Woodward(US:WWD)2024-05-03 18:21PART I – FINANCIAL INFORMATION Financial Statements The company achieved significant growth in Q2 and H1 FY2024, with net sales rising to $835.3 million and net earnings to $97.6 million for the quarter, alongside improved cash and cash equivalents of $316.9 million and operating cash flow of $144.1 million Condensed Consolidated Statements of Earnings Q2 2024 net sales increased 16.3% to $835.3 million, with net earnings reaching $97.6 million or $1.56 per diluted share, while H1 net sales grew 21.3% to $1.62 billion and net earnings tripled to $187.6 million Key Earnings Data (in thousands, except per share amounts) | Metric | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | Six Months Ended March 31, 2024 | Six Months Ended March 31, 2023 | | :--- | :--- | :--- | :--- | :--- | | Net sales | $835,343 | $718,214 | $1,622,073 | $1,336,833 | | Earnings before income taxes | $120,624 | $40,241 | $230,344 | $71,990 | | Net earnings | $97,556 | $35,511 | $187,600 | $65,117 | | Diluted earnings per share | $1.56 | $0.58 | $3.02 | $1.07 | Condensed Consolidated Balance Sheets Total assets reached $4.37 billion as of March 31, 2024, driven by a rise in cash and cash equivalents to $316.9 million, with total liabilities at $2.04 billion and stockholders' equity at $2.33 billion Balance Sheet Highlights (in thousands) | Account | March 31, 2024 | September 30, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $316,932 | $137,447 | | Inventories | $580,377 | $517,843 | | Total current assets | $1,811,974 | $1,469,452 | | Total assets | $4,366,259 | $4,010,203 | | Total liabilities | $2,036,846 | $1,939,214 | | Total stockholders' equity | $2,329,413 | $2,070,989 | Condensed Consolidated Statements of Cash Flows Net cash from operating activities for H1 FY2024 significantly increased to $144.1 million, with net cash used in investing activities at $49.6 million and net cash provided by financing activities at $80.6 million, ending with $316.9 million in cash Cash Flow Summary (in thousands) | Cash Flow Activity | Six Months Ended March 31, 2024 | Six Months Ended March 31, 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $144,118 | $40,150 | | Net cash (used in) investing activities | ($49,641) | ($35,236) | | Net cash provided by financing activities | $80,588 | $24,337 | | Net change in cash and cash equivalents | $179,485 | $21,583 | Notes to Condensed Consolidated Financial Statements Key notes detail revenue recognition, segment performance, and debt structure, highlighting the Aerospace segment's majority sales contribution, a $1 billion revolving credit facility, $791 million total debt, and a new $600 million stock repurchase program - Remaining performance obligations from firm orders totaled $2.38 billion as of March 31, 2024, with the majority expected to be recognized as revenue within the next two years31 - In January 2024, the Board authorized a new $600 million stock repurchase program, ending in January 2027, after terminating the previous 2022 authorization. No shares were repurchased in the first six months of fiscal 2024101 - On November 15, 2023, Woodward paid the entire $75 million principal balance on its Series H and K Notes using proceeds from its revolving credit facility76 Segment Net Sales (in thousands) | Segment | Three Months Ended March 31, 2024 | Six Months Ended March 31, 2024 | | :--- | :--- | :--- | | Aerospace | $497,512 | $958,268 | | Industrial | $337,831 | $663,805 | | Total | $835,343 | $1,622,073 | Management's Discussion and Analysis of Financial Condition and Results of Operations Management reported significant sales growth and margin expansion in H1 FY2024, with net sales growing 16.3% in Q2 and 21.3% year-to-date, driven by strong demand in Aerospace and Industrial markets, leading to free cash flow of $87.8 million Overview The company achieved significant sales growth and margin expansion in H1 FY2024, with net cash from operations increasing to $144.1 million and free cash flow reaching $87.8 million, while monitoring macroeconomic uncertainties - The company achieved significant sales growth and margin expansion in the first half of fiscal 2024, capitalizing on strong end market demand and operational excellence efforts129 Financial Highlights | Metric | Six Months Ended March 31, 2024 | Six Months Ended March 31, 2023 | | :--- | :--- | :--- | | Consolidated Net Sales | $1,622,073 | $1,336,833 | | Consolidated Net Earnings | $187,600 | $65,117 | | Consolidated Diluted EPS | $3.02 | $1.07 | | Net Cash from Operations | $144,118 | $40,150 | | Free Cash Flow | $87,817 | ($3,896) | Results of Operations Q2 2024 consolidated net sales increased 16.3% to $835.3 million, with gross margin expanding to 28.1%, and both Aerospace and Industrial segments reporting strong growth and improved earnings margins of 19.8% and 19.3% respectively - Gross margin for Q2 2024 was 28.1%, a significant improvement from 22.1% in Q2 2023, primarily due to higher sales volume and price realization, which offset inflationary impacts142 - Nonsegment expenses decreased by $25.5 million in Q2 2024 compared to the prior year, primarily because significant one-time charges in 2023 (such as for excess inventory, product rationalization, and restructuring) did not recur161162 Segment Earnings as a Percent of Segment Net Sales | Segment | Q2 2024 | Q2 2023 | H1 2024 | H1 2023 | | :--- | :--- | :--- | :--- | :--- | | Aerospace | 19.8% | 16.8% | 18.5% | 15.5% | | Industrial | 19.3% | 13.4% | 19.9% | 9.7% | Liquidity and Capital Resources The company maintains a strong liquidity position with $791.0 million total debt, $141.3 million outstanding on its revolver, $850.8 million additional borrowing availability, and net cash from operating activities surging to $144.1 million in H1 FY2024 - As of March 31, 2024, the company had total outstanding debt of $791.0 million and additional borrowing availability of $850.8 million under its revolving credit facility165166 - Net cash provided by operating activities increased to $144.1 million for the first half of fiscal 2024, compared to $40.2 million for the same period in 2023, primarily due to higher earnings172 - Free cash flow for the first six months of fiscal 2024 was $87.8 million, a significant improvement from a negative $3.9 million in the prior-year period132186 Quantitative and Qualitative Disclosures About Market Risk The company faces market risks from interest rates, foreign currency, and raw material costs, which have not materially changed since the last Form 10-K filing, with some mitigation through contractual relationships - The company's market risks, including interest rate, foreign currency, and commodity price exposures, have not materially changed since the last Annual Report on Form 10-K191 Controls and Procedures The Principal Executive Officer and Principal Financial Officer concluded that disclosure controls and procedures were effective as of March 31, 2024, with no material changes in internal controls over financial reporting during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of March 31, 2024193 - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, these controls194 PART II – OTHER INFORMATION Legal Proceedings The company is involved in various legal proceedings and claims in the normal course of business, with management not expecting a material effect on financial condition or operations - Woodward is involved in various claims and legal proceedings in the normal course of business but does not expect any resulting liabilities to have a material effect on its liquidity, financial condition, or operations196197 Risk Factors No material changes have occurred to the risk factors previously disclosed in the company's most recent Annual Report on Form 10-K - The risk factors disclosed in the company's most recent Form 10-K have not materially changed198 Unregistered Sales of Equity Securities and Use of Proceeds In January 2024, the Board authorized a new $600 million stock repurchase program, replacing the 2022 authorization, with no shares repurchased under the new program during the quarter and no unregistered equity sales - In January 2024, the Board authorized a new stock repurchase program for up to $600 million of common stock, ending in January 2027. The previous $800 million program from 2022 was terminated201 - No shares were repurchased as part of the publicly announced repurchase programs during the three months ended March 31, 2024200 Other Information No directors or officers adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement during the quarter ended March 31, 2024 - No directors or officers adopted or terminated a Rule 10b5-1 trading arrangement during the quarter202 Exhibits The report includes an exhibit index listing all filed exhibits, such as a separation agreement and officer certifications