Woodward, Inc.
For the period ended Mar 31, 2025. Filed May 1, 2025.
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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.
Mar 31, 2025 · Filed May 1, 2025
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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 | Six Months Ended | |||||||
|---|---|---|---|---|---|---|---|---|
| March 31, 2025 | % of Net Sales | March 31, 2024 | % of Net Sales | March 31, 2025 | % of Net Sales | March 31, 2024 | % of Net Sales | |
| Net sales | $883,629 | 100% | $835,343 | 100% | $1,656,354 | 100% | $1,622,073 | 100% |
| Costs and expenses: | ||||||||
| Cost of goods sold | 643,530 | 72.8% | 600,954 | 71.9% | 1,226,621 | 74.1% | 1,183,335 | 73.0% |
| Selling, general, and administrative expenses | 83,842 | 9.5% | 81,447 | 9.8% | 153,538 | 9.3% | 155,958 | 9.6% |
| Research and development costs | 37,230 | 4.2% | 36,465 | 4.4% | 67,437 | 4.1% | 67,259 | 4.1% |
| Interest expense | 11,889 | 1.3% | 11,530 | 1.4% | 24,230 | 1.5% | 22,966 | 1.4% |
| Interest income | (1,021) | (0.1)% | (1,293) | (0.2)% | (2,398) | (0.2)% | (2,766) | (0.2)% |
| Other (income) expense, net | (24,804) | (2.8)% | (14,384) | (1.7)% | (47,891) | (2.9)% | (35,023) | (2.2)% |
| Total costs and expenses | 750,666 | 85.0% | 714,719 | 85.6% | 1,421,537 | 85.8% | 1,391,729 | 85.8% |
| Earnings before income taxes | 132,963 | 15.0% | 120,624 | 14.4% | 234,817 | 14.2% | 230,344 | 14.2% |
| Income tax expense | 24,014 | 2.7% | 23,068 | 2.8% | 38,777 | 2.3% | 42,744 | 2.6% |
| Net earnings | $108,949 | 12.3% | $97,556 | 11.7% | $196,040 | 11.8% | $187,600 | 11.6% |
Other select financial data:
| March 31, 2025 | September 30, 2024 | |
|---|---|---|
| Net working capital | $932,220 | $820,101 |
| Total debt | 911,910 | 872,470 |
| Total stockholders' equity | 2,337,507 | 2,176,416 |
Net Sales
Consolidated net sales for the second quarter of fiscal year 2025 increased by $48,286, or 5.8%, compared to the same period of fiscal year 2024. Consolidated net sales for the first half of fiscal year 2025 increased by $34,281, or 2.1%, compared to the same period of fiscal year 2024.
Details of the changes in consolidated net sales were as follows:
| Three-Month Period | Six-Month Period | |
|---|---|---|
| Consolidated net sales for the period ended March 31, 2024 | $835,343 | $1,622,073 |
| Aerospace volume | 22,083 | 14,881 |
| Industrial volume | (26,528) | (81,622) |
| Effects of changes in price | 59,320 | 108,935 |
| Effects of changes in foreign currency rates | (6,589) | (7,913) |
| Consolidated net sales for the period ended March 31, 2025 | $883,629 | $1,656,354 |
The increase in Aerospace segment net sales in the second quarter of fiscal year 2025 as compared to the same period of the prior fiscal year was primarily attributable to price realization and volume, partially offset by unfavorable mix. The increase in Aerospace segment net sales in the first half of fiscal year 2025 as compared to the same period of the prior fiscal year was primarily attributable to price realization, partially offset by unfavorable mix.
In the Industrial segment, the decrease in net sales for the second quarter and first half of fiscal year 2025 as compared to the same periods of the prior fiscal year was primarily a result of lower China on-highway volume and unfavorable mix, partially offset by price realization.
We have experienced, and expect to continue to experience, significant sales and earnings decreases in our China on-highway natural gas truck business in fiscal year 2025 as compared to fiscal year 2024. Future demand remains uncertain due to the volatility of this business. We also continue to monitor the evolving trade policy between the U.S. and China.
