated with the intercompany floating-rate cross-currency interest rate swap.

Derivative instruments in cash flow hedging relationships

In May 2020, Woodward entered into five US dollar intercompany loans payable, with identical terms and notional values of each tranche of the 2020 Fixed-Rate Cross-Currency Swaps, together with reciprocal fixed-rate intercompany cross-currency interest rate swaps. The agreements were entered into by Euro Barbados and are designated as cash flow hedges under the criteria prescribed in ASC 815. The objective of these derivative instruments is to hedge the risk of variability in cash flows attributable to the foreign currency exchange risk of cash flows for future principal and interest payments associated with the US dollar denominated intercompany loans over a thirteen-year period, as Euro Barbados maintains a Euro functional currency.

For each of the fixed-rate intercompany cross-currency interest rate swaps, changes in the fair values of the derivative instruments are recognized in accumulated OCI and reclassified to foreign currency transaction gain or loss included in “Selling, general and administrative costs” in Woodward’s Condensed Consolidated Statements of Earnings. Reclassifications out of accumulated OCI of the change in fair value occur each reporting period based upon changes in the spot rate remeasurement of the Euro and US dollar denominated intercompany loans, including associated interest. Hedge effectiveness is assessed based on the fair value changes of the derivative instruments and such hedges are deemed to be highly effective in offsetting exposure to variability in foreign exchange rates. There are no credit-risk-related contingent features associated with these fixed-rate cross-currency interest rate swaps.

Derivatives instruments in net investment hedging relationships

On September 23, 2016, Woodward and Woodward International Holding B.V., a wholly owned subsidiary of Woodward organized under the laws of The Netherlands (the “BV Subsidiary”), each entered into a note purchase agreement (the “2016 Note Purchase Agreement”) relating to the sale by Woodward and the BV Subsidiary of an aggregate principal amount of €160,000 of senior unsecured notes in a series of private placement transactions. Woodward issued €40,000 aggregate principal amount of Woodward’s Series M Senior Notes due September 23, 2026 (the “Series M Notes”). Woodward designated the Series M Notes as a hedge of a foreign currency exposure of Woodward’s net investment in its Euro denominated functional currency subsidiaries. Related to the Series M Notes, included in foreign currency translation adjustments within total comprehensive (losses) earnings are net foreign exchange losses of $1,866 for the three months ended December 31, 2023, compared to $3,625 for the three months ended December 31, 2022.

13


 

Impact of derivative instruments designated as qualifying hedging instruments

The following table discloses the amount of (income) expense recognized in earnings on derivative instruments designated as qualifying hedging instruments:

 

 

 

 

Three months ended December 31,

 

Derivatives in:

 

Location

 

2023

 

 

2022

 

Cross-currency interest rate swap agreement designated as fair value hedges

 

Selling, general and administrative expenses

 

$

 

 

$

901

 

Cross-currency interest rate swap agreements designated as cash flow hedges

 

Selling, general and administrative expenses

 

 

17,899

 

 

 

37,285

 

 

 

 

 

$

17,899

 

 

$

38,186

 

The following table discloses the amount of (gain) loss recognized in accumulated OCI on derivative instruments designated as qualifying hedging instruments:

 

 

 

 

Three months ended December 31,

 

Derivatives in:

 

Location

 

2023

 

 

2022

 

Cross-currency interest rate swap agreement designated as fair value hedges

 

Selling, general and administrative expenses

 

$

 

 

$

896

 

Cross-currency interest rate swap agreements designated as cash flow hedges

 

Selling, general and administrative expenses

 

 

18,510

 

 

 

31,692

 

 

 

 

 

$

18,510

 

 

$

32,588

 

The following table discloses the amount of (gain) loss reclassified from accumulated OCI into earnings on derivative instruments designated as qualifying hedging instruments:

 

 

 

 

Three months ended December 31,

 

Derivatives in:

 

Location

 

2023

 

 

2022

 

Cross-currency interest rate swap agreement designated as fair value hedges

 

Selling, general and administrative expenses

 

$

 

 

$

901

 

Cross-currency interest rate swap agreements designated as cash flow hedges

 

Selling, general and administrative expenses

 

 

17,899

 

 

 

37,285

 

 

 

 

 

$

17,899

 

 

$

38,186

 

The remaining unrecognized gains and losses in Woodward’s Condensed Consolidated Balance Sheets associated with derivative instruments that were previously entered into by Woodward, which are classified in accumulated OCI, were net losses of $10,312 as of December 31, 2023 and $9,701 as of September 30, 2023.

Note 9. Supplemental statement of cash flows information

 

 

Three Months Ended December 31,

 

 

 

2023

 

 

2022

 

Interest paid, net of amounts capitalized

 

$

13,411

 

 

$

12,334

 

Income taxes paid

 

 

13,032

 

 

 

3,725

 

Income tax refunds received

 

 

2,440

 

 

 

322

 

Non-cash activities:

 

 

 

 

 

 

Purchases of property, plant and equipment on account

 

 

3,121

 

 

 

5,821

 

 

Note 10. Inventories

 

 

December 31, 2023

 

 

September 30, 2023

 

Raw materials

 

$

154,663

 

 

$

133,699

 

Work in progress

 

 

133,977

 

 

 

127,438

 

Component parts(1)

 

 

343,444

 

 

 

327,522

 

Finished goods

 

 

88,614

 

 

 

74,594

 

Customer supplied inventory

 

 

14,357

 

 

 

14,543

 

On-hand inventory for which control has transferred to the customer

 

 

(175,382

)

 

 

(159,953

)

 

$

559,673

 

 

$

517,843

 

(1)
Component parts include items that can be sold separately as finished goods or included in the manufacture of other products.

14


 

Note 11. Property, plant, and equipment

 

 

December 31, 2023

 

 

September 30, 2023

 

Land and land improvements

 

$

90,073

 

 

$

89,352

 

Buildings and building improvements

 

 

591,776

 

 

 

589,735

 

Leasehold improvements

 

 

21,707

 

 

 

21,079

 

Machinery and production equipment

 

 

817,319

 

 

 

807,244

 

Computer equipment and software

 

 

121,329

 

 

 

120,290

 

Office furniture and equipment

 

 

42,931

 

 

 

41,943

 

Other

 

 

38,354

 

 

 

20,073

 

Construction in progress

 

 

66,357

 

 

 

55,487

 

 

 

1,789,846

 

 

 

1,745,203

 

Less accumulated depreciation

 

 

(858,593

)

 

 

(832,109

)

Property, plant, and equipment, net

 

$

931,253

 

 

$

913,094

 

Woodward had depreciation expense as follows:

 

 

Three Months Ended December 31,

 

 

 

2023

 

 

2022

 

Depreciation expense

 

$

20,226

 

 

$

20,126

 

 

Note 12. Goodwill

 

 

September 30,
2023

 

 

Effects of Foreign
Currency
Translation

 

 

December 31,
2023

 

Aerospace

 

$

455,423

 

 

$

 

 

$

455,423

 

Industrial

 

 

336,045

 

 

 

12,019

 

 

 

348,064

 

Consolidated

 

$

791,468

 

 

$

12,019

 

 

$

803,487

 

Woodward tests goodwill for impairment during the fourth quarter of each fiscal year and at any time there is an indication that goodwill is more-likely-than-not impaired (commonly referred to as a triggering event). Woodward’s goodwill impairment test in the fourth quarter of fiscal year 2023 resulted in no impairment.

15


 

Note 13. Intangible assets, net

 

 

December 31, 2023

 

 

September 30, 2023

 

 

 

Gross
Carrying
Value

 

 

Accumulated
Amortization

 

 

Net
Carrying
Amount

 

 

Gross
Carrying
Value

 

 

Accumulated
Amortization

 

 

Net
Carrying
Amount

 

Intangible assets with finite lives:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Customer relationships and contracts:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Aerospace

 

$

281,683

 

 

$

(238,825

)

 

$

42,858

 

 

$

281,683

 

 

$

(236,143

)

 

$

45,540

 

Industrial

 

 

394,516

 

 

 

(98,353

)

 

 

296,163

 

 

 

378,804

 

 

 

(90,084

)

 

 

288,720

 

Total

 

$

676,199

 

 

$

(337,178

)

 

$

339,021

 

 

$

660,487

 

 

$

(326,227

)

 

$

334,260

 

Intellectual property:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Aerospace

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

Industrial

 

 

3,139

 

 

 

(3,139

)

 

 

 

 

 

3,139

 

 

 

(3,139

)

 

 

 

Total

 

$

3,139

 

 

$

(3,139

)

 

$

 

 

$

3,139

 

 

$

(3,139

)

 

$

 

Process technology:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Aerospace

 

$

44,570

 

 

$

(39,788

)

 

$

4,782

 

 

$

44,570

 

 

$

(39,551

)

 

$

5,019

 

Industrial

 

 

86,436

 

 

 

(33,261

)

 

 

53,175

 

 

 

83,456

 

 

 

(31,709

)

 

 

51,747

 

Total

 

$

131,006

 

 

$

(73,049

)

 

$

57,957

 

 

$

128,026

 

 

$

(71,260

)

 

$

56,766

 

Other intangibles:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Aerospace

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

Industrial

 

 

574

 

 

 

(574

)

 

 

 

 

 

554

 

 

 

(524

)

 

 

30

 

Total

 

$

574

 

 

$

(574

)

 

$

 

 

$

554

 

 

$

(524

)

 

$

30

 

Intangible asset with indefinite life:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Trade name:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Aerospace

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

Industrial

 

 

64,008

 

 

 

 

 

 

64,008

 

 

 

61,307

 

 

 

 

 

 

61,307

 

Total

 

$

64,008

 

 

$

 

 

$

64,008

 

 

$

61,307

 

 

$

 

 

$

61,307

 

Total intangibles:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Aerospace

 

$

326,253

 

 

$

(278,613

)

 

$

47,640

 

 

$

326,253

 

 

$

(275,694

)

 

$

50,559

 

Industrial

 

 

548,673

 

 

 

(135,327

)

 

 

413,346

 

 

 

527,260

 

 

 

(125,456

)

 

 

401,804

 

Consolidated Total

 

$

874,926

 

 

$

(413,940

)

 

$

460,986

 

 

$

853,513

 

 

$

(401,150

)

 

$

452,363

 

Woodward tests the indefinite lived trade name intangible asset for impairment during the fourth quarter of each fiscal year and at any time there is an indication the indefinite lived trade name intangible asset is more-likely-than-not impaired (commonly referred to as a triggering event). Woodward’s impairment test for the indefinite lived trade name intangible asset in the fourth quarter of fiscal year 2023 resulted in no impairment.

