Woodward Reports Third Quarter Fiscal Year 2021 Results

Fort Collins, Colorado, UNITED STATES


FORT COLLINS, Colo., Aug. 02, 2021 (GLOBE NEWSWIRE) -- Woodward, Inc. (NASDAQ: WWD) today reported financial results for its third quarter of fiscal year 2021.

All amounts are presented on a U.S. GAAP basis unless otherwise indicated. All per share amounts are presented on a fully diluted basis. All comparisons are made to the same period of the prior year unless otherwise stated.

Third Quarter Overview

  • Net sales were $557 million, compared to $524 million.
  • Net earnings and adjusted net earnings1 were both $49 million, or $0.74 per share. For the third quarter of fiscal 2020, net earnings were $38 million, or $0.61 per share, and adjusted net earnings were $31 million, or $0.48 per share.
  • Net cash provided by operating activities was $318 million for the first nine months of fiscal 2021, compared to $212 million for the same period of the prior year. Free cash flow1 and adjusted free cash flow1 for the first nine months of fiscal 2021 were both $297 million. For the first nine months of fiscal 2020, free cash flow was $173 million and adjusted free cash flow was $169 million.

“We delivered significantly improved performance in the quarter compared to the prior year period. Global economies are beginning to recover; however, both of our segments were impacted by COVID, supply chain disruptions and regional market volatility,” said Thomas A. Gendron, Chairman and Chief Executive Officer. “Woodward continues to generate strong cash flow by leveraging our operational structure and optimizing working capital, which is enabling increased investments in growth opportunities and a return to our pre-COVID capital allocation strategy to drive long-term shareholder value.”

Third Quarter Company Results

Net sales for the third quarter of fiscal 2021 were $557 million, compared to $524 million for the third quarter of last year, an increase of 6 percent. Sales were negatively impacted by approximately $30 million due to global supply chain disruptions, which delayed orders scheduled for third quarter shipment.

Net earnings and adjusted net earnings were both $49 million, or $0.74 per share, for the third quarter of 2021. For the third quarter of 2020, net earnings were $38 million, or $0.61 per share, and adjusted net earnings were $31 million, or $0.48 per share.  

EBIT1 and adjusted EBIT1 were both $67 million for the third quarter of 2021. For the third quarter of 2020, EBIT was $53 million and adjusted EBIT was $52 million.

The effective tax rate and the adjusted effective tax rate1 were both 16.8 percent for the third quarter of 2021. For the third quarter of 2020, the effective tax rate was 14.6 percent and the adjusted effective tax rate was 29.1 percent.

Segment Results

Aerospace

Aerospace segment net sales for the third quarter of fiscal 2021 were $341 million, compared to $306 million for the third quarter a year ago, an increase of 11 percent.

Commercial OEM and aftermarket both increased due to higher aircraft production rates and recovering domestic passenger traffic compared to a weak third quarter in the prior year. Defense sales were slightly lower than the prior year quarter.

Segment earnings for the third quarter of 2021 were $53 million, compared to $41 million for the third quarter of last year. Segment earnings as a percent of segment net sales were 15.6 percent for the third quarter of 2021, compared to 13.4 percent in the same quarter of the prior year. The increase in segment earnings was primarily the result of higher volume, predominantly in commercial OEM.

Industrial

Industrial segment net sales for the third quarter of fiscal 2021 were $216 million, compared to $217 million for the third quarter of the prior year. For the third quarter of 2020, Industrial segment net sales excluding renewable power systems and related businesses1 (“RPS”), which was divested on April 30, 2020, were $210 million. For the current year quarter, foreign currency exchange rates had a favorable impact on Industrial sales of approximately $11 million.

Industrial segment net sales excluding RPS for the third quarter of 2021 increased slightly primarily due to the impact of favorable foreign currency exchange rates, partially offset by softness in China natural gas engines and the impact of global supply chain constraints.

Industrial segment earnings for the third quarter of 2021 were $27 million, or 12.6 percent of segment net sales, consistent with the prior year quarter.

Nonsegment

Nonsegment expenses and adjusted nonsegment expenses1 were both $14 million for the third quarter of fiscal 2021. For the third quarter of 2020, nonsegment expenses were $15 million and adjusted nonsegment expenses were $17 million.