Costs and Expenses
Cost of goods sold increased by $42,576 to $643,530 for the second quarter of fiscal year 2025, from $600,954, for the second quarter of fiscal year 2024. Cost of goods sold increased to 72.8% of net sales, for the second quarter of fiscal year 2025, compared to 71.9% of net sales for the second quarter of fiscal year 2024.
Cost of goods sold increased by $43,286 to $1,226,621, for the first half of fiscal year 2025, from $1,183,335, for the first half of fiscal 2024. Cost of goods sold increased to 74.1% of net sales, for the first half of fiscal year 2025, compared to 73.0% of net sales for the first half of fiscal year 2024.
The increase in cost of goods sold in the second quarter and first half of fiscal year 2025 compared to the same periods of the prior fiscal year is primarily due to 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 27.2% for the second quarter of fiscal year 2025, compared to 28.1% for the second quarter of fiscal year 2024. Gross margin was 25.9% for the first half of fiscal year 2025, compared to 27.0% for the first half of fiscal year 2024. The decrease in gross margin for the second quarter and first half of fiscal year 2025 as compared to the same periods of the prior fiscal year is primarily attributable to unfavorable mix, partially offset by price realization.
Selling, general, and administrative expenses increased by $2,395, or 2.9%, to $83,842 for the second quarter of fiscal year 2025, compared to $81,447 for the second quarter of fiscal year 2024. Selling, general, and administrative expenses as a percentage of net sales decreased to 9.5% for the second quarter of fiscal year 2025, compared to 9.8% for the second quarter of fiscal year 2024. The increase in selling, general, and administrative expenses on an absolute basis for the second quarter of fiscal year 2025 as compared to the same period of the prior fiscal year is primarily due to increased expenses relating to business development activities.
Selling, general, and administrative expenses decreased by $2,420, or 1.6%, to $153,538 for the first half of fiscal year 2025, compared to $155,958 for the first half of fiscal year 2024. Selling, general, and administrative expenses as a percentage of net sales decreased to 9.3% for the first half of fiscal year 2025, compared to 9.6% for the first half of fiscal year 2024. The decrease in selling, general, and administrative expenses for the first half of fiscal year 2025 as compared to the same period of the prior fiscal year is primarily due to decreases in expenses relating to our deferred compensation program, partially offset by increased expenses relating to business development activities.
Research and development costs were roughly flat at $37,230, or 4.2% of net sales, for the second quarter of fiscal year 2025 and $67,437, or 4.1% of net sales, for the first half of fiscal year 2025, as compared to $36,465, or 4.4% of net sales, for the second quarter of fiscal year 2024 and $67,259, or 4.1% of net sales, for the first half of fiscal year 2024. 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 $359, or 3.1%, to $11,889 for the second quarter of fiscal year 2025, compared to $11,530 for the second quarter of fiscal year 2024. Interest expense as a percentage of net sales was 1.3% for the second quarter of fiscal year 2025, compared to 1.4% for the second quarter of fiscal year 2024. Interest expense increased by $1,264, or 5.5%, to $24,230 for the first half of fiscal year 2025, compared to $22,966 for the first half of fiscal year 2024. Interest expense as a percentage of net sales was 1.5% for the first half of fiscal year 2025, compared to 1.4% for the first half of fiscal year 2024. The increase in interest expense on an absolute basis for the second quarter and first half of fiscal year 2025 as compared to the same periods of the prior fiscal year is primarily attributable to increased average daily borrowings on the revolving credit facility during the second quarter and first half of fiscal year 2025.
Other income increased by $10,420 to $24,804 for the second quarter of fiscal year 2025, compared to $14,384 for the second quarter of fiscal year 2024. Other income increased $12,868 to $47,891 for the first half of fiscal year 2025, compared to $35,023 for the first half of fiscal year 2024. The increase in other income for the second quarter and first half of fiscal year 2025 as compared to the same periods of the prior fiscal year is primarily attributable to a one-time gain related to product rationalization activities that was recognized in the current fiscal year that did not occur in the prior year.
Income taxes were provided at an effective rate on earnings before income taxes of 18.1% for the second quarter of fiscal year 2025, compared to 19.1% for the second quarter of fiscal year 2024. Income taxes were provided at an effective rate on earnings before income taxes of 16.5% for the first half of fiscal year 2025, as compared to 18.6% for the first half of fiscal year 2024.