Woodward recorded amortization expense associated with intangibles of the following:

 

 

Three Months Ended December 31,

 

 

 

2023

 

 

2022

 

Amortization expense

 

$

8,599

 

 

$

9,178

 

Future amortization expense associated with intangibles is expected to be:

Year Ending September 30:

 

 

 

2024 (remaining)

 

$

24,862

 

2025

 

 

28,195

 

2026

 

 

28,185

 

2027

 

 

28,137

 

2028

 

 

27,536

 

Thereafter

 

 

260,063

 

 

$

396,978

 

 

Note 14. Credit facilities, short-term borrowings and long-term debt

Revolving credit facility

Woodward maintains a $1,000,000 revolving credit facility established under a revolving credit agreement among Woodward, a syndicate of lenders and Wells Fargo Bank, National Association, as administrative agent, which provides for the option to increase available borrowings up to $1,500,000, subject to lenders’ participation (as amended in October

16


 

2022, the “Second Amended and Restated Revolving Credit Agreement”). Borrowings under the Second Amended and Restated Revolving Credit Agreement can be made by Woodward and certain of its foreign subsidiaries in U.S. dollars or in foreign currencies other than the U.S. dollar and generally bear interest at the Euro Interbank Offered Rate (“Euribor”), Sterling Overnight Index Average (“SONIA”), Tokyo Interbank Offered Rate (“TIBOR”), and Secured Overnight Financing Rate (“SOFR”) base rates plus 0.875% to 1.75%. The Revolving Credit Agreement matures on October 21, 2027.

Under the Second Amended and Restated Revolving Credit Agreement, there were $65,100 in principal amount of borrowings outstanding as of December 31, 2023 at an effective interest rate of 6.46% as compared to no borrowings outstanding as of September 30, 2023. All of the borrowings outstanding were classified as short-term borrowings based on Woodward's intent and ability to pay this amount in the next twelve months.

Short-term borrowings

Woodward has other foreign lines of credit and foreign overdraft facilities at various financial institutions, which are generally reviewed annually for renewal and are subject to the usual terms and conditions applied by the financial institutions. Pursuant to the terms of the related facility agreements, Woodward’s foreign performance guarantee facilities are limited in use to providing performance guarantees to third parties. There were no borrowings outstanding on Woodward’s foreign lines of credit and foreign overdraft facilities as of December 31, 2023 and September 30, 2023.

The Notes

On November 15, 2023, Woodward paid the entire principal balance of $75,000 on the Series H and K Notes using proceeds from borrowings under its existing revolving credit facility.

Note 15. Accrued liabilities

 

 

 

December 31, 2023

 

 

September 30, 2023

 

Salaries and other member benefits

 

$

89,797

 

 

$

146,713

 

Product warranties and related liabilities

 

 

21,802

 

 

 

18,162

 

Interest payable

 

 

4,105

 

 

 

13,611

 

Accrued retirement benefits

 

 

2,869

 

 

 

2,822

 

Net current contract liabilities

 

 

37,122

 

 

 

33,748

 

Taxes, other than income

 

 

22,842

 

 

 

13,436

 

Other

 

 

33,120

 

 

 

34,124

 

 

$

211,657

 

 

$

262,616

 

Product warranties and related liabilities

Provisions of Woodward’s sales agreements include product warranties customary to these types of agreements. Accruals are established for specifically identified warranty issues and related liabilities for which are probable to result in future costs. Warranty costs are accrued as revenue is recognized on a non-specific basis whenever past experience indicates a normal and predictable pattern exists.

Changes in accrued product warranties and related liabilities were as follows:

 

 

Three Months Ended December 31,

 

 

 

2023

 

 

2022

 

Beginning of period

 

$

18,162

 

 

$

40,042

 

Additions, net of recoveries

 

 

5,306

 

 

 

17,010

 

Reductions for settlement

 

 

(1,827

)

 

 

(7,702

)

Foreign currency exchange rate changes

 

 

161

 

 

 

176

 

End of period

 

$

21,802

 

 

$

49,526

 

Restructuring charges

In fiscal year 2022, the Company determined to implement a streamlined Aerospace and Industrial organizational and leadership structure designed to enhance the sales experience for customers, simplify operations, and increase profitability through improved execution. In connection with leadership changes arising from such reorganization, we recorded $1,083 of restructuring charges as nonsegment expenses, which were paid as of December 31, 2022.

17


 

Note 16. Other liabilities

 

 

December 31, 2023

 

 

September 30, 2023

 

Net accrued retirement benefits, less amounts recognized within accrued liabilities

 

$

78,117

 

 

$

72,570

 

Total unrecognized tax benefits

 

 

8,618

 

 

 

8,020

 

Noncurrent income taxes payable

 

 

10,714

 

 

 

10,714

 

Deferred economic incentives (1)

 

 

5,479

 

 

 

5,797

 

Noncurrent operating lease liabilities

 

 

20,250

 

 

 

20,685

 

Net noncurrent contract liabilities

 

 

419,939

 

 

 

414,657

 

Cross-currency swap derivative liability

 

 

12,362

 

 

 

 

Other

 

 

10,403

 

 

 

11,047

 

 

 

$

565,882

 

 

$

543,490

 

(1)
Woodward receives certain economic incentives from various state and local authorities related to capital expansion projects. Such amounts are initially recorded as deferred credits and are being recognized as a reduction to pre-tax expense over the economic lives of the related capital expansion projects.

Note 17. Other (income) expense, net

 

 

Three Months Ended December 31,

 

 

 

2023

 

 

2022

 

Equity interest in the earnings of the JV

 

$

(10,155

)

 

$

(4,573

)

Rent income

 

 

(82

)

 

 

(88

)

Net gain on investments in deferred compensation program

 

 

(2,609

)

 

 

(1,191

)

Gain on non-recurring matter related to a previous acquisition

 

 

(4,803

)

 

 

 

Other components of net periodic pension and other postretirement benefit, excluding service cost and interest expense

 

 

(2,919

)

 

 

(2,485

)

Other

 

 

(71

)

 

 

(53

)

 

$

(20,639

)

 

$

(8,390

)

 

Note 18. Income taxes

The determination of the estimated annual effective tax rate is based upon a number of significant estimates and judgments. In addition, as a global commercial enterprise, Woodward’s tax expense can be impacted by changes in tax rates or laws, the finalization of tax audits and reviews, changes in the estimate of the amount of undistributed foreign earnings that Woodward considers indefinitely reinvested, issuance of future guidance, interpretation, and rule-making, and other factors that cannot be predicted with certainty. As such, there can be significant volatility in interim tax provisions.

The following table sets forth the tax expense and the effective tax rate for Woodward’s earnings before income taxes:

 

 

Three Months Ended December 31,

 

 

 

2023

 

 

2022

 

Earnings before income taxes

 

$

109,720

 

 

$

31,749

 

Income tax expense

 

 

19,676

 

 

 

2,143

 

Effective tax rate

 

 

17.9

%

 

 

6.7

%

The increase in the effective tax rate for the three months ended December 31, 2023 compared to the three months ended December 31, 2022 is primarily attributable to the release of uncertain tax positions in the prior year and projected future withholding taxes on unremitted earnings. This increase was offset by a larger stock-based compensation tax benefit in the current quarter.

Gross unrecognized tax benefits were $11,858 as of December 31, 2023, and $11,112 as of September 30, 2023. At December 31, 2023, the amount of the liability for unrecognized tax benefits that, if recognized, would impact Woodward’s effective tax rate was $7,588. At this time, Woodward believes it is reasonably possible that the liability for unrecognized tax benefits will decrease by as much as $2,178 in the next twelve months due to the completion of review by tax authorities, lapses of statutes, and the settlement of tax positions. Woodward’s tax expense includes accruals for potential interest and penalties related to unrecognized tax benefits and all other interest and penalties related to tax payments.

Woodward’s tax returns are subject to audits by U.S. federal, state, and foreign tax authorities, and these audits are at various stages of completion at any given time. Reviews of tax matters by authorities and lapses of the applicable statutes

18


 

of limitation may result in changes to tax expense. Generally, Woodward’s fiscal years remaining open to examination for U.S. Federal income taxes include fiscal years 2020 and thereafter. Woodward’s fiscal years remaining open to examination for significant U.S. state income tax jurisdictions include fiscal years 2019 and thereafter. Woodward’s fiscal years remaining open to examination in significant foreign jurisdictions include 2018 and thereafter.

