Woodward(US:WWD)2025-05-01 17:24PART I – FINANCIAL INFORMATION This section presents Woodward's unaudited financial statements, management's analysis, market risk disclosures, and internal controls Financial Statements This section presents Woodward's unaudited condensed consolidated financial statements, including earnings, balance sheets, and cash flows Condensed Consolidated Financial Statements Condensed consolidated financial statements show 5.8% net sales growth to $883.6 million, $108.9 million net earnings, and $4.49 billion total assets Condensed Consolidated Statements of Earnings (Q2 FY2025 vs Q2 FY2024, in thousands) | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net sales | $883,629 | $835,343 | | Earnings before income taxes | $132,963 | $120,624 | | Net earnings | $108,949 | $97,556 | | Diluted earnings per share | $1.78 | $1.56 | Condensed Consolidated Balance Sheets (in thousands) | Metric | March 31, 2025 | September 30, 2024 | | :--- | :--- | :--- | | Total current assets | $1,911,937 | $1,743,611 | | Total assets | $4,493,469 | $4,368,915 | | Total current liabilities | $979,717 | $923,510 | | Total liabilities | $2,155,962 | $2,192,499 | | Total stockholders' equity | $2,337,507 | $2,176,416 | Condensed Consolidated Statements of Cash Flows (Six Months Ended, in thousands) | Metric | Six Months Ended March 31, 2025 | Six Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $112,341 | $144,118 | | Net cash (used in) investing activities | $(4,138) | $(49,641) | | Net cash (used in) provided by financing activities | $(17,602) | $80,588 | | Net change in cash and cash equivalents | $81,871 | $179,485 | Notes to Condensed Consolidated Financial Statements Notes detail accounting policies, segment performance, and key events including the Safran acquisition and a product line divestiture - On December 19, 2024, Woodward entered into a definitive agreement to acquire the Safran Electronics & Defense electromechanical actuation business in the US, Mexico, and Canada, with the acquisition expected to close in the second half of fiscal year 202565 - During the first six months of fiscal 2025, the company sold certain product lines, including its heavy-duty gas turbine combustion parts product line, for cash proceeds of $44.9 million and recognized a pretax gain of $20.5 million67 Revenue by Segment (Six Months Ended March 31, in thousands) | Segment | 2025 | 2024 | | :--- | :--- | :--- | | Aerospace | $1,055,611 | $958,268 | | Industrial | $600,743 | $663,805 | | Total net sales | $1,656,354 | $1,622,073 | Segment Earnings (Six Months Ended March 31, in thousands) | Segment | 2025 | 2024 | | :--- | :--- | :--- | | Aerospace | $219,341 | $177,453 | | Industrial | $86,164 | $132,125 | | Nonsegment expenses | $(48,856) | $(59,034) | | Consolidated earnings before income taxes | $234,817 | $230,344 | Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q2 and first-half fiscal 2025 financial results, highlighting segment performance, liquidity, and capital resources Overview Q2 FY2025 consolidated net sales rose 5.8% to $883.6 million, driven by Aerospace growth, with $108.9 million net earnings Q2 FY2025 Financial Highlights (in thousands) | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Consolidated Net Sales | $883,629 | $835,343 | | Aerospace Segment Sales | $561,729 | $497,512 | | Industrial Segment Sales | $321,900 | $337,831 | | Consolidated Net Earnings | $108,949 | $97,556 | | Consolidated Diluted EPS | $1.78 | $1.56 | - Free cash flow for the first half of fiscal year 2025 was $60.4 million, down from $87.8 million in the same period of 2024, mainly due to an increase in working capital, offset by lower capital expenditures132 Results of Operations Consolidated net sales increased due to Aerospace growth, offset by Industrial declines, with gross margin decreasing from unfavorable product mix Consolidated Net Sales Change Breakdown (Q2 FY2025 vs Q2 FY2024, in thousands) | Component | Change (in thousands) | | :--- | :--- | | Net Sales, Q2 2024 | $835,343 | | Aerospace volume | $22,083 | | Industrial volume | $(26,528) | | Effects of changes in price | $59,320 | | Effects of changes in foreign currency rates | $(6,589) | | Net Sales, Q2 2025 | $883,629 | - Gross margin decreased to 27.2% for Q2 2025 from 28.1% in Q2 2024, primarily due to unfavorable product mix, which was partially offset by price realization141 - The company anticipates continued significant sales and earnings decreases in its China on-highway natural gas truck business in fiscal year 2025 compared to 2024, with future demand remaining uncertain137 Aerospace Segment Aerospace segment net sales increased 12.9% to $561.7 million in Q2 2025, with earnings up 26.6% to $124.6 million Aerospace Segment Performance (Q2 FY2025 vs Q2 FY2024, in thousands) | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Net Sales | $561,729 | $497,512 | | Segment Earnings | $124,616 | $98,451 | | Segment Margin | 22.2% | 19.8% | - Commercial aftermarket sales