Woodward Inc
For the period ended Dec 31, 2024. Filed Feb 4, 2025.
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, 2024 · Filed Feb 4, 2025
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, 2024 | % of Net Sales | December 31, 2023 | % of Net Sales | |
| Net sales | $772,725 | 100% | $786,730 | 100% |
| Costs and expenses: | ||||
| Cost of goods sold | 583,091 | 75.5% | 582,381 | 74.0% |
| Selling, general, and administrative expenses | 69,696 | 9.0% | 74,511 | 9.5% |
| Research and development costs | 30,207 | 3.9% | 30,794 | 3.9% |
| Interest expense | 12,341 | 1.6% | 11,436 | 1.5% |
| Interest income | (1,377) | (0.2)% | (1,473) | (0.2)% |
| Other (income) expense, net | (23,087) | (3.0)% | (20,639) | (2.6)% |
| Total costs and expenses | 670,871 | 86.8% | 677,010 | 86.1% |
| Earnings before income taxes | 101,854 | 13.2% | 109,720 | 13.9% |
| Income tax expense | 14,763 | 1.9% | 19,676 | 2.5% |
| Net earnings | $87,091 | 11.3% | $90,044 | 11.4% |
Other select financial data:
| December 31, 2024 | September 30, 2024 | |
|---|---|---|
| Net working capital | $809,774 | $820,101 |
| Total debt | 902,174 | 872,470 |
| Total stockholders' equity | 2,208,421 | 2,176,416 |
Net Sales
Consolidated net sales for the first quarter of fiscal year 2025 decreased by $14,005, or 1.8%, compared to the same period of fiscal year 2024.
Details of the changes in consolidated net sales are as follows:
| Three-Month Period | |
|---|---|
| Consolidated net sales for the period ended December 31, 2023 | $786,730 |
| Aerospace volume | (7,202) |
| Industrial volume | (55,094) |
| Effects of changes in price | 49,615 |
| Effects of changes in foreign currency rates | (1,324) |
| Consolidated net sales for the period ended December 31, 2024 | $772,725 |
In the Aerospace segment, the increase in net sales for the first quarter of fiscal year 2025 as compared to the same period of the prior fiscal year is primarily attributable to price realization, partially offset by inflation, unfavorable mix, and lower volumes.
In the Industrial segment, the decrease in net sales for the first quarter of fiscal year 2025 as compared to the same period of the prior fiscal year was primarily a result of lower volumes and unfavorable mix, partially offset by price realization and favorable foreign currency exchange rates.
We expect significant sales and earnings decreases in our China on-highway natural gas truck business in fiscal year 2025 due to the deteriorating local Chinese economy. Future demand remains uncertain due to the volatility of this business.
Costs and Expenses
Cost of goods sold remained flat at $583,091, or 75.5% of net sales, for the first quarter of fiscal year 2025, as compared to $582,381, or 74.0% of net sales, for the first quarter of fiscal year 2024.
Gross margin (as measured by net sales less cost of goods sold, divided by net sales) was 24.5% for the first quarter of fiscal year 2025, compared to 26.0% for the first quarter of fiscal year 2024. The decrease in gross margin for the first quarter of fiscal year 2025 as compared to the same period of the prior fiscal year is primarily attributable to lower sales volume, partially offset by price realization.
Selling, general, and administrative expenses decreased by $4,815, or 6.5%, to $69,696 for the first quarter of fiscal year 2025, compared to $74,511 for the first quarter of fiscal year 2024. Selling, general, and administrative expenses as a percentage of net sales decreased to 9.0% for the first quarter of fiscal year 2025, compared to 9.5% for the first quarter of fiscal year 2024. The decrease in selling, general, and administrative expenses on an absolute basis for the first quarter of fiscal year 2025 as compared to the same period of the prior fiscal year is primarily due to the positive effects of changes in foreign currency rates and decreased expenses relating to our deferred compensation program, partially offset by increased headcount.
Research and development costs were consistent at $30,207, or 3.9% of net sales, for the first quarter of fiscal year 2025, as compared to $30,794, or 3.9% of net sales, for the first quarter of fiscal year 2024 primarily due to variability in the timing of projects and expenses. 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 $905, or 7.9%, to $12,341 for the first quarter of fiscal year 2025, compared to $11,436 for the first quarter of fiscal year 2024. Interest expense as a percentage of net sales was 1.6% for the first quarter of fiscal year 2025, compared to 1.5% for the first quarter of fiscal year 2024. The increase in interest expense on an absolute basis and percentage basis for the first quarter of fiscal year 2025 as compared to the same period of the prior fiscal year is primarily attributable to increased average daily borrowings on the revolving credit facility during the first quarter of fiscal year 2025.
Other income increased by $2,448 to $23,087 for the first quarter of fiscal year 2025, compared to $20,639 for the first quarter of fiscal year 2024. The increase in other income for the first quarter of fiscal year 2025 as compared to the same period of the prior fiscal year is primarily attributable to a one-time gain related to product rationalization activities that was recognized in the current year first quarter that did not occur in the prior year first quarter, partially offset by a gain in the prior year first quarter associated with a non-recurring matter related to a previous acquisition that did not reoccur in the current year first quarter.
Income taxes were provided at an effective rate on earnings before income taxes of 14.5% for the first quarter of fiscal year 2025, and 17.9% for the first quarter of fiscal year 2024.
The decrease in the effective tax rate for the three months ended December 31, 2024 compared to the three months ended December 31, 2023 is primarily attributable to larger stock-based compensation tax benefit in the current quarter, partially offset by a smaller estimated Research and Development Credit as well as the impact of higher projected full year earnings on state income tax expense.