Note 19. Retirement benefits

Woodward provides various retirement benefits to eligible members of the Company, including contributions to various defined contribution plans, pension benefits associated with defined benefit plans, postretirement medical benefits, and postretirement life insurance benefits. Eligibility requirements and benefit levels vary depending on employee location.

Defined contribution plans

Most of the Company’s U.S. employees are eligible to participate in the U.S. defined contribution plan. The U.S. defined contribution plan allows employees to defer part of their annual income for income tax purposes into their personal 401(k) accounts. The Company makes matching contributions to eligible employee accounts, which are also deferred for employee personal income tax purposes. Certain non-U.S. employees are also eligible to participate in similar non-U.S. plans.

The amount of expense associated with defined contribution plans was as follows:

 

 

Three Months Ended December 31,

 

 

 

2023

 

 

2022

 

Company costs

 

$

11,175

 

 

$

10,102

 

Defined benefit plans

Woodward has defined benefit plans that provide pension benefits for certain retired employees in the United States, the United Kingdom, Japan, and Germany. Woodward also provides other postretirement benefits to its employees including postretirement medical benefits and life insurance benefits. Postretirement medical benefits are provided to certain current and retired employees, their covered dependents, and beneficiaries in the United States. Life insurance benefits are provided to certain retirees in the United States under frozen plans, which are no longer available to current employees. A September 30 measurement date is utilized to value plan assets and obligations for all of Woodward’s defined benefit pension and other postretirement benefit plans.

U.S. GAAP requires that, for obligations outstanding as of September 30, 2023, the funded status reported in interim periods shall be the same asset or liability recognized in the previous year end statement of financial position adjusted for (a) subsequent accruals of net periodic benefit cost that exclude the amortization of amounts previously recognized in other comprehensive income (for example, subsequent accruals of service cost, interest cost, and return on plan assets) and (b) contributions to a funded plan or benefit payments.

The components of the net periodic retirement pension costs recognized are as follows:

 

 

Three Months Ended December 31,

 

 

 

United States

 

 

Other Countries

 

 

Total

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Service cost

 

$

194

 

 

$

223

 

 

$

309

 

 

$

320

 

 

$

503

 

 

$

543

 

Interest cost

 

 

1,899

 

 

 

1,824

 

 

 

793

 

 

 

750

 

 

 

2,692

 

 

 

2,574

 

Expected return on plan assets

 

 

(2,271

)

 

 

(2,074

)

 

 

(592

)

 

 

(551

)

 

 

(2,863

)

 

 

(2,625

)

Amortization of:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net actuarial loss (gain)

 

 

57

 

 

 

73

 

 

 

(168

)

 

 

(148

)

 

 

(111

)

 

 

(75

)

Prior service cost

 

 

174

 

 

 

174

 

 

 

6

 

 

 

5

 

 

 

180

 

 

 

179

 

Net periodic retirement pension cost

 

$

53

 

 

$

220

 

 

$

348

 

 

$

376

 

 

$

401

 

 

$

596

 

Contributions paid

 

$

 

 

$

 

 

$

593

 

 

$

562

 

 

$

593

 

 

$

562

 

The components of net periodic retirement pension costs other than the service cost and interest cost components are included in the line item “Other (income) expense, net”, and the interest component is included in the line item “Interest expense” in the Condensed Consolidated Statements of Earnings.

19


 

The components of the net periodic other postretirement benefit costs recognized are as follows:

 

 

Three Months Ended December 31,

 

 

 

2023

 

 

2022

 

Interest cost

 

$

226

 

 

$

226

 

Amortization of:

 

 

 

 

 

 

Net actuarial gain

 

 

(139

)

 

 

(124

)

Net periodic other postretirement cost

 

$

87

 

 

$

102

 

Contributions paid

 

$

412

 

 

$

441

 

The components of net periodic other postretirement benefit costs other than the service cost and interest cost components are included in the line item “Other (income) expense, net”, and the interest cost component is included in the line item “Interest expense” in the Condensed Consolidated Statements of Earnings.

The amount of cash contributions made to these plans in any year is dependent upon a number of factors, including minimum funding requirements in the jurisdictions in which Woodward operates and arrangements made with trustees of certain foreign plans. As a result, the actual funding in fiscal year 2024 may differ from the current estimate. Woodward estimates its remaining cash contributions in fiscal year 2024 will be as follows:

Retirement pension benefits:

 

 

 

United States

 

$

 

United Kingdom

 

 

861

 

Japan

 

 

 

Germany

 

 

932

 

Other postretirement benefits

 

 

2,264

 

 

Note 20. Stockholders’ equity

Common stock and treasury stock

A summary of common stock and treasury stock share activity is as follows:

 

 

Common Stock

 

 

Treasury Stock

 

 

Treasury stock held for deferred compensation

 

Balances as of September 30, 2022

 

 

72,960

 

 

 

(13,207

)

 

 

(139

)

Sales of treasury stock

 

 

 

 

 

19

 

 

 

 

Purchase of treasury stock

 

 

 

 

 

(274

)

 

 

 

Common shares issued for benefit plans

 

 

 

 

 

2

 

 

 

 

Purchases of stock by deferred compensation

 

 

 

 

 

 

 

 

(1

)

Distribution of stock from deferred compensation

 

 

 

 

 

 

 

 

18

 

Balances as of December 31, 2022

 

 

72,960

 

 

 

(13,460

)

 

 

(122

)

 

 

 

 

 

 

 

 

 

 

Balances as of September 30, 2023

 

 

72,960

 

 

 

(13,070

)

 

 

(55

)

Sales of treasury stock

 

 

 

 

 

247

 

 

 

 

Purchases of stock by deferred compensation

 

 

 

 

 

 

 

 

(1

)

Distribution of stock from deferred compensation

 

 

 

 

 

 

 

 

2

 

Balances as of December 31, 2023

 

 

72,960

 

 

 

(12,823

)

 

 

(54

)

Stock repurchase program

In January 2022, the Woodward board of directors (the "Board") authorized a program for the repurchase of up to $800,000 of Woodward’s outstanding shares of common stock on the open market or in privately negotiated transactions over a two-year period ending in January 2024 (the “2022 Authorization”). During the first three months of fiscal year 2024, Woodward repurchased no shares of its common stock under the 2022 Authorization, whereas during the first three months of fiscal year 2023, Woodward repurchased 274 shares of its common stock for $26,369.

In January 2024, the Board terminated the 2022 Authorization, which was nearing expiration, and concurrently authorized a new program for the repurchase of up to $600,000 of Woodward’s outstanding shares of common stock on the open market or in privately negotiated transactions over a three-year period ending in January 2027 (the “2024 Authorization”).

20


 

Stock-based compensation

Provisions governing outstanding stock option awards, restricted stock units ("RSUs"), and performance restricted stock units ("PSUs") are included in the 2017 Omnibus Incentive Plan, as amended from time to time (the “2017 Plan”) and, with respect to outstanding stock options awarded in or prior to 2016, the 2006 Omnibus Incentive Plan (the “2006 Plan”).

The 2017 Plan was first approved by Woodward’s stockholders in January 2017 and is the successor plan to the 2006 Plan. The Board has delegated authority to administer the 2017 Plan to the Compensation Committee of the Board, including, but not limited to, the power to determine the recipients of awards and the terms of those awards. On January 25, 2023, Woodward’s stockholders approved an additional 500 shares of Woodward’s common stock to be made available for future grants. Under the 2017 Plan, there were approximately 2,661 shares of Woodward’s common stock available for future grants as of December 31, 2023 and 2,689 shares as of September 30, 2023.

Stock options

Stock option awards are granted with an exercise price equal to the market price of Woodward’s stock at the date the grants are awarded, a ten-year term, and generally have a four-year vesting schedule at a rate of 25% per year.

The fair value of options granted is estimated as of the grant date using the Black-Scholes-Merton option-valuation model. Woodward calculates the expected term, which represents the average period of time that stock options granted are expected to be outstanding, based upon historical experience of plan participants. Expected volatility is based on historical volatility using daily stock price observations. The estimated dividend yield is based upon Woodward’s historical dividend practice and the market value of its common stock. The risk-free rate is based on the U.S. treasury yield curve, for periods within the contractual life of the stock option, at the time of grant.

The following is a summary of the activity for stock option awards:

 

 

Three Months Ended December 31, 2023

 

 

 

Number of options

 

 

Weighted-Average Exercise Price per Share

 

Beginning balance

 

 

4,842

 

 

$

80.48

 

Granted

 

 

6

 

 

 

131.66

 

Exercised

 

 

(235

)

 

 

71.74

 

Forfeited

 

 

(2

)

 

 

92.74

 

Ending balance

 

 

4,611

 

 

$

80.99

 

Changes in non-vested stock options were as follows:

 

 

Three Months Ended December 31, 2023

 

 

 

Number of options

 

 

Weighted-Average Grant Date Fair Value per Share

 

Beginning balance

 

 

1,393

 

 

$

33.96

 

Granted

 

 

6

 

 

 

61.03

 

Exercised

 

 

(572

)

 

 

32.37

 

Forfeited

 

 

(1

)

 

 

34.42

 

Ending balance

 

 

826

 

 

$

35.26

 

Information about stock options that have vested, or are expected to vest, and are exercisable at December 31, 2023 was as follows:

 

 

Number of options

 

 

Weighted-Average Exercise Price

 

 

Weighted-Average Remaining Life in Years

 

 

Aggregate Intrinsic Value

 

Options outstanding

 

 

4,611

 

 

$

80.99

 

 

 

5.4

 

 

$

254,265

 

Options vested and exercisable

 

 

3,753

 

 

 

77.96

 

 

 

4.8

 

 

 

218,292

 

Options vested and expected to vest

 

 

4,577

 

 

 

80.90

 

 

 

5.4

 

 

 

252,769

 

Restricted stock units

For purposes of annual grants and promotional awards, the Company grants RSUs to eligible employees under its form RSU agreement (the “Standard Form RSU Agreement”). The Company has also granted RSUs to certain employees under its form attraction and retention RSU agreement (the “Form Attraction and Retention RSU Agreement”), which has from time to time been used for new hires and specific retention purposes. RSUs granted under the Form Attraction and Retention

21


 

Agreement are generally scheduled to fully vest on the third or fourth anniversary of the respective grant dates, and in each case, subject to continued employment. RSUs granted prior to November 14, 2023, under the Standard Form RSU Agreement generally have a four-year vesting schedule at a rate of 25% per year, and RSUs to be granted thereafter under such agreement are generally expected to have a three-year vesting schedule at a rate of 33.3% per year, in each case generally subject to continued employment.

