Woodward(WWD) - 2024 Q1 - Quarterly Report

PART I – FINANCIAL INFORMATION Item 1. Financial Statements This section presents Woodward, Inc.'s unaudited condensed consolidated financial statements for Q1 FY2024 and FY2023, including earnings, balance sheets, cash flows, and equity, with detailed notes Condensed Consolidated Statements of Earnings This statement details Woodward's financial performance, showing net sales, earnings before income taxes, net earnings, and earnings per share for the three months ended December 31, 2023 and 2022 | Metric (in thousands, except per share amounts) | Three Months Ended Dec 31, 2023 | Three Months Ended Dec 31, 2022 | | :-------------------------------------------- | :------------------------------ | :------------------------------ | | Net sales | $786,730 | $618,619 | | Earnings before income taxes | $109,720 | $31,749 | | Net earnings | $90,044 | $29,606 | | Basic earnings per share | $1.50 | $0.50 | | Diluted earnings per share | $1.46 | $0.49 | - Net sales increased by 27.2% to $786,730 thousand in Q1 FY2024 from $618,619 thousand in Q1 FY2023[9] - Net earnings increased significantly by 204.1% to $90,044 thousand in Q1 FY2024 from $29,606 thousand in Q1 FY2023[9] Condensed Consolidated Statements of Comprehensive Earnings This statement outlines Woodward's total comprehensive earnings, including net earnings and other comprehensive income components, for the three months ended December 31, 2023 and 2022 | Metric (in thousands) | Three Months Ended Dec 31, 2023 | Three Months Ended Dec 31, 2022 | | :---------------------------------------------------------------------------------------- | :------------------------------ | :------------------------------ | | Net earnings | $90,044 | $29,606 | | Foreign currency translation and transactions adjustments, net of tax | $21,688 | $27,946 | | Derivative adjustments, net of tax | $(611) | $5,485 | | Pension and other postretirement benefit plan adjustments, net of tax | $210 | $500 | | Total comprehensive earnings | $111,331 | $63,537 | - Total comprehensive earnings increased by 75.2% to $111,331 thousand in Q1 FY2024 from $63,537 thousand in Q1 FY2023[11] - Derivative adjustments, net of tax, swung to a loss of $(611) thousand in Q1 FY2024 from a gain of $5,485 thousand in Q1 FY2023[11] Condensed Consolidated Balance Sheets This statement presents Woodward's financial position, detailing assets, liabilities, and stockholders' equity as of December 31, 2023, and September 30, 2023 | Metric (in thousands) | December 31, 2023 | September 30, 2023 | | :-------------------------------------------------- | :---------------- | :----------------- | | Total assets | $4,130,805 | $4,010,203 | | Total current assets | $1,546,157 | $1,469,452 | | Total liabilities | $1,940,743 | $1,939,214 | | Total stockholders' equity | $2,190,062 | $2,070,989 | | Cash and cash equivalents | $144,348 | $137,447 | | Inventories | $559,673 | $517,843 | - Total assets increased by 3.0% to $4,130,805 thousand as of December 31, 2023, from $4,010,203 thousand as of September 30, 2023[13] - Total stockholders' equity increased by 5.7% to $2,190,062 thousand as of December 31, 2023, from $2,070,989 thousand as of September 30, 2023[13] Condensed Consolidated Statements of Cash Flows This statement summarizes Woodward's cash inflows and outflows from operating, investing, and financing activities for the three months ended December 31, 2023 and 2022 | Metric (in thousands) | Three Months Ended Dec 31, 2023 | Three Months Ended Dec 31, 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 | | Net change in cash and cash equivalents | $6,901 | $(8,509) | | Cash and cash equivalents at end of period | $144,348 | $99,335 | - Net cash provided by operating activities increased significantly by 766.1% to $46,789 thousand in Q1 FY2024 from $5,402 thousand in Q1 FY2023[15] - Net cash used in investing activities increased by 77.9% to $41,776 thousand in Q1 FY2024, primarily due to higher capital expenditures[15] Condensed Consolidated Statements of Stockholders' Equity This statement details changes in Woodward's stockholders' equity, including additional paid-in capital, retained earnings, and treasury stock, as of December 31, 2023 and 2022 | Metric (in thousands) | December 31, 2023 | December 31, 2022 | | :------------------------------------- | :---------------- | :---------------- | | Additional paid-in capital | $337,038 | $305,108 | | Accumulated other comprehensive losses | $(49,384) | $(58,632) | | Retained earnings | $2,985,409 | $2,745,484 | | Treasury stock at cost | $(1,083,107) | $(1,052,623) | | Total stockholders' equity | $2,190,062 | $1,939,435 | - Total stockholders' equity increased by 12.9% to $2,190,062 thousand as of December 