The decrease in the effective tax rate for the second quarter of fiscal year 2025 compared to the second quarter of fiscal year 2024 is primarily attributable to a decrease to the projected future withholding taxes on unremitted foreign earnings, partially offset by a decrease to the research and development credit.
The decrease in the effective tax rate for first half of fiscal year 2025 as compared to the same period of the prior fiscal year is primarily attributable to a larger stock-based compensation tax benefit and a decrease to projected future withholding taxes on unremitted foreign earnings, partially offset by a decrease to the research and development credit.
Segment Results
The following table presents sales by segment:
| Three Months Ended March 31, · Six Months Ended March 31, | ||||||||
|---|---|---|---|---|---|---|---|---|
| 2025 · 2024 · 2025 · 2024 | ||||||||
| Net sales: | ||||||||
| Aerospace | $561,729 | 63.6% | $497,512 | 59.6% | $1,055,611 | 63.7% | $958,268 | 59.1% |
| Industrial | 321,900 | 36.4% | 337,831 | 40.4% | 600,743 | 36.3% | 663,805 | 40.9% |
| Consolidated net sales | $883,629 | 100% | $835,343 | 100% | $1,656,354 | 100% | $1,622,073 | 100% |
The following table presents earnings by segment and reconciles segment earnings to consolidated net earnings:
| Three Months Ended March 31, | Six Months Ended March 31, | |||
|---|---|---|---|---|
| 2025 | 2024 | 2025 | 2024 | |
| Aerospace | $124,616 | $98,451 | $219,341 | $177,453 |
| Industrial | 45,967 | 65,244 | 86,164 | 132,125 |
| Nonsegment expenses | (26,752) | (32,834) | (48,856) | (59,034) |
| Interest expense, net | (10,868) | (10,237) | (21,832) | (20,200) |
| Consolidated earnings before income taxes | 132,963 | 120,624 | 234,817 | 230,344 |
| Income tax expense | (24,014) | (23,068) | (38,777) | (42,744) |
| Consolidated net earnings | $108,949 | $97,556 | $196,040 | $187,600 |
The following table presents segment earnings as a percent of segment net sales:
| Three Months Ended March 31, | Six Months Ended March 31, | |||
|---|---|---|---|---|
| 2025 | 2024 | 2025 | 2024 | |
| Aerospace | 22.2% | 19.8% | 20.8% | 18.5% |
| Industrial | 14.3% | 19.3% | 14.3% | 19.9% |
Aerospace
Aerospace segment net sales increased by $64,217, or 12.9%, to $561,729 for the second quarter of fiscal year 2025, compared to $497,512 for the second quarter of fiscal year 2024. Aerospace segment net sales increased by $97,343, or 10.2%, to $1,055,611 for the first half of fiscal year 2025, compared to $958,268 for the first half of fiscal year 2024.
The increase in Aerospace segment net sales in the second quarter of fiscal year 2025 as compared to the same period of the prior fiscal year was primarily attributable to price realization and volume, partially offset by unfavorable mix. The increase in Aerospace segment net sales in the first half of fiscal year 2025 as compared to the same period of the prior fiscal year was primarily attributable to price realization, partially offset by inflation and unfavorable mix.
Commercial OEM sales decreased in the second quarter and first half of fiscal year 2025 as compared to the same periods of the prior fiscal year, primarily due to a measured ramp to customer demand following the Boeing work stoppage. We expect commercial OEM sales to continue to grow in the second half of fiscal year 2025 as production continues to ramp. Commercial aftermarket sales increased in the second quarter and first half of fiscal year 2025 as compared to the same periods of the prior fiscal year, primarily due to high aircraft utilization rates.
Defense OEM sales increased in the second quarter and first half of fiscal year 2025 as compared to the same periods of the prior fiscal year, primarily driven by increased demand for smart defense. Defense aftermarket sales were down in the second quarter of fiscal year 2025 as compared to the same period of the prior fiscal year. Defense aftermarket sales were flat for the first half of fiscal year 2025 as compared to the first half of fiscal year 2024.
Aerospace segment earnings increased by $26,165, or 26.6%, to $124,616 for the second quarter of fiscal year 2025, compared to $98,451 for the second quarter of fiscal year 2024. Aerospace segment earnings increased by $41,888, or 23.6%, to $219,341 for the first half of fiscal year 2025, compared to $177,453 for the first half of fiscal year 2024.
