Woodward Inc

Global Business Conditions

During the first three months of fiscal year 2024, we achieved significant sales growth and margin expansion as compared to the same period of the prior year. We continued to see strong end market demand for our products and services across the aerospace and industrial markets. We also saw improvement in our output as a result of our strategic initiatives and our supply chain has continued to stabilize. Further, we have also been able to more closely align price to the value of our products which helps to mitigate the impacts of inflation. We remain committed to growth, operational excellence, and innovation to deliver long-term success and enhanced shareholder value. We also continue to monitor the macroeconomic environment as inflation and economic uncertainty continues to impact certain aspects of our business.

Operational Highlights

Quarter to Date Highlights

Adjusted net earnings, adjusted earnings per share, adjusted effective tax rate, EBIT, adjusted EBIT, EBITDA, and adjusted EBITDA are non-U.S. GAAP financial measures. A description of these measures as well as a reconciliation of these non-U.S. GAAP financial measures to the most directly comparable U.S. GAAP financial measures can be found under the caption “Non-U.S. GAAP Financial Measures” in this Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Liquidity Highlights

Net cash provided by operating activities for the first three months of fiscal year 2024 was $46,789, compared to $5,402 for the first three months of fiscal year 2023. The increase in net cash provided by operating activities in the first three months of fiscal year 2024 compared to the first three months of the prior fiscal year is primarily attributable to increased earnings, partially offset by the above-target payout for fiscal year 2023 annual incentive compensation.

For the first three months of fiscal year 2024, free cash flow was $4,977, compared to negative $18,988 for the first three months of fiscal year 2023. We define free cash flow as net cash flow from operating activities less payments for property, plant, and equipment. Adjusted free cash flow, which we define as free cash flow excluding cash payments pertaining to a non-recurring matter unrelated to the ongoing operations and cash received for a non-recurring matter related to a previous acquisition, was $2,899 for the first three months of fiscal year 2024. No adjustments were made to free cash flow for the first three months of fiscal year 2023. The increase in free cash flow and adjusted free cash flow for the first three months of fiscal year 2024 as compared to the same period of the prior fiscal year was primarily due to increased earnings, partially offset by the above-target payout for fiscal year 2023 annual incentive compensation, as well as higher capital expenditures. Free cash flow and adjusted free cash flow are non-U.S. GAAP financial measures. A description of these measures as well as a reconciliation of these non-U.S. GAAP financial measures to the most directly comparable U.S. GAAP financial measures can be found under the caption “Non-U.S. GAAP Financial Measures” in this Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations.

At December 31, 2023, we held $144,348 in cash and cash equivalents and had total outstanding debt of $718,874. We have additional borrowing availability of $927,212, net of outstanding letters of credit, under our revolving credit agreement. At December 31, 2023, we also had additional borrowing capacity of $25,110 under various foreign lines of credit and foreign overdraft facilities.