increased due to high aircraft utilization rates, while commercial OEM sales saw a measured ramp following the Boeing work stoppage153 - Defense OEM sales increased due to higher demand for smart defense, while defense aftermarket sales were down in the quarter154 Industrial Segment Industrial segment net sales fell 4.7% to $321.9 million in Q2 2025, with earnings down 29.5% to $46.0 million due to lower China on-highway truck volume Industrial Segment Performance (Q2 FY2025 vs Q2 FY2024, in thousands) | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Net Sales | $321,900 | $337,831 | | Segment Earnings | $45,967 | $65,244 | | Segment Margin | 14.3% | 19.3% | - The decrease in sales and earnings was primarily attributable to lower China on-highway volume and unfavorable mix, partially offset by price realization158 - Future demand in the on-highway natural gas truck business in China remains uncertain due to the volatility of this business161 Liquidity and Capital Resources Woodward maintains strong liquidity with $364.1 million cash, $731.0 million available credit, and $911.9 million total debt - As of March 31, 2025, the company had total outstanding debt of $911.9 million and additional borrowing availability of $731.0 million under its revolving credit facility133166 - Net cash from operating activities decreased to $112.3 million in the first half of FY2025 from $144.1 million in the prior year, primarily due to an increase in working capital173 - Financing activities used $17.6 million in cash in the first half of FY2025, compared to providing $80.6 million in the prior year, mainly due to $79.5 million in common stock repurchases and lower net debt borrowings175 Free Cash Flow Reconciliation (Six Months Ended March 31, in thousands) | Metric | 2025 | 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities (U.S. GAAP) | $112,341 | $144,118 | | Payments for property, plant and equipment | $(51,990) | $(56,301) | | Free cash flow (Non-U.S. GAAP) | $60,351 | $87,817 | Quantitative and Qualitative Disclosures About Market Risk Market risk exposures, including interest rates, foreign currency, and raw material costs, remain unchanged from prior Form 10-K disclosures - Market risks related to interest rates, foreign currency exchange, and raw material costs have not materially changed since the company's last annual report on Form 10-K195 Controls and Procedures The CEO and CFO concluded disclosure controls were effective, with no material changes to internal controls during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective at a reasonable assurance level as of March 31, 2025197 - No changes in internal controls over financial reporting occurred during the quarter ended March 31, 2025, that have materially affected, or are reasonably likely to materially affect, internal control over financial reporting198 PART II – OTHER INFORMATION This section covers legal proceedings, risk factors, equity sales, other information, and exhibits filed with the report Legal Proceedings Woodward is involved in various legal proceedings, which management believes will not materially impact financial condition or operations - Management believes that any liabilities resulting from pending claims, legal proceedings, and investigations will not materially affect Woodward's liquidity, financial condition, or results of operations201 Risk Factors No material changes to risk factors previously disclosed in the most recent Annual Report on Form 10-K have occurred - The risk factors disclosed in the most recent Form 10-K have not materially changed202 Unregistered Sales of Equity Securities and Use of Proceeds This section details the company's equity repurchases during the quarter under the $600 million stock repurchase program - In January 2024, the Board authorized a three-year program for the repurchase of up to $600 million of Woodward's common stock207 Issuer Purchases of Equity Securities (January - March 2025) | Period | Total Shares Purchased | Weighted Average Price Paid Per Share | Approx. Dollar Value Remaining for Purchase (in thousands) | | :--- | :--- | :--- | :--- | | Jan 2025 | 81,176 | $172.27 | $159,750 | | Feb 2025 | 81,082 | $190.75 | $144,292 | | Mar 2025 | 81,037 | $180.21 | $129,689 | Other Information Three executive officers, including the CEO, established Rule 10b5-1 trading plans during the second quarter - Three officers, including the CEO, entered into trading plans pursuant to Rule 10b5-1 during the quarter205 - On February 10, 2025, CEO Charles Blankenship, Jr. established a plan for the exercise of up to 49,072 stock options and the sale of up to an additional 8,378 shares, terminating in November 2025206 Exhibits This section lists exhibits filed with the Form 10-Q, including officer certifications and Inline XBRL financial data - The exhibits filed with the report include Rule 13a-14(a)/15d-14(a) certifications from the CEO and CFO, Section 1350 certifications, and financial statements formatted in Inline XBRL213217