A summary of the activity for RSUs:

 

 

Three Months Ended December 31, 2023

 

 

 

Number of units

 

 

Weighted-Average Grant Date Fair Value

 

Beginning balance

 

 

177

 

 

$

93.46

 

Granted

 

 

12

 

 

 

131.66

 

Released

 

 

(19

)

 

 

85.91

 

Ending balance

 

 

170

 

 

$

96.95

 

Performance restricted stock units

In November 2023, the Company granted PSUs to certain employees under its form PSU agreement that generally will vest subject to a market condition and a service condition through the performance period. The market condition associated with the awards is based on the Company's relative total shareholder return ("TSR") compared to the TSR generated by the other companies that comprise the S&P 400 Midcap Index over a three-year performance period. Performance at target will result in vesting and issuance of the number of PSUs granted, equal to 100% payout. Performance below or above target can result in an issuance of between 0% - 150% of the target number of PSUs granted. Expense is recognized based on the weighted average grant date fair value on a straight line basis over the service period, irrespective as to whether the market condition is achieved.

The fair value of the PSUs for the November 2023 grant was determined based upon a Monte Carlo valuation method. The assumptions used in the Monte Carlo method to value the PSUs granted, which includes the grant date fair value outcome from the Monte Carlo method, were as follows:

 

 

December 31, 2023

 

Expected volatility

 

 

30.2

%

Risk free interest rate

 

 

4.5

%

Expected life

 

3 years

 

Grant date fair value

 

$

146.47

 

The PSUs granted receive dividend equivalent units; therefore, no discount was applied for Woodward’s dividends.

A summary of the activity for PSUs:

 

 

Three Months Ended December 31, 2023

 

 

 

Number of units

 

 

Weighted-Average Grant Date Fair Value

 

Beginning balance

 

 

 

 

$

 

Granted

 

 

66

 

 

 

146.47

 

Forfeited

 

 

 

 

 

 

Ending balance

 

 

66

 

 

$

146.47

 

Stock-based compensation expense

Woodward recognizes stock-based compensation expense on a straight-line basis over the requisite service period. Pursuant to form stock option agreements, form RSU agreements, and form PSU agreements used by the Company, with terms approved by the administrator of the applicable plan, the requisite service period can be less than the vesting period defined in the award agreement based on grantee’s retirement eligibility. As such, the recognition of stock-based compensation expense associated with some stock option grants, RSU grants, and PSU grants can be accelerated to a period of less than the vesting period, including immediate recognition of stock-based compensation expense on the date of grant.

At December 31, 2023, there was approximately $27,881 of total unrecognized compensation expense related to non-vested stock-based compensation arrangements, including stock options, RSUs, and PSUs. The pre-vesting forfeiture rates for purposes of determining stock-based compensation expense recognized were estimated to be 0.0% for members of the

22


 

Board and 7.3% for all others. The remaining unrecognized compensation cost is expected to be recognized over a weighted-average period of approximately 1.6 years.

Note 21. Commitments and contingencies

Woodward is currently involved in claims, pending or threatened litigation or other legal proceedings, investigations and/or regulatory proceedings arising in the normal course of business, including, among others, those relating to product liability claims, employment matters, worker’s compensation claims, contractual disputes, product warranty claims, and alleged violations of various laws and regulations. Woodward accrues for known individual matters using estimates of the most likely amount of loss where it believes that it is probable the matter will result in a loss when ultimately resolved and such loss is reasonably estimable. Legal costs are expensed as incurred and are classified in “Selling, general and administrative expenses” on the Condensed Consolidated Statements of Earnings.

Woodward is partially self-insured in the United States for healthcare and worker’s compensation up to predetermined amounts, above which third party insurance applies. Management regularly reviews the probable outcome of related claims and proceedings, the expenses expected to be incurred, the availability and limits of the insurance coverage, and the established accruals for liabilities.

While the outcome of pending claims, legal and regulatory proceedings, and investigations cannot be predicted with certainty, management believes that any liabilities that may result from these claims, proceedings, and investigations will not have a material effect on Woodward’s liquidity, financial condition, or results of operations.

Under the Company’s severance and change in control agreements with its current corporate officers, Woodward would be required to pay termination benefits to any such officer if such officer’s employment is terminated without Cause (as defined therein). The amount of such benefits would vary depending on whether such termination occurs during a specified period within a change of control.

Note 22. Segment information

Woodward serves the aerospace and industrial markets through its two reportable segments – Aerospace and Industrial. When appropriate, Woodward’s reportable segments are aggregations of Woodward’s operating segments. Woodward uses operating segment information internally to manage its business, including the assessment of operating segment performance and decisions for the allocation of resources between operating segments.

The accounting policies of the reportable segments are the same as those of the Company. Woodward evaluates segment profit or loss based on internal performance measures for each segment in a given period. In connection with that assessment, Woodward generally excludes matters such as certain charges for restructuring, interest income and expense, certain gains and losses from asset dispositions, or other non-recurring and/or non-operationally related expenses.

A summary of consolidated net sales and earnings by segment follows:

 

 

Three Months Ended December 31,

 

 

 

2023

 

 

2022

 

Segment external net sales:

 

 

 

 

 

 

Aerospace

 

$

460,756

 

 

$

395,685

 

Industrial

 

 

325,974

 

 

 

222,934

 

Total consolidated net sales

 

$

786,730

 

 

$

618,619

 

Segment earnings:

 

 

 

 

 

 

Aerospace

 

$

79,002

 

 

$

55,434

 

Industrial

 

 

66,881

 

 

 

11,402

 

Nonsegment expenses

 

 

(26,200

)

 

 

(24,311

)

Interest expense, net

 

 

(9,963

)

 

 

(10,776

)

Consolidated earnings before income taxes

 

$

109,720

 

 

$

31,749

 

 

23


 

Segment assets consist of accounts receivable, inventories, property, plant, and equipment, net, goodwill, and other intangibles, net. A summary of consolidated total assets by segment follows:

 

 

December 31, 2023

 

 

September 30, 2023

 

Segment assets:

 

 

 

 

 

 

Aerospace

 

$

1,838,875

 

 

$

1,829,410

 

Industrial

 

 

1,574,497

 

 

 

1,490,341

 

Unallocated corporate property, plant, and equipment, net

 

 

122,740

 

 

 

104,962

 

Other unallocated assets

 

 

594,693

 

 

 

585,490

 

Consolidated total assets

 

$

4,130,805

 

 

$

4,010,203

 

 

Note 23. Subsequent events

On January 24, 2024, the Board approved a cash dividend of $0.25 per share for the quarter, payable on March 5, 2024, for stockholders of record as of February 20, 2024.

 

24


 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward Looking Statements

This Quarterly Report on Form 10-Q, including “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” contains forward-looking statements regarding future events and our future results within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact are statements that are deemed forward-looking statements. These statements are based on current expectations, estimates, forecasts, and projections about the industries in which we operate and the beliefs and assumptions of management. Words such as “anticipate,” “believe,” “estimate,” “seek,” “goal,” “expect,” “forecast,” “intend,” “continue,” “outlook,” “plan,” “project,” “target,” “strive,” “can,” “could,” “may,” “should,” “will,” “would,” variations of such words, and similar expressions are intended to identify such forward-looking statements. In addition, any statements that refer to projections of our future financial performance, our anticipated growth and trends in our businesses, and other characteristics of future events or circumstances are forward-looking statements. Forward-looking statements may include, among others, statements relating to:

future sales, earnings, cash flow, uses of cash, and other measures of financial performance, including our assumptions underlying our expectations;
trends in our business and the markets in which we operate, including expectations for those markets, our customers and their business and products;
our ability to manage risks from operating internationally;
expectations regarding demand for our products, in particular our expectations with respect to natural gas trucks in China;
our expected expenses in future periods and trends in such expenses over time;
our expectations regarding margins and the impact of specific products, product mix, and our strategic actions on margins;
descriptions of our plans and expectations for future operations, including our strategic initiatives and impact of such initiatives;
plans and expectations relating to the performance of our joint venture with General Electric Company;
the expected levels of activity in particular industries or markets and the effects of changes in those levels;
the scope, nature, or impact of acquisition activity and integration of such acquisition into our business;
the research, development, production, and support of new products and services;
ability to implement and realize the intended effects of any restructuring efforts;
our plans, objectives, expectations and intentions with respect to business opportunities that may be available to us;
our liquidity, including our ability to meet capital spending requirements and operations;
future dividends and repurchases of common stock;
future levels of indebtedness and capital spending;
the stability of financial institutions, including those lending to us;
pension and other postretirement plan assumptions and future contributions;
our tax rate and other effects of the changes in U.S. federal tax law;
availability of raw materials and components used in our products;
expectations relating to environmental and emissions regulations;
effects of data privacy, data protection, and information security regulations;
our ability to increase automation and develop competitive technologies;
our consolidated customer base and ability to enhance customer experience;
our ability to manage risks related to U.S. Government contracting, including defense activity and spending patterns;
our ability to attract, retain, and develop qualified personnel and maintain favorable labor relations;
impact of our ability to protect our intellectual property on our business, financial condition, results of operations, and cash flows; and
impact of any potential physical or cybersecurity attacks on our operations, business, including our financial condition, operating results, and reputation.

