Woodward Inc
For the period ended Dec 31, 2023. Filed Feb 2, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Dec 31, 2023 · Filed Feb 2, 2024
Extracted filing text, with the paragraph anchors used by the comparison.
See the whole filing, with its images and exhibitsContents
Item 2. Results of Operations
RESULTS OFOPERATIONS
The following table sets forth condensed consolidated statements of earnings data as a percentage of net sales for each period indicated:
| Three Months Ended | ||||
|---|---|---|---|---|
| December 31, 2023 | % of Net Sales | December 31, 2022 | % of Net Sales | |
| Net sales | $786,730 | 100% | $618,619 | 100% |
| Costs and expenses: | ||||
| Cost of goods sold | 582,381 | 74.0% | 492,663 | 79.6% |
| Selling, general, and administrative expenses | 74,511 | 9.5% | 63,187 | 10.2% |
| Research and development costs | 30,794 | 3.9% | 28,634 | 4.6% |
| Interest expense | 11,436 | 1.5% | 11,142 | 1.8% |
| Interest income | (1,473) | (0.2)% | (366) | (0.1)% |
| Other (income) expense, net | (20,639) | (2.6)% | (8,390) | (1.4)% |
| Total costs and expenses | 677,010 | 86.1% | 586,870 | 94.9% |
| Earnings before income taxes | 109,720 | 13.9% | 31,749 | 5.1% |
| Income tax expense | 19,676 | 2.5% | 2,143 | 0.3% |
| Net earnings | $90,044 | 11.4% | $29,606 | 4.8% |
Other select financial data:
| December 31, 2023 | September 30, 2023 | |
|---|---|---|
| Working capital | $963,343 | $852,256 |
| Total debt | 718,874 | 721,526 |
| Total stockholders' equity | 2,190,062 | 2,070,989 |
Net Sales
Consolidated net sales for the first quarter of fiscal year 2024 increased by $168,111, or 27.2%, compared to the same period of fiscal year 2023.
Details of the changes in consolidated net sales are as follows:
| Three-Month Period | |
|---|---|
| Consolidated net sales for the period ended December 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 the period ended December 31, 2023 | $786,730 |
In the Aerospace segment, the increase in net sales for the first quarter of fiscal year 2024 as compared to the same period of the prior fiscal year is primarily attributable to higher commercial OEM production rates, continued growth in both domestic and international passenger traffic, increasing aircraft utilization, and price realization.
In the Industrial segment, the increase in net sales for the first quarter of fiscal year 2024 as compared to the same period of the prior fiscal year is primarily attributable to volume increases across all markets, particularly in our on-highway natural gas truck business in China, and price realization.
Costs and Expenses
Cost of goods sold increased by $89,718 to $582,381, or 74.0% of net sales, for the first quarter of fiscal year 2024, from $492,663, or 79.6% of net sales, for the first quarter of fiscal year 2023. The increase in cost of goods sold on an absolute basis in the first quarter of fiscal year 2024 compared to the same period of the prior fiscal year was primarily due to higher sales volume and net inflationary impacts on material and labor costs.
Gross margin (as measured by net sales less cost of goods sold, divided by net sales) was 26.0% for the first quarter of fiscal year 2024, compared to 20.4% for the first quarter of fiscal year 2023. The increase in gross margin for the first quarter of fiscal year 2024 as compared to the same period of the prior fiscal year is primarily attributable to higher sales volume and price realizations, partially offset by net inflationary impacts on material and labor costs.
Selling, general, and administrative expenses increased by $11,324, or 17.9%, to $74,511 for the first quarter of fiscal year 2024, compared to $63,187 for the first quarter of fiscal year 2023. Selling, general, and administrative expenses as a percentage of net sales decreased to 9.5% for the first quarter of fiscal year 2024, compared to 10.2% for the first quarter of fiscal year 2023. The increase in selling, general, and administrative expenses on an absolute basis for the first quarter of fiscal year 2024 as compared to the same period of the prior fiscal year is primarily due to increased expenses relating to business development activities, increased headcount, increased expenses relating to our deferred compensation program, and increases in our annual variable incentive compensation costs.
Research and development costs increased by $2,160, or 7.5%, to $30,794 for the first quarter of fiscal year 2024, as compared to $28,634 for the first quarter of fiscal year 2023. The increase in research and development costs for the first quarter of fiscal year 2024 as compared to the same period of the prior fiscal year is primarily due to variability in the timing of projects and expenses. As a percentage of net sales, research and development costs decreased to 3.9% for the first quarter of fiscal year 2024, as compared to 4.6% for the same period of the prior fiscal year.
Our research and development activities extend across almost all of our customer base, and we anticipate ongoing variability in research and development costs due to the timing of customer business needs on current and future programs.
Interest expense increased by $294, or 2.6%, to $11,436 for the first quarter of fiscal year 2024, compared to $11,142 for the first quarter of fiscal year 2023. Interest expense as a percentage of net sales was 1.5% for the first quarter of fiscal year 2024, compared to 1.8% for the first quarter of fiscal year 2023. The increase in interest expense on an absolute basis for the first quarter of fiscal year 2024 as compared to the same period of the prior fiscal year is primarily attributable to increased borrowings and interest rates on the revolving credit facility during the first quarter of fiscal year 2024.
