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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 March 31, 2021

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 April 30, 2021, 63,525,499 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

 

7

Item 2.

 

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

 

31

 

 

Forward Looking Statements

 

31

 

 

Overview

 

32

 

 

Results of Operations

 

34

 

 

Liquidity and Capital Resources

 

39

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

45

Item 4.

 

Controls and Procedures

 

45

PART II – OTHER INFORMATION

Item 1.

 

Legal Proceedings

 

45

Item 1A.

 

Risk Factors

 

45

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

46

Item 6.

 

Exhibits

 

46

 

 

Signatures

 

47

 

 

 

 


 

 

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

 

 

Six-Months Ended

 

 

 

March 31,

 

 

March 31,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Net sales

 

$

581,321

 

 

$

720,220

 

 

$

1,118,940

 

 

$

1,440,575

 

Costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of goods sold

 

 

434,243

 

 

 

517,514

 

 

 

835,883

 

 

 

1,052,431

 

Selling, general and administrative expenses

 

 

44,329

 

 

 

57,629

 

 

 

100,440

 

 

 

119,674

 

Research and development costs

 

 

27,627

 

 

 

34,661

 

 

 

59,623

 

 

 

71,507

 

Impairment of assets sold

 

 

 

 

 

 

 

 

 

 

 

37,902

 

Interest expense

 

 

8,249

 

 

 

8,756

 

 

 

17,155

 

 

 

17,765

 

Interest income

 

 

(283

)

 

 

(476

)

 

 

(778

)

 

 

(963

)

Other (income) expense, net

 

 

(11,331

)

 

 

(5,063

)

 

 

(19,454

)

 

 

(26,488

)

Total costs and expenses

 

 

502,834

 

 

 

613,021

 

 

 

992,869

 

 

 

1,271,828

 

Earnings before income taxes

 

 

78,487

 

 

 

107,199

 

 

 

126,071

 

 

 

168,747

 

Income tax expense

 

 

10,174

 

 

 

15,881

 

 

 

16,188

 

 

 

24,056

 

Net earnings

 

$

68,313

 

 

$

91,318

 

 

$

109,883

 

 

$

144,691

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings per share

 

$

1.08

 

 

$

1.47

 

 

$

1.74

 

 

$

2.33

 

Diluted earnings per share

 

$

1.04

 

 

$

1.41

 

 

$

1.68

 

 

$

2.24

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted Average Common Shares Outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

63,278

 

 

 

62,266

 

 

 

63,043

 

 

 

62,128

 

Diluted

 

 

65,654

 

 

 

64,564

 

 

 

65,274

 

 

 

64,622

 

 

See accompanying Notes to Condensed Consolidated Financial Statements

1


 

WOODWARD, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS

(In thousands)

(Unaudited)

 

 

 

Three-Months Ended

 

 

Six-Months Ended

 

 

 

March 31,

 

 

March 31,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Net earnings

 

$

68,313

 

 

$

91,318

 

 

$

109,883

 

 

$

144,691

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive earnings:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

(8,789

)

 

 

(13,355

)

 

 

8,539

 

 

 

(2,202

)

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

 

 

(2,329

)

 

 

650

 

 

 

(102

)

 

 

(395

)

Taxes on changes in foreign currency translation adjustments

 

 

(2,555

)

 

 

130

 

 

 

(871

)

 

 

(210

)

Foreign currency translation and transactions

adjustments, net of tax

 

 

(13,673

)

 

 

(12,575

)

 

 

7,566

 

 

 

(2,807

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized (loss)/gain on fair value adjustment of derivative instruments

 

 

8,892

 

 

 

45,298

 

 

 

(21,766

)

 

 

34,004

 

Reclassification of net realized (gain)/loss on derivatives to earnings

 

 

(20,683

)

 

 

(7,262

)

 

 

277

 

 

 

4,394

 

Taxes on changes in derivative transactions

 

 

1,543

 

 

 

(790

)

 

 

203

 

 

 

(772

)

Derivative adjustments, net of tax

 

 

(10,248

)

 

 

37,246

 

 

 

(21,286

)

 

 

37,626

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortization of pension and other postretirement plan:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net prior service cost

 

 

250

 

 

 

240

 

 

 

498

 

 

 

481

 

Net loss

 

 

377

 

 

 

628

 

 

 

747

 

 

 

1,259

 

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

 

 

453

 

 

 

1,225

 

 

 

(1,244

)

 

 

(277

)

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

 

 

(284

)

 

 

(592

)

 

 

72

 

 

 

(352

)

Pension and other postretirement benefit plan

adjustments, net of tax

 

 

796

 

 

 

1,501

 

 

 

73

 

 

 

1,111

 

Total comprehensive earnings

 

$

45,188

 

 

$

117,490

 

 

$

96,236

 

 

$

180,621

 

 

See accompanying Notes to Condensed Consolidated Financial Statements

 

2


 

 

WOODWARD, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except per share amounts)

(Unaudited)

 

 

 

March 31,

 

 

September 30,

 

 

 

2021

 

 

2020

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents, including restricted cash of $1,908 and $3,497, respectively

 

$

287,595

 

 

$

153,270

 

Accounts receivable, less allowance for uncollectible amounts of $7,522 and $8,359, respectively

 

 

588,064

 

 

 

537,987

 

Inventories

 

 

422,321

 

 

 

437,943

 

Income taxes receivable

 

 

30,459

 

 

 

28,879

 

Other current assets

 

 

39,723

 

 

 

52,786

 

Total current assets

 

 

1,368,162

 

 

 

1,210,865

 