The increase in Aerospace segment earnings was due to the following:
| Three-Month Period | Six-Month Period | |
|---|---|---|
| Earnings for the period ended March 31, 2024 | $98,451 | $177,453 |
| Sales volume and mix | 1,146 | (7,856) |
| Price, inflation, and productivity | 22,289 | 51,440 |
| Other, net | 2,730 | (1,696) |
| Earnings for the period ended March 31, 2025 | $124,616 | $219,341 |
Aerospace segment earnings as a percentage of segment net sales were 22.2% for the second quarter and 20.8% for the first half of fiscal year 2025, compared to 19.8% for the second quarter and 18.5% for the first half of fiscal year 2024.
Industrial
Industrial segment net sales decreased by $15,931, or 4.7%, to $321,900 for the second quarter of fiscal year 2025, compared to $337,831 for the second quarter of fiscal year 2024. Industrial segment net sales decreased by $63,062, or 9.5%, to $600,743 for the first half of fiscal year 2025, compared to $663,805 for the first half of fiscal year 2024.
The decrease in Industrial segment net sales in the second quarter and first half of fiscal year 2025 as compared to the same periods of the prior fiscal year was primarily attributable to lower China on-highway volume and unfavorable mix, partially offset by price realization.
In the second quarter and first half of fiscal year 2025 as compared to the same periods of the prior fiscal year, we saw a substantial sales decline in our on-highway natural gas truck business in China. Future demand remains uncertain due to the volatility of this business. We also continue to monitor the evolving trade policy between the U.S. and China.
Industrial segment earnings decreased by $19,277, or 29.5%, to $45,967 for the second quarter of fiscal year 2025, compared to $65,244 for the second quarter of fiscal year 2024. Industrial segment earnings decreased by $45,961, or 34.8%, to $86,164 for the first half of fiscal year 2025, compared to $132,125 for the first half of fiscal year 2024.
The decrease in Industrial segment earnings was due to the following:
| Three-Month Period | Six-Month Period | |
|---|---|---|
| Earnings for the period ended March 31, 2024 | $65,244 | $132,125 |
| Sales volume and mix | (28,398) | (66,207) |
| Price, inflation, and productivity | 13,583 | 27,342 |
| Effects of changes in foreign currency rates | (1,499) | 1,619 |
| Other, net | (2,963) | (8,715) |
| Earnings for the period ended March 31, 2025 | $45,967 | $86,164 |
Industrial segment earnings as a percentage of segment net sales were 14.3% for the second quarter and the first half of fiscal year 2025, compared to 19.3% for the second quarter and 19.9% for the first half 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. We also continue to monitor the evolving trade policy between the U.S. and China.
Nonsegment
Nonsegment expenses decreased by $6,082 to $26,752 for the second quarter of fiscal year 2025, compared to $32,834 for the second quarter of fiscal year 2024. Nonsegment expenses decreased by $10,178 to $48,856 for the first half of fiscal year 2025 compared to $59,034 for the first half of fiscal year 2024.
The significant items that impacted nonsegment expenses in the current fiscal year as compared to the prior fiscal year were as follows:
| Three Months Ended March 31, | Six Months Ended March 31, | |||
|---|---|---|---|---|
| 2025 | 2024 | 2025 | 2024 | |
| Nonsegment expenses | $(26,752) | $(32,834) | $(48,856) | $(59,034) |
| Product rationalization | (11,163) | — | (20,524) | — |
| Business development activities | 3,793 | 1,664 | 7,310 | 5,902 |
| Non-recurring gain related to a previous acquisition | — | — | — | (4,803) |
| Certain non-recurring separation costs | — | 2,666 | — | 2,666 |
| Nonsegment expenses excluding infrequent significant items | $(34,122) | $(28,504) | $(62,070) | $(55,269) |
Excluding these items, nonsegment expenses increased $5,618 in the second quarter of fiscal year 2025 as compared to the same period of the prior fiscal year. Excluding these items, nonsegment expenses increased $6,801 in the first half of fiscal year 2025 as compared to the same period of the prior fiscal year. These increases were primarily attributable 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.