Other income increased by $12,249 to $20,639 for the first quarter of fiscal year 2024, compared to $8,390 for the first quarter of fiscal year 2023. The increase in other income for the first quarter of fiscal year 2024 as compared to the same period of the prior fiscal year is primarily attributable to increased earnings in the joint venture with General Electric and a non-recurring gain related to a previous acquisition that was recognized during the first quarter of fiscal year 2024.
Income taxes were provided at an effective rate on earnings before income taxes of 17.9% for the first quarter of fiscal year 2024, and 6.7% for the first quarter of fiscal year 2023.
The increase in the effective tax rate for the first quarter of fiscal 2024 compared to the first quarter of fiscal year 2023, is primarily attributable to the release of uncertain tax positions in the prior year and projected future withholding taxes on unremitted earnings, partially offset by a larger stock-based compensation tax benefit in the first quarter of fiscal year 2024.
Segment Results
The following table presents sales by segment:
| Three Months Ended December 31, | ||||
|---|---|---|---|---|
| 2023 · 2022 | ||||
| Net sales: | ||||
| Aerospace | $460,756 | 58.6% | $395,685 | 64.0% |
| Industrial | 325,974 | 41.4% | 222,934 | 36.0% |
| Consolidated net sales | $786,730 | 100% | $618,619 | 100% |
The following table presents earnings by segment and reconciles segment earnings to consolidated net earnings:
| Three Months Ended December 31, | ||
|---|---|---|
| 2023 | 2022 | |
| Aerospace | $79,002 | $55,434 |
| Industrial | 66,881 | 11,402 |
| Nonsegment expenses | (26,200) | (24,311) |
| Interest expense, net | (9,963) | (10,776) |
| Consolidated earnings before income taxes | 109,720 | 31,749 |
| Income tax expense | (19,676) | (2,143) |
| Consolidated net earnings | $90,044 | $29,606 |
The following table presents segment earnings as a percent of segment net sales:
| Three Months Ended December 31, | ||
|---|---|---|
| 2023 | 2022 | |
| Aerospace | 17.2% | 14.0% |
| Industrial | 20.5% | 5.1% |
Aerospace
Aerospace segment net sales increased by $65,071, or 16.4%, to $460,756 for the first quarter of fiscal year 2024, compared to $395,685 for the first quarter of fiscal year 2023. The increase in Aerospace segment net sales in the first quarter of fiscal year 2024 as compared to the same period of the prior fiscal year is primarily attributable to higher commercial OEM production rates, continued growth in passenger traffic, increasing aircraft utilization, and price realization.
Defense OEM sales increased in the first quarter of fiscal year 2024 as compared to the same period of the prior fiscal year, primarily driven by increased demand for rotorcraft and ground vehicle components. Our defense aftermarket sales increased in the first quarter of fiscal year 2024 compared to the same period of the prior fiscal year, primarily driven by increased defense budgets resulting in operations and maintenance upgrades.
Aerospace segment earnings increased by $23,568, or 42.5%, to $79,002 for the first quarter of fiscal year 2024, compared to $55,434 for the first quarter of fiscal year 2023.
The increase in Aerospace segment earnings was due to the following:
| Three-Month Period | |
|---|---|
| Earnings for the period ended December 31, 2022 | $55,434 |
| Sales volume and mix | 14,130 |
| Price, inflation, and productivity | 12,071 |
| Other, net | (2,633) |
| Earnings for the period ended December 31, 2023 | $79,002 |
Aerospace segment earnings as a percentage of segment net sales were 17.2% for the first quarter of fiscal year 2024, compared to 14.0% for the first quarter of fiscal year 2023.
Industrial
Industrial segment net sales increased by $103,040, or 46.2%, to $325,974 for the first quarter of fiscal year 2024, compared to $222,934 for the first quarter of fiscal year 2023. The increase in Industrial segment net sales in the first quarter of fiscal year 2024 as compared to the same period of the prior fiscal year was primarily attributable to volume increases across all markets, particularly in our on-highway natural gas truck business in China, as well as price realization.
Industrial segment earnings increased by $55,479, or 486.6%, to $66,881 for the first quarter of fiscal year 2024, compared to $11,402 for the first quarter of fiscal year 2023.
The increase in Industrial segment earnings was due to the following:
| Three-Month Period | |
|---|---|
| Earnings for the period ended December 31, 2022 | $11,402 |
| Sales volume and mix | 43,745 |
| Price, inflation, and productivity | 13,918 |
| Other, net | (2,184) |
| Earnings for the period ended December 31, 2023 | $66,881 |
Industrial segment earnings as a percentage of segment net sales were 20.5% for the first quarter of fiscal year 2024, compared to 5.1% for the first quarter of fiscal year 2023. Industrial earnings benefited significantly from increased demand for on-highway natural gas trucks in China as well as from operational improvements including increased output and other efficiency gains, and favorable product mix.
Nonsegment
Nonsegment expenses increased by $1,889 to $26,200 for the first quarter of fiscal year 2024, compared to $24,311 for the first quarter of fiscal year 2023. The increase in nonsegment expenses for the first quarter of fiscal year 2024 as compared to the first quarter of fiscal year 2023 was primarily due to business development activity costs of $4,238 and a non-recurring gain of $4,803 related to a previous acquisition, each of which did not occur in the prior fiscal year. Excluding these charges from 2024, nonsegment expenses increased $2,454.
The text of this filing, as the company filed it with the SEC, without its images or exhibits. This is not investment advice.