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, risk factors described in Woodward's filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K for the year ended September 30, 2023, which was filed on November 17, 2023, and other risks described in Woodward’s filings with the Securities and Exchange Commission.

We undertake no obligation to revise or update any forward-looking statements for any reason, except as required by applicable law. Unless we have indicated otherwise or the context otherwise requires, references in this Form 10-Q to “Woodward,” “the Company,” “we,” “us,” and “our” refer to Woodward, Inc. and its consolidated subsidiaries.

Except where we have otherwise indicated or the context otherwise requires, amounts presented in this Form 10-Q are in thousands, except per share amounts.

25


 

OVERVIEW

Global Business Conditions

During the first three months of fiscal year 2024, we achieved significant sales growth and margin expansion as compared to the same period of the prior year. We continued to see strong end market demand for our products and services across the aerospace and industrial markets. We also saw improvement in our output as a result of our strategic initiatives and our supply chain has continued to stabilize. Further, we have also been able to more closely align price to the value of our products which helps to mitigate the impacts of inflation. We remain committed to growth, operational excellence, and innovation to deliver long-term success and enhanced shareholder value. We also continue to monitor the macroeconomic environment as inflation and economic uncertainty continues to impact certain aspects of our business.

Operational Highlights

Quarter to Date Highlights

 

 

Three Months Ended
December 31,

 

 

 

2023

 

 

2022

 

Net sales:

 

 

 

 

 

 

Aerospace segment

 

$

460,756

 

 

$

395,685

 

Industrial segment

 

 

325,974

 

 

 

222,934

 

Consolidated net sales

 

$

786,730

 

 

$

618,619

 

 

 

 

 

 

 

 

Earnings:

 

 

 

 

 

 

Aerospace segment

 

$

79,002

 

 

$

55,434

 

Segment earnings as a percent of segment net sales

 

 

17.2

%

 

 

14.0

%

Industrial segment

 

$

66,881

 

 

$

11,402

 

Segment earnings as a percent of segment net sales

 

 

20.5

%

 

 

5.1

%

Consolidated net earnings

 

$

90,044

 

 

$

29,606

 

Adjusted net earnings

 

$

89,811

 

 

$

29,606

 

 

 

 

 

 

 

 

Effective tax rate

 

 

17.9

%

 

 

6.7

%

Adjusted effective tax rate

 

 

17.7

%

 

 

6.7

%

Consolidated diluted earnings per share

 

$

1.46

 

 

$

0.49

 

Consolidated adjusted diluted earnings per share

 

$

1.45

 

 

$

0.49

 

 

 

 

 

 

 

 

Earnings before interest and taxes ("EBIT")

 

$

119,683

 

 

$

42,525

 

Adjusted EBIT

 

$

119,118

 

 

$

42,525

 

Earnings before interest, taxes, depreciation, and amortization ("EBITDA")

 

$

148,508

 

 

$

71,829

 

Adjusted EBITDA

 

$

147,943

 

 

$

71,829

 

Adjusted net earnings, adjusted earnings per share, adjusted effective tax rate, EBIT, adjusted EBIT, EBITDA, and adjusted EBITDA are non-U.S. GAAP financial measures. A description of these measures as well as a reconciliation of these non-U.S. GAAP financial measures to the most directly comparable U.S. GAAP financial measures can be found under the caption “Non-U.S. GAAP Financial Measures” in this Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Liquidity Highlights

Net cash provided by operating activities for the first three months of fiscal year 2024 was $46,789, compared to $5,402 for the first three months of fiscal year 2023. The increase in net cash provided by operating activities in the first three months of fiscal year 2024 compared to the first three months of the prior fiscal year is primarily attributable to increased earnings, partially offset by the above-target payout for fiscal year 2023 annual incentive compensation.

For the first three months of fiscal year 2024, free cash flow was $4,977, compared to negative $18,988 for the first three months of fiscal year 2023. We define free cash flow as net cash flow from operating activities less payments for property, plant, and equipment. Adjusted free cash flow, which we define as free cash flow excluding cash payments pertaining to a non-recurring matter unrelated to the ongoing operations and cash received for a non-recurring matter related to a previous acquisition, was $2,899 for the first three months of fiscal year 2024. No adjustments were made to free cash flow for the first three months of fiscal year 2023. The increase in free cash flow and adjusted free cash flow for the first three months of fiscal year 2024 as compared to the same period of the prior fiscal year was primarily due to increased earnings, partially offset by the above-target payout for fiscal year 2023 annual incentive compensation, as well

26


 

as higher capital expenditures. Free cash flow and adjusted free cash flow are non-U.S. GAAP financial measures. A description of these measures as well as a reconciliation of these non-U.S. GAAP financial measures to the most directly comparable U.S. GAAP financial measures can be found under the caption “Non-U.S. GAAP Financial Measures” in this Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations.

At December 31, 2023, we held $144,348 in cash and cash equivalents and had total outstanding debt of $718,874. We have additional borrowing availability of $927,212, net of outstanding letters of credit, under our revolving credit agreement. At December 31, 2023, we also had additional borrowing capacity of $25,110 under various foreign lines of credit and foreign overdraft facilities.

RESULTS OF OPERATIONS

The following table sets forth condensed consolidated statements of earnings data as a percentage of net sales for each period indicated:

 

 

Three Months Ended

 

 

 

December 31, 2023

 

 

% of Net Sales

 

 

December 31, 2022

 

 

% of Net Sales

 

Net sales

 

$

786,730

 

 

 

100

%

 

$

618,619

 

 

 

100

%

Costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Cost of goods sold

 

 

582,381

 

 

 

74.0

%

 

 

492,663

 

 

 

79.6

%

Selling, general, and administrative expenses

 

 

74,511

 

 

 

9.5

%

 

 

63,187

 

 

 

10.2

%

Research and development costs

 

 

30,794

 

 

 

3.9

%

 

 

28,634

 

 

 

4.6

%

Interest expense

 

 

11,436

 

 

 

1.5

%

 

 

11,142

 

 

 

1.8

%

Interest income

 

 

(1,473

)

 

 

(0.2

)%

 

 

(366

)

 

 

(0.1

)%

Other (income) expense, net

 

 

(20,639

)

 

 

(2.6

)%

 

 

(8,390

)

 

 

(1.4

)%

Total costs and expenses

 

 

677,010

 

 

 

86.1

%

 

 

586,870

 

 

 

94.9

%

Earnings before income taxes

 

 

109,720

 

 

 

13.9

%

 

 

31,749

 

 

 

5.1

%

Income tax expense

 

 

19,676

 

 

 

2.5

%

 

 

2,143

 

 

 

0.3

%

Net earnings

 

$

90,044

 

 

 

11.4

%

 

$

29,606

 

 

 

4.8

%

Other select financial data:

 

 

December 31, 2023

 

 

September 30, 2023

 

Working capital

 

$

963,343

 

 

$

852,256

 

Total debt

 

 

718,874

 

 

 

721,526

 

Total stockholders' equity

 

 

2,190,062

 

 

 

2,070,989

 

Net Sales

Consolidated net sales for the first quarter of fiscal year 2024 increased by $168,111, or 27.2%, compared to the same period of fiscal year 2023.

Details of the changes in consolidated net sales are as follows:

 

 

Three-Month Period

 

Consolidated net sales for the period ended December 31, 2022

 

$

618,619

 

Aerospace volume

 

 

34,493

 

Industrial volume

 

 

79,190

 

Effects of changes in price

 

 

49,805

 

Effects of changes in foreign currency rates

 

 

4,623

 

Consolidated net sales for the period ended December 31, 2023

 

$

786,730

 

In the Aerospace segment, the increase in net sales for the first quarter of fiscal year 2024 as compared to the same period of the prior fiscal year is primarily attributable to higher commercial OEM production rates, continued growth in both domestic and international passenger traffic, increasing aircraft utilization, and price realization.

In the Industrial segment, the increase in net sales for the first quarter of fiscal year 2024 as compared to the same period of the prior fiscal year is primarily attributable to volume increases across all markets, particularly in our on-highway natural gas truck business in China, and price realization.

27


 

Costs and Expenses

Cost of goods sold increased by $89,718 to $582,381, or 74.0% of net sales, for the first quarter of fiscal year 2024, from $492,663, or 79.6% of net sales, for the first quarter of fiscal year 2023. The increase in cost of goods sold on an absolute basis in the first quarter of fiscal year 2024 compared to the same period of the prior fiscal year was primarily due to higher sales volume and net inflationary impacts on material and labor costs.

Gross margin (as measured by net sales less cost of goods sold, divided by net sales) was 26.0% for the first quarter of fiscal year 2024, compared to 20.4% for the first quarter of fiscal year 2023. The increase in gross margin for the first quarter of fiscal year 2024 as compared to the same period of the prior fiscal year is primarily attributable to higher sales volume and price realizations, partially offset by net inflationary impacts on material and labor costs.