31, 2023, from $1,939,435 thousand as of December 31, 2022[17] - Retained earnings increased by 8.7% to $2,985,409 thousand as of December 31, 2023, from $2,745,484 thousand as of December 31, 2022[17] Notes to Condensed Consolidated Financial Statements This section provides detailed explanations and disclosures supporting the condensed consolidated financial statements, covering accounting policies, estimates, and specific financial line items Note 1. Basis of presentation This note explains that the financial statements are unaudited, reflect normal recurring adjustments, and rely on management's significant estimates and assumptions - The financial statements are unaudited and reflect all normal recurring adjustments necessary for fair presentation[18] - Results for the three months ended December 31, 2023 and 2022, are not necessarily indicative of future operating results[18] - Management uses significant estimates and assumptions in preparing these statements, and actual results could vary[20] Note 2. New accounting standards This note discusses recently issued accounting standards, including ASU 2023-07 and ASU 2023-09, and their potential impact on Woodward's financial disclosures - ASU 2023-07, "Improvements to Reportable Segment Disclosures," effective for FY2025, requires enhanced disclosures about significant segment expenses, with Woodward currently assessing the impact[22] - ASU 2023-09, "Improvements to Income Tax Disclosures," effective for FY2026, requires enhanced and disaggregated income tax disclosures, with Woodward currently assessing the impact[23] Note 3. Revenue This note provides a breakdown of Woodward's net sales by recognition method (point in time and over time) and by market within its Aerospace and Industrial segments | Revenue Type (in thousands) | Three Months Ended Dec 31, 2023 | Three Months Ended Dec 31, 2022 | | :-------------------------- | :------------------------------ | :------------------------------ | | Point in time | $375,133 | $309,679 | | Over time | $411,597 | $308,940 | | Total net sales | $786,730 | $618,619 | | Aerospace Segment Revenue by Market (in thousands) | Three Months Ended Dec 31, 2023 | Three Months Ended Dec 31, 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 | | Industrial Segment Revenue by Market (in thousands) | Three Months Ended Dec 31, 2023 | Three Months Ended Dec 31, 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 | Note 4. Earnings per share This note details the calculation of basic and diluted earnings per share, including net earnings and the dilutive effect of stock options and restricted stock | Metric (per share amounts) | Three Months Ended Dec 31, 2023 | Three Months Ended Dec 31, 2022 | | :------------------------------------------------ | :------------------------------ | :------------------------------ | | Net earnings | $90,044 | $29,606 | | 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 | | Basic earnings per share | $1.50 | $0.50 | | Diluted earnings per share | $1.46 | $0.49 | - Diluted earnings per share increased by 198.0% to $1.46 in Q1 FY2024 from $0.49 in Q1 FY2023[35] Note 5. Leases This note provides information on Woodward's lease assets, liabilities, and related expenses, including operating lease costs and revenue from embedded operating leases | Lease-Related Metrics (in thousands) | December 31, 2023 | September 30, 2023 | | :--------------------------------- | :---------------- | :----------------- | | Total lease assets | $27,369 | $28,017 | | Total lease liabilities | $28,211 | $28,829 | | Lease-Related Expenses (in thousands) | Three Months Ended Dec 31, 2023 | Three Months Ended Dec 31, 2022 | | :---------------------------------- | :------------------------------ | :------------------------------ | | Operating lease expense | $1,632 | $1,487 | | Total lease expense | $2,187 | $2,044 | - Revenue from contracts with customers that included embedded operating leases was $1,364 thousand for Q1 FY2024, a slight decrease from $1,388 thousand in Q1 FY2022[41] Note 6. Joint venture This note details Woodward's equity interest in the earnings of its joint venture, cash distributions received, and net sales to the JV | JV Related Metrics (in thousands) | Three Months Ended Dec 31, 2023 | Three Months Ended Dec 31, 2022 | | :-------------------------------- | :------------------------------ | :------------------------------ | | Equity interest in the earnings of the JV (Other income) | $10,155 | $4,573 | | Cash distributions to Woodward from the JV | $6,500 | $4,500 | | Net sales to the JV | $20,272 | $6,477 | - Equity interest in the earnings of the JV (Other income) increased by 121.9% to $10,155 thousand in Q1 FY2024[43] - Net sales to the JV increased significantly by 