Segment Results
The following table presents sales by segment:
| Three Months Ended December 31, | ||||
|---|---|---|---|---|
| 2024 · 2023 | ||||
| Net sales: | ||||
| Aerospace | $493,882 | 63.9% | $460,756 | 58.6% |
| Industrial | 278,843 | 36.1% | 325,974 | 41.4% |
| Consolidated net sales | $772,725 | 100% | $786,730 | 100% |
The following table presents earnings by segment and reconciles segment earnings to consolidated net earnings:
| Three Months Ended December 31, | ||
|---|---|---|
| 2024 | 2023 | |
| Aerospace | $94,725 | $79,002 |
| Industrial | 40,197 | 66,881 |
| Nonsegment expenses | (22,104) | (26,200) |
| Interest expense, net | (10,964) | (9,963) |
| Consolidated earnings before income taxes | 101,854 | 109,720 |
| Income tax expense | (14,763) | (19,676) |
| Consolidated net earnings | $87,091 | $90,044 |
The following table presents segment earnings as a percent of segment net sales:
| Three Months Ended December 31, | ||
|---|---|---|
| 2024 | 2023 | |
| Aerospace | 19.2% | 17.2% |
| Industrial | 14.4% | 20.5% |
Aerospace
Aerospace segment net sales increased by $33,126, or 7.2%, to $493,882 for the first quarter of fiscal year 2025, compared to $460,756 for the first quarter of fiscal year 2024. The increase in Aerospace segment net sales in the first quarter of fiscal year 2025 as compared to the same period of the prior fiscal year is primarily attributable to price realization, partially offset by inflation, unfavorable mix, and lower volumes.
Commercial OEM sales decreased in the first quarter of fiscal year 2025 as compared to the same period of the prior fiscal year, primarily driven by the impacts from the Boeing work stoppage. Commercial aftermarket sales increased in the first quarter of fiscal year 2025 as compared to the same period of the prior fiscal year, primarily due to high aircraft utilization rates.
Defense OEM and defense aftermarket sales increased in the first quarter of fiscal year 2025 as compared to the same period of the prior fiscal year, primarily driven by increased demand for smart defense and fixed wing aircraft, respectively.
Aerospace segment earnings increased by $15,723, or 19.9%, to $94,725 for the first quarter of fiscal year 2025, compared to $79,002 for the first quarter of fiscal year 2024.
The increase in Aerospace segment earnings was due to the following:
| Three-Month Period | |
|---|---|
| Earnings for the period ended December 31, 2023 | $79,002 |
| Sales volume and mix | (9,002) |
| Price, inflation, and productivity | 29,151 |
| Other, net | (4,426) |
| Earnings for the period ended December 31, 2024 | $94,725 |
Aerospace segment earnings as a percentage of segment net sales were 19.2% for the first quarter of fiscal year 2025, compared to 17.2% for the first quarter of fiscal year 2024.
Industrial
Industrial segment net sales decreased by $47,131, or 14.5%, to $278,843 for the first quarter of fiscal year 2025, compared to $325,974 for the first quarter of fiscal year 2024. The decrease in Industrial segment net sales in the first quarter of fiscal year 2025 as compared to the same period of the prior fiscal year was primarily attributable to lower volumes and unfavorable mix, partially offset by price realization and favorable foreign currency exchange rates.
In the first quarter of fiscal year 2025 as compared to the same period of the prior year, we saw a substantial sales decline in our on-highway natural gas truck business in China due to the deteriorating local Chinese economy.
Industrial segment earnings decreased by $26,684, or 39.9%, to $40,197 for the first quarter of fiscal year 2025, compared to $66,881 for the first quarter of fiscal year 2024.
The decrease in Industrial segment earnings was due to the following:
| Three-Month Period | |
|---|---|
| Earnings for the period ended December 31, 2023 | $66,881 |
| Sales volume and mix | (37,809) |
| Price, inflation, and productivity | 13,759 |
| Effects of changes in foreign currency rates | 3,118 |
| Other, net | (5,752) |
| Earnings for the period ended December 31, 2024 | $40,197 |
Industrial segment earnings as a percentage of segment net sales were 14.4% for the first quarter of fiscal year 2025, compared to 20.5% for the first quarter of fiscal year 2024. Industrial earnings were significantly impacted by the sales decline in our on-highway natural gas truck business in China, partially offset by price realization, volume increases in power generation and oil and gas, as well as operational improvements, including increased output and other efficiency gains.
Future demand in our on-highway natural gas truck business in China remains uncertain due to the volatility of this business.
Nonsegment
Nonsegment expenses decreased by $4,096 to $22,104 for the first quarter of fiscal year 2025, compared to $26,200 for the first quarter of fiscal year 2024.
The significant items that impacted nonsegment expenses in the current year first quarter compared to the prior year first quarter are as follows:
| Three Months Ended December 31, | ||
|---|---|---|
| 2024 | 2023 | |
| Nonsegment expenses | $(22,104) | $(26,200) |
| Product rationalization | (9,361) | — |
| Business development activities | 3,518 | 4,238 |
| Non-recurring gain related to a previous acquisition | — | (4,803) |
| Nonsegment expenses excluding infrequent significant charges | $(27,947) | $(26,765) |
Excluding these items, nonsegment expenses increased $1,182 in the first quarter of fiscal year 2025 as compared to the same period of the prior fiscal year. The remaining increase in nonsegment expenses is due to increased headcount.
The text of this filing, as the company filed it with the SEC, without its images or exhibits. This is not investment advice.