Selling, general, and administrative expenses increased by $11,324, or 17.9%, to $74,511 for the first quarter of fiscal year 2024, compared to $63,187 for the first quarter of fiscal year 2023. Selling, general, and administrative expenses as a percentage of net sales decreased to 9.5% for the first quarter of fiscal year 2024, compared to 10.2% for the first quarter of fiscal year 2023. The increase in selling, general, and administrative expenses on an absolute basis for the first quarter of fiscal year 2024 as compared to the same period of the prior fiscal year is primarily due to increased expenses relating to business development activities, increased headcount, increased expenses relating to our deferred compensation program, and increases in our annual variable incentive compensation costs.

Research and development costs increased by $2,160, or 7.5%, to $30,794 for the first quarter of fiscal year 2024, as compared to $28,634 for the first quarter of fiscal year 2023. The increase in research and development costs for the first quarter of fiscal year 2024 as compared to the same period of the prior fiscal year is primarily due to variability in the timing of projects and expenses. As a percentage of net sales, research and development costs decreased to 3.9% for the first quarter of fiscal year 2024, as compared to 4.6% for the same period of the prior fiscal year.

Our research and development activities extend across almost all of our customer base, and we anticipate ongoing variability in research and development costs due to the timing of customer business needs on current and future programs.

Interest expense increased by $294, or 2.6%, to $11,436 for the first quarter of fiscal year 2024, compared to $11,142 for the first quarter of fiscal year 2023. Interest expense as a percentage of net sales was 1.5% for the first quarter of fiscal year 2024, compared to 1.8% for the first quarter of fiscal year 2023. The increase in interest expense on an absolute basis for the first quarter of fiscal year 2024 as compared to the same period of the prior fiscal year is primarily attributable to increased borrowings and interest rates on the revolving credit facility during the first quarter of fiscal year 2024.

Other income increased by $12,249 to $20,639 for the first quarter of fiscal year 2024, compared to $8,390 for the first quarter of fiscal year 2023. The increase in other income for the first quarter of fiscal year 2024 as compared to the same period of the prior fiscal year is primarily attributable to increased earnings in the joint venture with General Electric and a non-recurring gain related to a previous acquisition that was recognized during the first quarter of fiscal year 2024.

Income taxes were provided at an effective rate on earnings before income taxes of 17.9% for the first quarter of fiscal year 2024, and 6.7% for the first quarter of fiscal year 2023.

The increase in the effective tax rate for the first quarter of fiscal 2024 compared to the first quarter of fiscal year 2023, is primarily attributable to the release of uncertain tax positions in the prior year and projected future withholding taxes on unremitted earnings, partially offset by a larger stock-based compensation tax benefit in the first quarter of fiscal year 2024.

Segment Results

The following table presents sales by segment:

 

 

Three Months Ended December 31,

 

 

 

2023

 

 

2022

 

Net sales:

 

 

 

 

 

 

 

 

 

 

 

 

Aerospace

 

$

460,756

 

 

 

58.6

%

 

$

395,685

 

 

 

64.0

%

Industrial

 

 

325,974

 

 

 

41.4

%

 

 

222,934

 

 

 

36.0

%

Consolidated net sales

 

$

786,730

 

 

 

100

%

 

$

618,619

 

 

 

100

%

 

28


 

The following table presents earnings by segment and reconciles segment earnings to consolidated net earnings:

 

 

Three Months Ended December 31,

 

 

 

2023

 

 

2022

 

Aerospace

 

$

79,002

 

 

$

55,434

 

Industrial

 

 

66,881

 

 

 

11,402

 

Nonsegment expenses

 

 

(26,200

)

 

 

(24,311

)

Interest expense, net

 

 

(9,963

)

 

 

(10,776

)

Consolidated earnings before income taxes

 

 

109,720

 

 

 

31,749

 

Income tax expense

 

 

(19,676

)

 

 

(2,143

)

Consolidated net earnings

 

$

90,044

 

 

$

29,606

 

The following table presents segment earnings as a percent of segment net sales:

 

 

Three Months Ended December 31,

 

 

 

2023

 

 

2022

 

Aerospace

 

 

17.2

%

 

 

14.0

%

Industrial

 

 

20.5

%

 

 

5.1

%

Aerospace

Aerospace segment net sales increased by $65,071, or 16.4%, to $460,756 for the first quarter of fiscal year 2024, compared to $395,685 for the first quarter of fiscal year 2023. The increase in Aerospace segment net sales in the first quarter of fiscal year 2024 as compared to the same period of the prior fiscal year is primarily attributable to higher commercial OEM production rates, continued growth in passenger traffic, increasing aircraft utilization, and price realization.

Defense OEM sales increased in the first quarter of fiscal year 2024 as compared to the same period of the prior fiscal year, primarily driven by increased demand for rotorcraft and ground vehicle components. Our defense aftermarket sales increased in the first quarter of fiscal year 2024 compared to the same period of the prior fiscal year, primarily driven by increased defense budgets resulting in operations and maintenance upgrades.

Aerospace segment earnings increased by $23,568, or 42.5%, to $79,002 for the first quarter of fiscal year 2024, compared to $55,434 for the first quarter of fiscal year 2023.

The increase in Aerospace segment earnings was due to the following:

 

 

Three-Month Period

 

Earnings for the period ended December 31, 2022

 

$

55,434

 

Sales volume and mix

 

 

14,130

 

Price, inflation, and productivity

 

 

12,071

 

Other, net

 

 

(2,633

)

Earnings for the period ended December 31, 2023

 

$

79,002

 

Aerospace segment earnings as a percentage of segment net sales were 17.2% for the first quarter of fiscal year 2024, compared to 14.0% for the first quarter of fiscal year 2023.

Industrial

Industrial segment net sales increased by $103,040, or 46.2%, to $325,974 for the first quarter of fiscal year 2024, compared to $222,934 for the first quarter of fiscal year 2023. The increase in Industrial segment net sales in the first quarter of fiscal year 2024 as compared to the same period of the prior fiscal year was primarily attributable to volume increases across all markets, particularly in our on-highway natural gas truck business in China, as well as price realization.

Industrial segment earnings increased by $55,479, or 486.6%, to $66,881 for the first quarter of fiscal year 2024, compared to $11,402 for the first quarter of fiscal year 2023.

The increase in Industrial segment earnings was due to the following:

 

 

Three-Month Period

 

Earnings for the period ended December 31, 2022

 

$

11,402

 

Sales volume and mix

 

 

43,745

 

Price, inflation, and productivity

 

 

13,918

 

Other, net

 

 

(2,184

)

Earnings for the period ended December 31, 2023

 

$

66,881

 

 

29


 

Industrial segment earnings as a percentage of segment net sales were 20.5% for the first quarter of fiscal year 2024, compared to 5.1% for the first quarter of fiscal year 2023. Industrial earnings benefited significantly from increased demand for on-highway natural gas trucks in China as well as from operational improvements including increased output and other efficiency gains, and favorable product mix.

Nonsegment

Nonsegment expenses increased by $1,889 to $26,200 for the first quarter of fiscal year 2024, compared to $24,311 for the first quarter of fiscal year 2023. The increase in nonsegment expenses for the first quarter of fiscal year 2024 as compared to the first quarter of fiscal year 2023 was primarily due to business development activity costs of $4,238 and a non-recurring gain of $4,803 related to a previous acquisition, each of which did not occur in the prior fiscal year. Excluding these charges from 2024, nonsegment expenses increased $2,454.

LIQUIDITY AND CAPITAL RESOURCES

Historically, we have satisfied our working capital needs, as well as capital expenditures, product development, and other liquidity requirements associated with our operations, with cash flow provided by operating activities and borrowings under our credit facilities. From time to time, we have also issued debt to supplement our cash needs, repay our other indebtedness, or finance our acquisitions. We continue to expect that cash generated from our operating activities, together with borrowings under our revolving credit facility and other borrowing capacity, will be sufficient to fund our continuing operating needs for the foreseeable future.

In addition to our revolving credit facility, we have various foreign credit facilities, some of which are tied to net amounts on deposit at certain foreign financial institutions. These foreign credit facilities are reviewed annually for renewal. We use borrowings under these foreign credit facilities to finance certain local operations on a periodic basis. For further discussion of our revolving credit facility and our other credit facilities, see Note 14, Credit facilities, short-term borrowings and long-term debt in the Notes to the Condensed Consolidated Financial Statements included in Part I, Item I of this Form 10-Q.

At December 31, 2023, we had total outstanding debt of $718,874 consisting of various series of unsecured notes due between 2025 and 2033 and obligations under our finance leases.

At December 31, 2023, we had $65,100 outstanding on our revolving credit facility, all of which is classified as short-term borrowings based on our intent and ability to repay this amount in the next twelve months. Revolving credit facility and short-term borrowing activity during the three months ended December 31, 2023 were as follows:

Maximum daily balance during the period

 

$

270,400

 

Average daily balance during the period

 

$

174,426

 

Weighted average interest rate on average daily balance

 

 

6.43

%

At December 31, 2023, we had additional borrowing availability of $927,212 under our revolving credit facility, net of outstanding letters of credit, and additional borrowing availability of $25,110 under various foreign credit facilities.

To our knowledge, we were in compliance with all our debt covenants as of December 31, 2023. See Note 15, Credit facilities, short-term borrowings and long-term debt in the Notes to the Consolidated Financial Statements included in Part II, Item 8 of our most recently filed Form 10-K, for more information about our covenants.

In addition to utilizing our cash resources to fund the working capital needs of our business, we evaluate additional strategic uses of our funds, including the repurchase of our common stock, payment of dividends, significant capital expenditures, strategic acquisitions, and other potential uses of cash.

