Woodward(US:WWD)2022-02-04 18:34PART I – FINANCIAL INFORMATION Financial Statements This section presents the unaudited condensed consolidated financial statements for Q1 FY2022, including earnings, balance sheets, cash flows, and equity, with detailed notes Condensed Consolidated Statements of Earnings Net sales slightly increased to $541.6 million in Q1 FY2022, but net earnings and diluted EPS declined due to higher costs Three-Months Ended December 31 (in thousands, except per share amounts) | Financial Metric | 2021 | 2020 | | :--- | :--- | :--- | | Net sales | $541,586 | $537,619 | | Total costs and expenses | $503,840 | $490,035 | | Earnings before income taxes | $37,746 | $47,584 | | Net earnings | $30,305 | $41,570 | | Diluted earnings per share | $0.47 | $0.64 | Condensed Consolidated Balance Sheets Total assets slightly decreased to $4.04 billion as of December 31, 2021, while total liabilities decreased and stockholders' equity slightly increased Balance Sheet Summary (in thousands) | Account | Dec 31, 2021 | Sep 30, 2021 | | :--- | :--- | :--- | | Total Assets | $4,035,240 | $4,091,004 | | Total Current Assets | $1,446,731 | $1,464,723 | | Total Liabilities | $1,811,808 | $1,876,223 | | Total Current Liabilities | $329,508 | $366,257 | | Long-term debt | $729,826 | $734,122 | | Total Stockholders' Equity | $2,223,432 | $2,214,781 | Condensed Consolidated Statements of Cash Flows Net cash from operating activities significantly decreased to $39.3 million in Q1 FY2022, primarily due to working capital changes, while financing cash outflow decreased Cash Flow Summary (in thousands) | Cash Flow Activity | Three-Months Ended Dec 31, 2021 | Three-Months Ended Dec 31, 2020 | | :--- | :--- | :--- | | Net cash provided by operating activities | $39,290 | $146,725 | | Net cash used in investing activities | ($13,115) | ($9,955) | | Net cash used in financing activities | ($46,688) | ($94,642) | | Net change in cash and cash equivalents | ($21,480) | $48,611 | Notes to Condensed Consolidated Financial Statements Notes detail revenue recognition, GE joint venture, financial instruments, debt, stock repurchases, and segment performance, supporting financial statements - The company's remaining performance obligations for firm orders totaled $1.39 billion as of December 31, 2021, with the majority related to the Aerospace segment and expected to be recognized within two years33 - The company's equity interest in the earnings of its joint venture with General Electric (GE) contributed $4.7 million to other income in Q1 FY2022, up from $2.4 million in Q1 FY202148 - In January 2022, the Board authorized a new $800 million stock repurchase program, terminating the previous $500 million authorization from 2019; in Q1 FY2022, the company repurchased $26.7 million of its common stock102103 Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 FY2022 financial performance, covering COVID-19 impacts, operational results, segment performance, liquidity, and capital resources Overview Q1 FY2022 saw market recovery signs but faced supply chain and labor disruptions, with consolidated net sales slightly increasing driven by Aerospace - The COVID-19 pandemic and related disruptions, including supply chain constraints and labor shortages, continue to adversely impact operations and caused some customer-initiated shipment delays125 Q1 FY2022 vs Q1 FY2021 Performance | Metric | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Total Net Sales | $541.6M | $537.6M | | Aerospace Sales | $336.4M | $321.7M | | Industrial Sales | $205.2M | $216.0M | | Consolidated Net Earnings | $30.3M | $41.6M | | Diluted EPS | $0.47 | $0.64 | | Adjusted Diluted EPS | $0.56 | $0.64 | Results of Operations Consolidated net sales rose to $541.6 million, but gross margin declined due to mix shift, while SG&A increased and R&D decreased - Aerospace segment sales increased 4.6% to $336.4 million, driven by recovering global passenger traffic and increased aircraft production rates, though negatively impacted by approximately $42 million due to supply chain and labor disruptions134145147 - Industrial segment sales decreased 5.0% to $205.2 million, primarily due to weakness in natural gas engine sales in China and unfavorable foreign currency impacts, with approximately $28 million negative impact from COVID-related disruptions135149150 - Gross margin declined to 22.6% from 25.3% year-over-year, attributed to increased Aerospace commercial OEM sales volume which carry lower margins137 Liquidity and Capital Resources Strong liquidity with $427.0 million cash, but operating cash flow decreased; a new $800 million stock repurchase program was authorized - As of December 31, 2021, the company had $427.0 million in cash and cash equivalents, total debt of $730.3 million, and $989.1 million of borrowing availability under its revolving credit facility131156 Cash Flow Comparison (Q1 FY2022 vs Q1 FY2021, in thousands) | Cash Flow Activity | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Net cash from operating activities | $39,290 | $146,725 | | Free cash flow (Non-GAAP) | $26,167 | $139,462 | - The Board terminated the 2019 stock repurchase authorization and approved a new $800 million program in January 2022, which will run for two years160 Quantitative and Qualitative Disclosures About Market Risk The company faces market risks including interest rate, foreign currency, and raw material costs, with no material changes since the last 10-K - The company's primary market risks include interest rate risk, foreign currency exchange rate risk, and raw material cost changes; there have been no material changes in these risks since the last annual report178179 Controls and Procedures Disclosure controls and procedures were effective as of December 31, 2021, with no material changes to internal controls during the quarter - The Principal Executive Officer and Principal Financial Officer concluded that the company's disclosure controls and procedures were effective at a reasonable assurance level as of December 31, 2021181 - No changes in internal controls over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, these controls182 PART II – OTHER INFORMATION Legal Proceedings The company is involved in routine legal proceedings, with management expecting no material impact on financial condition or operations - Woodward is involved in routine legal proceedings and claims, but management believes any resulting liabilities will not materially impact the company's liquidity, financial condition, or operations184185 Risk Factors No material changes to the company's risk factors have occurred since the most recent Annual Report on Form 10-K - The risk factors disclosed in the company's most recent Form 10-K have not materially changed186 Unregistered Sales of Equity Securities and Use of Proceeds The company repurchased 233,204 shares at $114.69 per share in October 2021, under a publicly announced plan Issuer Purchases of Equity Securities (October 2021) | Period | Total Shares Purchased | Weighted-Average Price Paid Per Share | Shares Purchased as Part of Publicly Announced Plan | | :--- | :--- | :--- | :--- | | Oct 1 - Oct 31, 2021 | 233,204 | $114.69 | 233,178 | - In January 2022, the Board terminated the 2019 stock repurchase authorization and approved a new $800 million program to run through January 2024188 Exhibits This section indexes exhibits filed with the 10-Q, including credit agreement amendments, officer certifications, and interactive data