212.9% to $20,272 thousand in Q1 FY2024, partly due to a smaller reduction for royalties owed to the JV[43] Note 7. Financial instruments and fair value measurements This note provides information on Woodward's financial assets and liabilities measured at fair value, including derivative instruments | Financial Instruments (in thousands) | December 31, 2023 | September 30, 2023 | | :--------------------------------- | :---------------- | :----------------- | | Total financial assets | $74,226 | $58,862 | | Total financial liabilities | $12,362 | $0 | - Total financial assets measured at fair value increased by 26.1% to $74,226 thousand as of December 31, 2023[46] - Total financial liabilities measured at fair value increased to $12,362 thousand as of December 31, 2023, primarily due to cross-currency interest rate swaps[46] Note 8. Derivative instruments and hedging activities This note describes Woodward's use of derivative instruments for hedging activities, including cross-currency swaps, and their impact on earnings and foreign exchange losses - The 2020 Floating-Rate Cross-Currency Swap expired on May 31, 2023, and is no longer recorded on the Condensed Consolidated Balance Sheets[55] - The total notional value of the 2020 Fixed-Rate Cross-Currency Swaps was $400,000 thousand as of December 31, 2023[55] | Derivative Impact (in thousands) | Three Months Ended Dec 31, 2023 | Three Months Ended Dec 31, 2022 | | :------------------------------- | :------------------------------ | :------------------------------ | | Income recognized in earnings on qualifying hedging instruments | $17,899 | $38,186 | | Net foreign exchange losses (net investment hedging) | $1,866 | $3,625 | Note 9. Supplemental statement of cash flows information This note provides additional cash flow details, including interest paid, income taxes paid, and purchases of property, plant, and equipment on account | Supplemental Cash Flow (in thousands) | Three Months Ended Dec 31, 2023 | Three Months Ended Dec 31, 2022 | | :------------------------------------ | :------------------------------ | :------------------------------ | | Interest paid, net of amounts capitalized | $13,411 | $12,334 | | Income taxes paid | $13,032 | $3,725 | | Purchases of property, plant and equipment on account | $3,121 | $5,821 | - Income taxes paid increased significantly by 249.9% to $13,032 thousand in Q1 FY2024 from $3,725 thousand in Q1 FY2023[62] Note 10. Inventories This note provides a detailed breakdown of Woodward's inventory categories, including raw materials, work in progress, component parts, and finished goods | Inventory Category (in thousands) | December 31, 2023 | September 30, 2023 | | :-------------------------------- | :---------------- | :----------------- | | Raw materials | $154,663 | $133,699 | | Work in progress | $133,977 | $127,438 | | Component parts | $343,444 | $327,522 | | Finished goods | $88,614 | $74,594 | | Total inventories | $559,673 | $517,843 | - Total inventories increased by 8.1% to $559,673 thousand as of December 31, 2023, from $517,843 thousand as of September 30, 2023[63] Note 11. Property, plant, and equipment This note details Woodward's property, plant, and equipment, net, including construction in progress, and reports depreciation expense | PP&E Category (in thousands) | December 31, 2023 | September 30, 2023 | | :-------------------------------------- | :---------------- | :----------------- | | Property, plant, and equipment, net | $931,253 | $913,094 | | Construction in progress | $66,357 | $55,487 | - Property, plant, and equipment, net, increased by 2.0% to $931,253 thousand as of December 31, 2023[64] - Depreciation expense remained stable at $20,226 thousand in Q1 FY2024 compared to $20,126 thousand in Q1 FY2023[64] Note 12. Goodwill This note provides a breakdown of goodwill by segment (Aerospace and Industrial) and discusses changes due to foreign currency translation effects | Goodwill by Segment (in thousands) | December 31, 2023 | September 30, 2023 | | :--------------------------------- | :---------------- | :----------------- | | Aerospace | $455,423 | $455,423 | | Industrial | $348,064 | $336,045 | | Consolidated | $803,487 | $791,468 | - Consolidated goodwill increased by 1.5% to $803,487 thousand as of December 31, 2023, primarily due to foreign currency translation effects in the Industrial segment[65] - No impairment was identified in the fourth quarter of fiscal year 2023 goodwill impairment test[65] Note 13. Intangible assets, net This note presents the consolidated total intangible assets, net, and details the amortization expense for the current period and projected future amortization | Intangible Assets (in thousands) | December 31, 2023 | September 30, 2023 | | :------------------------------- | :---------------- | :----------------- | | Consolidated Total Intangibles, Net | $460,986 | $452,363 | | Amortization Expense (in thousands) | Three Months Ended Dec 31, 2023 | Three Months Ended Dec 31, 2022 | | :---------------------------------- | :------------------------------ | :------------------------------ | | Amortization expense | $8,599 | $9,178 | | Future Amortization Expense (in thousands) | Amount | | :--------------------------------------- | :-------- | | 2024 (remaining) | $24,862 | | 2025 | $28,195 | | 2026 | $28,185 | | Thereafter | $260,063 | Note 14. Credit facilities, short-term borrowings and long-term debt This note outlines Woodward's credit facilities, outstanding borrowings, and long-term debt, including the revolving credit facility and the repayment of Series H and K Notes - Woodward maintains a $1,000,000 thousand revolving credit facility maturing on October 21, 2027[68][69] - Outstanding borrowings under the revolving credit facility were $65,100 thousand as of December 31, 2023, at an effective interest rate of 6.46%, compared to no borrowings as of September 30, 2023[70] - The entire principal balance of $75,000 thousand on the Series H and K Notes was paid on November 15, 2023, using proceeds from the revolving credit facility[72] Note 15. Accrued liabilities This note provides a breakdown of Woodward's accrued liabilities, including salaries, member benefits, product warranties, and interest payable | Accrued Liabilities (in thousands) | 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 | | Total accrued liabilities | $211,657 | $262,616 | - Total accrued liabilities decreased by 19.5% to $211,657 thousand as of December 31, 2023, from $262,616 thousand as of September 30, 2023[73] - Salaries and other member benefits decreased significantly by 38.8% to $89,797 thousand as of December 31, 2023[73] Note 16. Other liabilities This note details Woodward's other liabilities, including net accrued retirement benefits, noncurrent contract liabilities, and cross-currency swap derivative liabilities | Other Liabilities (in thousands) | December 31, 2023 | September 30, 2023 | | :------------------------------- | :---------------- | :----------------- | | Net accrued retirement benefits, less amounts recognized within accrued liabilities | $78,117 | $72,570 | | Net noncurrent contract liabilities | $419,939 | $414,657 | | Cross-currency swap derivative liability | $12,362 | $0 | | Total other liabilities | $565,882 | $543,490 | - Total other liabilities increased by 4.1% to $565,882 thousand as of December 31, 2023[77] - A cross-currency swap derivative liability of $12,362 thousand was recorded as of December 31, 2023, up from $0 as of September 30, 2023[77] Note 17. Other (income) expense, net This note presents the components of other (income) expense, net, including equity interest in JV earnings and a non-recurring gain from a previous acquisition | Other (Income) Expense, Net (in thousands) | Three Months Ended Dec 31, 2023 | Three Months Ended Dec 31, 2022 | | :----------------------------------------- | :------------------------------ | :------------------------------ | | Equity interest in the earnings of the JV | $(10,155) | $(4,573) | | Gain on non-recurring matter related to a previous acquisition | $(4,803) | $0 | | Total Other (income) expense, net | $(20,639) | $(8,390) | - Total Other (income) expense, net, swung to a net income of $(20,639) thousand in Q1 FY2024 from $(8,390) thousand in Q1 FY2023, an increase of 145.9%[78] - A non-recurring gain of $4,803 thousand related to a previous acquisition was recognized in Q1 FY2024[78] Note 18. Income taxes This note provides details on earnings before income taxes, income tax expense, and the effective tax rate, explaining the factors influencing tax rate changes | Income Tax Metrics (in thousands) | Three Months Ended Dec 31, 2023 | Three Months Ended Dec 31, 2022 | | :-------------------------------- | :------------------------------ | :------------------------------ | | Earnings before income taxes | $109,720 | $31,749 | | Income tax expense | $19,676 | $2,143 | | Effective tax rate | 17.9% | 6.7% | - The effective tax rate increased to 17.9% in Q1 FY2024 from 6.7% in Q1 FY2023, primarily due to the release of uncertain tax positions in the prior year and projected future withholding taxes, partially offset by a larger stock-based compensation tax benefit[80] - Gross unrecognized tax benefits were $11,858 thousand as of December 31, 2023, with a potential decrease of up to $2,178 thousand in the next twelve months[81] Note 19. Retirement benefits This note outlines Woodward's retirement benefit costs, including company contributions to defined contribution plans and net periodic