From time to time, the Company enters into various factoring agreements with third-party financial institutions to sell certain of its receivables. Factoring activity resulted in a decrease of approximately $5,161 in cash provided by operating activities during the three months ended December 31, 2023, compared to an increase in cash provided by operating activities of approximately $4,736 during the three months ended December 31, 2022.

Our ability to service our long-term debt, to remain in compliance with the various restrictions and covenants contained in our debt agreements, and to fund working capital, capital expenditures and product development efforts will depend on our ability to generate cash from operating activities, which in turn is subject to, among other things, future operating performance as well as general economic, financial, competitive, legislative, regulatory, and other conditions, some of which may be beyond our control.

30


 

We believe that cash flows from operations, along with our contractually committed borrowings and other borrowing capability, will continue to be sufficient to fund anticipated capital spending requirements and our operations for the foreseeable future. However, we could be adversely affected if the financial institutions providing our capital requirements refuse to honor their contractual commitments, cease lending, or declare bankruptcy. We believe the lending institutions participating in our credit arrangements are financially stable and do not currently foresee adverse impacts to financial institutions supporting our capital requirements.

Cash Flows

 

 

Three Months Ended December 31,

 

 

 

2023

 

 

2022

 

Net cash provided by operating activities

 

$

46,789

 

 

$

5,402

 

Net cash (used in) investing activities

 

 

(41,776

)

 

 

(23,475

)

Net cash (used in) provided by financing activities

 

 

(8,091

)

 

 

5,877

 

Effect of exchange rate changes on cash and cash equivalents

 

 

9,979

 

 

 

3,687

 

Net change in cash and cash equivalents

 

 

6,901

 

 

 

(8,509

)

Cash and cash equivalents at beginning of year

 

 

137,447

 

 

 

107,844

 

Cash and cash equivalents at end of period

 

$

144,348

 

 

$

99,335

 

Net cash flows provided by operating activities for the first three months of fiscal year 2024 was $46,789, compared to $5,402 for the same period of fiscal year 2023. The increase in net cash provided by operating activities in the first three months of fiscal year 2024 as compared to the first three months of the prior fiscal year is primarily attributable to increased earnings, partially offset by the above-target payout for fiscal year 2023 annual incentive compensation.

Net cash flows used in investing activities for the first three months of fiscal year 2024 was $41,776, compared to $23,475 for the same period of fiscal year 2023. The increase in cash flows used in investing activities in the first three months of fiscal year 2024 as compared to the first three months of the prior fiscal year is primarily due to increased payments for property, plant, and equipment.

Net cash flows used in financing activities for the first three months of fiscal year 2024 was $8,091, compared to net cash flows provided by financing activities of $5,877 for the same period of fiscal year 2023. The decrease in net cash flows used in financing activities in the first three months of fiscal year 2024 as compared to the first three months of the prior fiscal year is primarily attributable to the decrease in repurchases of common stock and an increase in net debt payments as compared to net borrowings. During the first three months of fiscal year 2024, we did not repurchase any common stock. During the first three months of fiscal year 2023, we repurchased $26,369 of common stock. During the first three months of fiscal year 2024, we had net debt payments in the amount of $10,149, compared to net debt borrowings of $42,402 in the first three months of fiscal year 2023.

Non-U.S. GAAP Financial Measures

Adjusted net earnings, adjusted earnings per share, adjusted effective tax rate, EBIT, adjusted EBIT, EBITDA, adjusted EBITDA, free cash flow, and adjusted free cash flow are financial measures not prepared and presented in accordance with U.S. GAAP. However, we believe these non-U.S. GAAP financial measures provide additional information that enables readers to evaluate our business from the perspective of management.

Earnings based non‐U.S. GAAP financial measures

Adjusted net earnings is defined by the Company as net earnings excluding, as applicable, (i) a non-recurring gain related to a previous acquisition, and (ii) costs related to business development activities. The Company believes that these excluded items are short‐term in nature, not directly related to the ongoing operations of the business, and therefore, the exclusion of them illustrates more clearly how the underlying business of Woodward is performing. Management uses adjusted net earnings to evaluate the Company’s performance excluding these infrequent or unusual period expenses that are not necessarily indicative of the Company’s operating performance for the period. Management defines adjusted earnings per share as adjusted net earnings, as defined above, divided by the weighted‐average number of diluted shares of common stock outstanding for the period. Management uses both adjusted net earnings and adjusted earnings per share when comparing operating performance to other periods which may not have similar, infrequent or unusual charges.

31


 

The reconciliation of net earnings and earnings per share to adjusted net earnings and adjusted earnings per share, respectively, is shown in the tables below:

 

 

Three Months Ended December 31,

 

 

 

2023

 

 

2022

 

 

 

Net Earnings

 

 

Earnings Per Share

 

 

Net Earnings

 

 

Earnings Per Share

 

Net earnings (U.S. GAAP)

 

$

90,044

 

 

$

1.46

 

 

$

29,606

 

 

$

0.49

 

Non-U.S. GAAP adjustments, net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

Non-recurring gain related to a previous acquisition

 

 

(3,433

)

 

 

(0.06

)

 

 

 

 

 

 

Business development activities

 

 

3,200

 

 

 

0.05

 

 

 

 

 

 

 

Non-U.S. GAAP adjustments

 

 

(233

)

 

 

(0.01

)

 

 

 

 

 

 

Adjusted net earnings (Non-U.S. GAAP)

 

$

89,811

 

 

$

1.45

 

 

$

29,606

 

 

$

0.49

 

Management uses EBIT to evaluate Woodward’s performance without financing and tax related considerations, as these elements do not fluctuate with operating results. 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. Securities analysts, investors, and others frequently use EBIT and EBITDA in their evaluation of companies, particularly those with significant property, plant, and equipment, and intangible assets subject to amortization. The Company believes that EBIT and EBITDA are useful measures to the investor when measuring operating performance as they eliminate the impact of financing and tax expenses, which are non-operating expenses and may be driven by factors outside of the Company’s operations, such as changes in tax laws or regulations, and, in the case of EBITDA, the noncash charges associated with depreciation and amortization. Further, as interest from financing, income taxes, depreciation, and amortization can vary dramatically between companies and between periods, management believes that the removal of these items can improve comparability.

Adjusted EBIT and adjusted EBITDA represent further non-U.S. GAAP adjustments to EBIT and EBITDA, in each case adjusted to exclude, as applicable, (i) a non-recurring gain related to a previous acquisition, and (ii) costs related to business development activities. As these charges are infrequent or unusual items that can be variable from period to period and do not fluctuate with operating results, management believes removing these gains and charges from EBIT and EBITDA improves comparability of past, present, and future operating results and provides consistency when comparing EBIT and EBITDA between periods.

EBIT and adjusted EBIT reconciled to net earnings were as follows:

 

 

Three Months Ended December 31,

 

 

 

2023

 

 

2022

 

Net earnings (U.S. GAAP)

 

$

90,044

 

 

$

29,606

 

Income tax expense

 

 

19,676

 

 

 

2,143

 

Interest expense

 

 

11,436

 

 

 

11,142

 

Interest income

 

 

(1,473

)

 

 

(366

)

EBIT (Non-U.S. GAAP)

 

 

119,683

 

 

 

42,525

 

Non-U.S. GAAP adjustments:

 

 

 

 

 

 

Non-recurring gain related to a previous acquisition

 

 

(4,803

)

 

 

 

Business development activities

 

 

4,238

 

 

 

 

Total non-U.S. GAAP adjustments

 

 

(565

)

 

 

 

Adjusted EBIT (Non-U.S. GAAP)

 

$

119,118

 

 

$

42,525

 

 

32


 

EBITDA and adjusted EBITDA reconciled to net earnings were as follows:

 

 

Three Months Ended December 31,

 

 

 

2023

 

 

2022

 

Net earnings (U.S. GAAP)

 

$

90,044

 

 

$

29,606

 

Income tax expense

 

 

19,676

 

 

 

2,143

 

Interest expense

 

 

11,436

 

 

 

11,142

 

Interest income

 

 

(1,473

)

 

 

(366

)

Amortization of intangible assets

 

 

8,599

 

 

 

9,178

 

Depreciation expense

 

 

20,226

 

 

 

20,126

 

EBITDA (Non-U.S. GAAP)

 

 

148,508

 

 

 

71,829

 

Non-U.S. GAAP adjustments:

 

 

 

 

 

 

Non-recurring gain related to a previous acquisition

 

 

(4,803

)

 

 

 

Business development activities

 

 

4,238

 

 

 

 

Total non-U.S. GAAP adjustments

 

 

(565

)

 

 

 

Adjusted EBITDA (Non-U.S. GAAP)

 

$

147,943

 

 

$

71,829

 

The use 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. As adjusted net earnings, adjusted net earnings per share, adjusted effective tax rate, EBIT, adjusted EBIT, EBITDA, and adjusted EBITDA exclude certain financial information compared with net earnings, the most directly comparable U.S. GAAP financial measure, users of this financial information should consider the information that is excluded. Our calculations of adjusted net earnings, adjusted net earnings per share, adjusted effective tax rate, EBIT, adjusted EBIT, EBITDA, and adjusted EBITDA may differ from similarly titled measures used by other companies, limiting their usefulness as comparative measures.