Property, plant and equipment, net

 

 

965,205

 

 

 

997,415

 

Goodwill

 

 

807,974

 

 

 

808,252

 

Intangible assets, net

 

 

584,948

 

 

 

606,711

 

Deferred income tax assets

 

 

14,873

 

 

 

14,658

 

Other assets

 

 

279,610

 

 

 

265,435

 

Total assets

 

$

4,020,772

 

 

$

3,903,336

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Current portion of long-term debt

 

$

1,398

 

 

$

101,634

 

Accounts payable

 

 

162,715

 

 

 

134,242

 

Income taxes payable

 

 

12,945

 

 

 

4,662

 

Accrued liabilities

 

 

164,350

 

 

 

151,794

 

Total current liabilities

 

 

341,408

 

 

 

392,332

 

Long-term debt, less current portion

 

 

736,095

 

 

 

736,849

 

Deferred income tax liabilities

 

 

164,068

 

 

 

163,573

 

Other liabilities

 

 

645,900

 

 

 

617,905

 

Total liabilities

 

 

1,887,471

 

 

 

1,910,659

 

Commitments and contingencies (Note 22)

 

 

 

 

 

 

 

 

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

 

 

257,006

 

 

 

231,936

 

Accumulated other comprehensive losses

 

 

(103,441

)

 

 

(89,794

)

Deferred compensation

 

 

9,103

 

 

 

9,222

 

Retained earnings

 

 

2,522,384

 

 

 

2,427,905

 

 

 

 

2,685,158

 

 

 

2,579,375

 

Treasury stock at cost, 9,454 shares and 10,277 shares, respectively

 

 

(542,754

)

 

 

(577,476

)

Treasury stock held for deferred compensation, at cost, 192 shares and 199 shares, respectively

 

 

(9,103

)

 

 

(9,222

)

Total stockholders' equity

 

 

2,133,301

 

 

 

1,992,677

 

Total liabilities and stockholders' equity

 

$

4,020,772

 

 

$

3,903,336

 

 

See accompanying Notes to Condensed Consolidated Financial Statements

3


 

WOODWARD, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

 

 

Six-Months Ended March 31,

 

 

 

2021

 

 

2020

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net earnings

 

$

109,883

 

 

$

144,691

 

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

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

65,556

 

 

 

65,476

 

Impairment of assets sold

 

 

 

 

 

37,902

 

Net gain on sales of assets and businesses

 

 

(1,942

)

 

 

(13,557

)

Stock-based compensation

 

 

16,438

 

 

 

13,475

 

Deferred income taxes

 

 

1,622

 

 

 

135

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Trade accounts receivable

 

 

(10,565

)

 

 

(521

)

Unbilled receivables (contract assets)

 

 

(32,565

)

 

 

(50,624

)

Costs to fulfill a contract

 

 

(9,226

)

 

 

(15,064

)

Inventories

 

 

16,877

 

 

 

(28,982

)

Accounts payable and accrued liabilities

 

 

53,555

 

 

 

(78,878

)

Contract liabilities

 

 

14,370

 

 

 

13,673

 

Income taxes

 

 

4,700

 

 

 

(30,331

)

Retirement benefit obligations

 

 

(3,450

)

 

 

(2,152

)

Other

 

 

(6,256

)

 

 

(3,064

)

Net cash provided by operating activities

 

 

218,997

 

 

 

52,179

 

 

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Payments for purchase of property, plant, and equipment

 

 

(13,313

)

 

 

(29,361

)

Proceeds from sale of assets

 

 

86

 

 

 

18,831

 

Proceeds from sales of short-term investments

 

 

16,566

 

 

 

12,684

 

Payments for purchases of short-term investments

 

 

(2,750

)

 

 

(23

)

Net cash provided by investing activities

 

 

589

 

 

 

2,131

 

 

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Cash dividends paid

 

 

(15,404

)

 

 

(27,525

)

Proceeds from sales of treasury stock

 

 

28,454

 

 

 

12,726

 

Payments for repurchases of common stock

 

 

 

 

 

(13,346

)

Borrowings on revolving lines of credit and short-term borrowings

 

 

74,400

 

 

 

788,306

 

Payments on revolving lines of credit and short-term borrowings

 

 

(74,400

)

 

 

(807,869

)

Payments of long-term debt and finance lease obligations

 

 

(100,835

)

 

 

(754

)

Net cash (used in) financing activities

 

 

(87,785

)

 

 

(48,462

)

Effect of exchange rate changes on cash and cash equivalents

 

 

2,524

 

 

 

(2,072

)

Net change in cash and cash equivalents

 

 

134,325

 

 

 

3,776

 

Cash and cash equivalents, including restricted cash, at beginning of year

 

 

153,270

 

 

 

99,073

 

Cash and cash equivalents, including restricted cash, at end of period

 

$

287,595

 

 

$

102,849

 

 

See accompanying Notes to Condensed Consolidated Financial Statements

 

4


 

 

WOODWARD, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands)

(Unaudited)

 

 

 

Number of shares

 

 

Stockholders' equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated other comprehensive (loss) earnings

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common

stock

 

 

Treasury

stock

 

 

Treasury

stock held for

deferred

compensation

 

 

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 January 1, 2020

 

 

72,960

 

 

 

(10,814

)

 

 

(215

)

 

$

106

 

 

$

216,158

 

 

$

(43,467

)

 

$

(4,575

)

 

$

(45,506

)

 

$

(93,548

)

 

$

9,911

 

 

$

2,268,483

 

 

$

(592,596

)

 

$

(9,911

)

 

$

1,798,603

 

Net earnings