pension and other postretirement costs | Retirement Benefit Costs (in thousands) | Three Months Ended Dec 31, 2023 | Three Months Ended Dec 31, 2022 | | :-------------------------------------- | :------------------------------ | :------------------------------ | | Company costs (defined contribution plans) | $11,175 | $10,102 | | Net periodic retirement pension cost | $401 | $596 | | Net periodic other postretirement cost | $87 | $102 | - Company costs for defined contribution plans increased by 10.6% to $11,175 thousand in Q1 FY2024[86] - Net periodic retirement pension cost decreased by 32.7% to $401 thousand in Q1 FY2024[89] Note 20. Stockholders' equity This note provides details on stockholders' equity activity, including treasury stock shares and the authorization of a new stock repurchase program | Stockholders' Equity Activity (in thousands, except shares) | December 31, 2023 | September 30, 2023 | | :-------------------------------------------------------- | :---------------- | :----------------- | | Treasury Stock (shares) | (12,823) | (13,070) | - No shares were repurchased under the 2022 Authorization in Q1 FY2024, compared to 274 shares for $26,369 thousand in Q1 FY2023[93] - The Board authorized a new $600,000 thousand stock repurchase program (2024 Authorization) over three years, replacing the expiring 2022 Authorization[94] Note 21. Commitments and contingencies This note discusses Woodward's involvement in various legal claims, litigation, and regulatory proceedings, and management's assessment of their financial impact - Woodward is involved in various claims, pending or threatened litigation, and regulatory proceedings arising in the normal course of business[109] - Accruals are established for known individual matters where a loss is probable and reasonably estimable[109] - Management believes that any liabilities from these matters will not have a material effect on Woodward's liquidity, financial condition, or results of operations[111] Note 22. Segment information This note presents financial performance by segment, detailing net sales and earnings for the Aerospace and Industrial segments for the three months ended December 31, 2023 and 2022 | Segment Performance (in thousands) | Three Months Ended Dec 31, 2023 | Three Months Ended Dec 31, 2022 | | :--------------------------------- | :------------------------------ | :------------------------------ | | Aerospace segment net sales | $460,756 | $395,685 | | Industrial segment net sales | $325,974 | $222,934 | | Aerospace segment earnings | $79,002 | $55,434 | | Industrial segment earnings | $66,881 | $11,402 | - Aerospace segment net sales increased by 16.4% and Industrial segment net sales increased by 46.2% in Q1 FY2024[115] - Aerospace segment earnings increased by 42.5% (17.2% of net sales) and Industrial segment earnings increased by 486.6% (20.5% of net sales) in Q1 FY2024[115][141] Note 23. Subsequent events This note discloses significant events that occurred after the balance sheet date but before the financial statements were issued - On January 24, 2024, the Board approved a cash dividend of $0.25 per share, payable on March 5, 2024[117] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on Woodward's financial performance, condition, and operational results for the first quarter of fiscal year 2024, highlighting significant sales growth and margin expansion driven by strong market demand, improved output, and price realization, while also discussing liquidity, capital resources, and the impact of non-GAAP financial measures Forward Looking Statements This section advises that the report contains forward-looking statements subject to risks and uncertainties, and the company undertakes no obligation to update them - The report contains forward-looking statements regarding future events, financial performance, growth, market trends, and strategic initiatives[119] - These statements are subject to risks, uncertainties, and assumptions, as detailed in Woodward's SEC filings, including the latest Form 10-K[120] - The company undertakes no obligation to revise or update any forward-looking statements, except as required by applicable law[121] Overview This overview highlights Woodward's strong Q1 FY2024 performance, driven by significant sales growth, margin expansion, and improved free cash flow due to market demand, strategic initiatives, and supply chain stabilization - Woodward achieved significant sales growth and margin expansion in Q1 FY2024 due to strong end-market demand, improved output from strategic initiatives, supply chain stabilization, and price realization[122] | Operational Highlights (in thousands, except %) | Three Months Ended Dec 31, 2023 | Three Months Ended Dec 31, 2022 | | :-------------------------------------------- | :------------------------------ | :------------------------------ | | Consolidated net sales | $786,730 | $618,619 | | Consolidated net earnings | $90,044 | $29,606 | | Consolidated diluted earnings per share | $1.46 | $0.49 | | Net cash provided by operating activities | $46,789 | $5,402 | | Free cash flow | $4,977 | $(18,988) | - Free cash flow improved to $4,977 thousand in Q1 FY2024 from negative $18,988 thousand in Q1 FY2023, primarily due to increased earnings[125] Results of Operations This section analyzes Woodward's consolidated financial data, including net sales, cost of goods sold, operating expenses, and gross margin, highlighting key drivers of change | Consolidated Financial Data (% of Net Sales) | Three Months Ended Dec 31, 2023 | Three Months Ended Dec 31, 2022 | | :----------------------------------------- | :------------------------------ | :------------------------------ | | Cost of goods sold | 74.0% | 79.6% | | Selling, general, and administrative expenses | 9.5% | 10.2% | | Research and development costs | 3.9% | 4.6% | | Earnings before income taxes | 13.9% | 5.1% | | Net earnings | 11.4% | 4.8% | | Net Sales Change Drivers (in thousands) | Amount | | :-------------------------------------- | :-------- | | Consolidated net sales for Dec 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 Dec 31, 2023 | $786,730 | - Gross margin improved to 26.0% in Q1 FY2024 from 20.4% in Q1 FY2023, primarily due to higher sales volume and price realizations, partially offset by net inflationary impacts[132] Liquidity and Capital Resources This section discusses Woodward's cash position, total outstanding debt, and available borrowing capacity, along with a summary of cash flows from operating, investing, and financing activities - Woodward had $144,348 thousand in cash and cash equivalents and total outstanding debt of $718,874 thousand at December 31, 2023[127][151] - Additional borrowing availability was $927,212 thousand under the revolving credit facility and $25,110 thousand under foreign lines of credit[127][152] | Cash Flow Summary (in thousands) | Three Months Ended Dec 31, 2023 | Three Months Ended Dec 31, 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 | Non-U.S. GAAP Financial Measures This section presents and reconciles non-U.S. GAAP financial measures, including adjusted net earnings, adjusted EPS, adjusted EBIT, adjusted EBITDA, and free cash flow, to their most directly comparable GAAP measures | Non-U.S. GAAP Earnings Metrics (in thousands, except per share) | Three Months Ended Dec 31, 2023 | Three Months Ended Dec 31, 2022 | | :------------------------------------------------------------ | :------------------------------ | :------------------------------ | | Adjusted net earnings (Non-U.S. GAAP) | $89,811 | $29,606 | | Adjusted Earnings Per Share (Non-U.S. GAAP) | $1.45 | $0.49 | | Adjusted EBIT (Non-U.S. GAAP) | $119,118 | $42,525 | | Adjusted EBITDA (Non-U.S. GAAP) | $147,943 | $71,829 | | Non-U.S. GAAP Cash Flow Metrics (in thousands) | Three Months Ended Dec 31, 2023 | Three Months Ended Dec 31, 2022 | | :--------------------------------------------- | :------------------------------ | :------------------------------ | | Free cash flow (Non-U.S. GAAP) | $4,977 | $(18,988) | | Adjusted free cash flow (Non-U.S. GAAP) | $2,899 | $(18,988) | - Adjusted net earnings increased by 203.9% to $89,811 thousand in Q1 FY2024, and adjusted diluted EPS increased to $1.45[163] Critical Accounting Estimates This section highlights the significant judgments, assumptions, and estimates required in preparing financial statements, which could materially impact actual results - The preparation of financial statements requires significant judgments, assumptions, and estimates, which could lead to material differences in actual results[170] - Key critical accounting estimates include revenue recognition, inventory valuation, impairment reviews for goodwill and other indefinitely lived intangible assets, and the provision for income taxes[170] New Accounting Standards This section refers to Note 2 for details on recently issued accounting guidance and management's assessment of its expected impact on the financial statements - The company refers to Note 2 for details on recently issued accounting guidance[172] - Management believes that the impact of recently issued guidance is not expected to have a material impact on the Condensed Consolidated Financial Statements upon adoption[172] Item 3. Quantitative and Qualitative Disclosures About Market Risk Woodward is exposed to market risks including interest rate risk from debt and postretirement plans, and foreign currency exchange rate risk from international operations. These risks have not materially