Cash flow‐based non‐U.S. GAAP financial measures

Management uses free cash flow, which is defined by the Company as net cash flows provided by operating activities less payments for property, plant, and equipment, in reviewing the financial performance of and cash generation by Woodward’s various business groups and evaluating cash levels. We believe free cash flow is a useful measure for investors because it portrays our ability to grow organically and generate cash from our businesses for purposes such as paying interest on our indebtedness, repaying maturing debt, funding business acquisitions, purchasing our common stock, paying dividends, and investing in additional research and development. In addition, securities analysts, investors, and others frequently use free cash flow in their evaluation of companies. Adjusted free cash flow represents a further non-U.S. GAAP adjustment to free cash flow to exclude the effect of cash payments pertaining to a non-recurring matter unrelated to the ongoing operations, and cash received for a non-recurring matter related to a previous acquisition. Management believes that excluding these infrequent or unusual items from free cash flow better portrays our ability to generate cash, as such items are not indicative of the Company’s operating performance for the period.

The use of these non‐U.S. GAAP financial measures is not intended to be considered in isolation of, or as substitutes for, the financial information prepared and presented in accordance with U.S. GAAP. Free cash flow and adjusted free cash flow do not necessarily represent funds available for discretionary use and are not necessarily a measure of our ability to fund our cash needs. Our calculation of free cash flow and adjusted free cash flow may differ from similarly titled measures used by other companies, limiting their usefulness as comparative measures.

Free cash flow and adjusted free cash flow reconciled to net cash provided by operating activities were as follows:

 

 

Three Months Ended December 31,

 

 

 

2023

 

 

2022

 

Net cash provided by operating activities (U.S. GAAP)

 

$

46,789

 

 

$

5,402

 

Payments for property, plant and equipment

 

 

(41,812

)

 

 

(24,390

)

Free cash flow (Non-U.S. GAAP)

 

 

4,977

 

 

 

(18,988

)

Cash received for a non-recurring matter related to a previous acquisition

 

 

(4,803

)

 

 

 

Cash paid for a non-recurring matter unrelated to the ongoing operations of the business

 

 

2,725

 

 

 

 

Adjusted free cash flow (Non-U.S. GAAP)

 

$

2,899

 

 

$

(18,988

)

 

33


 

CRITICAL ACCOUNTING ESTIMATES

The preparation of financial statements and related disclosures in conformity with U.S. GAAP requires us to make judgments, assumptions, and estimates that affect the amounts reported in the Condensed Consolidated Financial Statements and accompanying notes. Note 1, Operations and summary of significant accounting policies in the Notes to the Consolidated Financial Statements included in Part II, Item 8 of our most recently filed Form 10-K, describes the significant accounting policies and methods used in the preparation of the Consolidated Financial Statements. Our critical accounting estimates, identified in Management’s Discussion and Analysis of Financial Condition and Results of Operations in Part II, Item 7 of our most recently filed Form 10-K, include the discussion of estimates used for revenue recognition, inventory valuation, reviews for impairment of goodwill and other indefinitely lived intangible assets, and our provision for income taxes. Such accounting estimates require significant judgments and assumptions to be used in the preparation of the Condensed Consolidated Financial Statements included in this Form 10-Q, and actual results could differ materially from the amounts reported.

New Accounting Standards

From time to time, the FASB or other standards-setting bodies issue new accounting pronouncements. Updates to the FASB Accounting Standards Codification are communicated through issuance of an Accounting Standards Update.

To understand the impact of recently issued guidance, whether adopted or to be adopted, please review the information provided in Note 2, New accounting standards in the Notes to the Condensed Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q. Unless otherwise discussed, we believe that the impact of recently issued guidance, whether adopted or to be adopted in the future, is not expected to have a material impact on our Condensed Consolidated Financial Statements upon adoption.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

In the normal course of business, we have exposures to interest rate risk from our long-term and short-term debt and our postretirement benefit plans, and foreign currency exchange rate risk related to our foreign operations and foreign currency transactions. We are also exposed to various market risks that arise from transactions entered into in the normal course of business related to items such as the cost of raw materials and changes in inflation. Certain contractual relationships with customers and vendors mitigate risks from changes in raw material costs and foreign currency exchange rate changes that arise from normal purchasing and normal sales activities.

These market risks are discussed more fully in “Quantitative and Qualitative Disclosures About Market Risk” in Part II, Item 7A of our most recent Form 10-K. These market risks have not materially changed since the date our most recent Form 10-K was filed with the SEC.

Item 4. Controls and Procedures

We have established disclosure controls and procedures, which are designed to ensure that information required to be disclosed in reports filed or submitted under the Securities Exchange Act of 1934, as amended (the “Act”) is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. These disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in the reports that we file or submit under the Act is accumulated and communicated to management, including our Principal Executive Officer (Charles (“Chip”) P. Blankenship, Jr., Chairman of the Board, Chief Executive Officer and President) and Principal Financial and Accounting Officer (William F. Lacey, Chief Financial Officer), as appropriate, to allow timely decisions regarding required disclosures.

Chip P. Blankenship, Jr. and William F. Lacey evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15 under the Securities Exchange Act of 1934, as amended, or the Exchange Act), as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on their evaluations, they concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of December 31, 2023.

There have not been any changes in our internal controls over financial reporting during the quarter ended December 31, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

34


 

PART II – OTHER INFORMATION

Woodward is currently involved in claims, pending or threatened litigation or other legal proceedings, investigations, and/or regulatory proceedings arising in the normal course of business, including, among others, those relating to product liability claims, employment matters, worker’s compensation claims, contractual disputes, product warranty claims, and alleged violations of various laws and regulations. Woodward accrues for known individual matters using estimates of the most likely amount of loss where it believes that it is probable the matter will result in a loss when ultimately resolved and such loss is reasonably estimable.

While the outcome of pending claims, legal and regulatory proceedings, and investigations cannot be predicted with certainty, management believes that any liabilities that may result from these claims, proceedings, and investigations will not have a material effect on Woodward's liquidity, financial condition, or results of operations.

Item 1A. Risk Factors

Investment in our securities involves risk. An investor or potential investor should consider the risks summarized under the caption “Risk Factors” in Part I, Item 1A of our most recent Form 10-K when making investment decisions regarding our securities. The risk factors that were disclosed in our most recent Form 10-K have not materially changed since the date our most recent Form 10-K was filed with the SEC.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Sales of Unregistered Securities

None.

Issuer Purchases of Equity Securities
(In thousands, except for shares and per share amounts)

 

Total Number of Shares Purchased

 

 

Weighted Average Price Paid Per Share

 

 

Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1)

 

 

Maximum Number (or Approximate Dollar Value) of Shares that may yet be Purchased under the Plans or Programs at Period End (1)

 

October 1, 2023 through October 31, 2023 (2)

 

 

160

 

 

$

124.70

 

 

 

 

 

$

227,578

 

November 1, 2023 through November 30, 2023 (2)

 

 

89

 

 

 

135.18

 

 

 

 

 

 

227,578

 

December 1, 2023 through December 31, 2023 (2)

 

 

 

 

 

136.13

 

 

 

 

 

 

227,578

 

 

(1)
In January 2022, the Board authorized a program for the repurchase of up to $800,000 of Woodward’s outstanding shares of common stock on the open market or in privately negotiated transactions over a two-year period ending in January 2024 (the “2022 Authorization”). In January 2024, the Board terminated the 2022 Authorization, which was nearing expiration, and concurrently authorized a new program for the repurchase of up to $600,000 of Woodward’s outstanding shares of common stock on the open market or in privately negotiated transactions over a three-year period ending in January 2027 (the “2024 Authorization”).
(2)
Under a trust established for the purposes of administering the Woodward Executive Benefit Plan, shares of common stock were acquired on the open market related to the deferral of compensation by certain eligible members of Woodward’s management who irrevocably elected to invest some or all of their deferred compensation in Woodward common stock. In addition, 89 shares of common stock were acquired in November 2023 on the open market related to the reinvestment of dividends for shares of treasury stock held for deferred compensation. Shares owned by the trust, which is a separate legal entity, are included in "Treasury stock held for deferred compensation" in the Condensed Consolidated Balance Sheets.

Item 5. Other Information

During the three months ended December 31, 2023, no directors or officers, as defined in Rule 16a-1(f), adopted or terminated a “Rule 10b5-1 trading arrangement” or a “non-Rule 10b5-1 trading arrangement,” each as defined in Regulation S-K Item 408.

35


 

Item 6. Exhibits

Exhibits filed as part of this Report are listed in the Exhibit Index.

WOODWARD, INC.

EXHIBIT INDEX

 

 

Exhibit

Number

Description

*

10.1

Randall Hobbs Offer Letter, Dated October 7, 2022

*

31.1

Rule 13a-14(a)/15d-14(a) certification of Charles P. Blankenship, Jr.

*

31.2

Rule 13a-14(a)/15d-14(a) certification of William F. Lacey

*

32.1

Section 1350 certifications

*

101

The following financial statements from the Company’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2023, formatted in Inline XBRL: (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Earnings, (iii) Condensed Consolidated Statements of Comprehensive Earnings, (iv) Condensed Consolidated Statements of Cash Flows, (v) Condensed Consolidated Statements of Stockholders’ Equity, and (vi) Notes to Condensed Consolidated Financial Statements.

*

104

Cover page Interactive Data File (embedded within the Inline XBRL document and are contained in Exhibit 101)

* Filed as an exhibit to this Report

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

WOODWARD, INC.

Date: February 2, 2024

 

/s/ Charles P. Blankenship, Jr.

 

 

Charles P. Blankenship, Jr.

 

 

Chairman of the Board, Chief Executive Officer, and President

(on behalf of the registrant and as the registrant’s Principal Executive Officer)

 

 

 

Date: February 2, 2024

 

/s/ William F. Lacey

 

 

William F. Lacey

 

 

Chief Financial Officer

(on behalf of the registrant and as the registrant’s Principal Financial and Accounting Officer)

36