changed since the last Form 10-K filing - The company has exposures to interest rate risk from long-term and short-term debt and postretirement benefit plans[173] - Foreign currency exchange rate risk is related to foreign operations and transactions[173] - These market risks have not materially changed since the most recent Form 10-K was filed[174] Item 4. Controls and Procedures Management, including the CEO and CFO, evaluated the effectiveness of Woodward's disclosure controls and procedures as of December 31, 2023, concluding they were effective at a reasonable assurance level. No material changes to internal controls over financial reporting occurred during the quarter - Disclosure controls and procedures were evaluated by the Principal Executive Officer and Principal Financial and Accounting Officer[176] - The disclosure controls and procedures were concluded to be effective at the reasonable assurance level as of December 31, 2023[176] - There have been no material changes in internal controls over financial reporting during the quarter ended December 31, 2023[177] PART II – OTHER INFORMATION Item 1. Legal Proceedings Woodward is involved in various legal claims and proceedings in the normal course of business, for which accruals are made for probable and estimable losses. Management believes these matters will not have a material effect on the company's liquidity, financial condition, or results of operations - Woodward is currently involved in claims, pending or threatened litigation, and regulatory proceedings arising in the normal course of business[179] - Accruals are established for known individual matters where a loss is probable and reasonably estimable[179] - Management believes that any liabilities from these matters will not have a material effect on Woodward's liquidity, financial condition, or results of operations[180] Item 1A. Risk Factors Investment in Woodward's securities involves risks, which are summarized in the "Risk Factors" section of the company's most recent Form 10-K and have not materially changed since that filing - Investment in Woodward's securities involves risk[181] - Risk factors are summarized under the caption "Risk Factors" in Part I, Item 1A of the most recent Form 10-K[181] - The risk factors have not materially changed since the most recent Form 10-K was filed[181] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds There were no unregistered sales of equity securities during the quarter. The company repurchased 249 thousand shares of common stock for deferred compensation purposes during the quarter, but no shares were repurchased under the publicly announced 2022 Authorization. A new $600 million repurchase program (2024 Authorization) was approved in January 2024 - No unregistered sales of equity securities occurred during the three months ended December 31, 2023[182] | 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 | | :------------------------------------------------------------------------------------------ | :------------------------------- | :------------------------------------ | | October 1, 2023 through October 31, 2023 | 160 | $124.70 | | November 1, 2023 through November 30, 2023 | 89 | $135.18 | | December 1, 2023 through December 31, 2023 | — | $136.13 | - The Board terminated the 2022 Authorization and concurrently authorized a new program (2024 Authorization) for the repurchase of up to $600,000 thousand of common stock over a three-year period ending in January 2027[184] Item 5. Other Information No directors or officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the three months ended December 31, 2023 - No directors or officers adopted or terminated a "Rule 10b5-1 trading arrangement" or a "non-Rule 10b5-1 trading arrangement" during the three months ended December 31, 2023[184] Item 6. Exhibits This section lists all exhibits filed as part of the report, including certifications, financial statements in Inline XBRL format, and other documents - Exhibits include Rule 13a-14(a)/15d-14(a) certifications and Section 1350 certifications[189] - The financial statements (Condensed Consolidated Balance Sheets, Statements of Earnings, Comprehensive Earnings, Cash Flows, Stockholders' Equity, and Notes) are formatted in Inline XBRL[189] Signatures The report is duly signed on behalf of Woodward, Inc. by Charles P. Blankenship, Jr., Chairman of the Board, Chief Executive Officer, and President, and William F. Lacey, Chief Financial Officer, on February 2, 2024 - The report was signed by Charles P. Blankenship, Jr., Chairman of the Board, Chief Executive Officer, and President[189] - The report was also signed by William F. Lacey, Chief Financial Officer[189] - The signing date for the report was February 2, 2024[189]