Year-to-Date Results

Net sales for the first nine months of fiscal 2021 were $1.68 billion, compared to $1.96 billion for the same period last year. Foreign currency exchange rates had a favorable impact on net sales of approximately $32 million for the first nine months of 2021. Net earnings and adjusted net earnings for the first nine months of 2021 were both $159 million, or $2.42 per share. For the first nine months of 2020, net earnings were $183 million, or $2.85 per share, and adjusted net earnings were $206 million, or $3.20 per share.

The effective tax rate and the adjusted effective tax rate for the first nine months of 2021 were both 14.1 percent. For the first nine months of 2020, the effective tax rate was 14.3 percent and the adjusted effective tax rate was 18.7 percent.

Aerospace segment net sales for the first nine months of 2021 were $1.03 billion, compared to $1.25 billion for the same period last year. Aerospace segment earnings for the first nine months of 2021 were $169 million, or 16.4 percent of segment net sales, compared to $252 million, or 20.1 percent of segment net sales, for the same period last year.

Industrial segment net sales for the first nine months of 2021 were $648 million, compared to $710 million for the same period last year. Foreign currency exchange rates had a favorable impact on net sales of approximately $31 million for the first nine months of 2021. Industrial segment earnings for the first nine months of 2021 were $88 million, or 13.6 percent of segment net sales, compared to Industrial segment earnings of $82 million, or 11.5 percent of segment net sales, for the same period last year.

Industrial segment net sales excluding RPS for the first nine months of 2020 were $642 million. Industrial segment earnings excluding RPS for the first nine months of 2020 were $78 million, or 12.2 percent of segment net sales excluding RPS.

Nonsegment expenses and adjusted nonsegment expenses were both $47 million for the first nine months of 2021. For the first nine months of 2020, nonsegment expenses were $94 million and adjusted nonsegment expenses were $57 million.

Cash Flow and Financial Position

Net cash provided by operating activities for the first nine months of fiscal 2021 was $318 million, compared to $212 million for the same period of the prior year. Payments for property, plant, and equipment for the first nine months of 2021 were $21 million, compared to $39 million for the same period of 2020.

Free cash flow and adjusted free cash flow for the first nine months of 2021 were both $297 million. For the first nine months of 2020, free cash flow was $173 million and adjusted free cash flow was $169 million. The increase in free cash flow and adjusted free cash flow was primarily related to effective working capital management and lower capital expenditures, partially offset by lower net earnings.

Total debt was $740 million at June 30, 2021, compared to $929 million at June 30, 2020. Debt-to-EBITDA1 leverage at June 30, 2021, was 1.7 times EBITDA, compared to 1.8 times EBITDA at June 30, 2020.

Fiscal Year 2021 Outlook

While we expect sales, earnings and free cash flow results for the fourth quarter to be higher than the third quarter, considerable uncertainty remains with respect to the COVID-19 variants, global supply chain disruptions, and regional market volatility, all of which are expected to continue. Accordingly, we are not providing more detailed guidance at this time.

Conference Call

Woodward will hold an investor conference call at 4:30 p.m. EDT, August 2, 2021, to provide an overview of the financial performance for the third quarter and first nine months of fiscal year 2021, business highlights, and outlook for fiscal 2021. You are invited to listen to the live webcast of our conference call, or a recording, and view or download accompanying presentation slides at our website, www.woodward.com2.

You may also listen to the call by dialing 1-877-231-2582 (domestic) or 1-478-219-0714 (international). Participants should call prior to the start time to allow for registration; the Conference ID is 7551758. An audio replay will be available by telephone from 7:30 p.m. EDT on August 2, 2021 until 11:59 p.m. EDT on August 16, 2021. The telephone number to access the replay is 1-855-859-2056 (domestic) or 1-404-537-3406 (international), reference access code 7551758.

A webcast presentation will be available on the website by selecting “Investors/Events & Presentations”. The call and presentation will remain accessible on the website for 14 days.

About Woodward, Inc.

Woodward is an independent designer, manufacturer, and service provider of control system solutions and components for the aerospace and industrial markets. The company's innovative fluid, combustion, electrical, and motion control systems help customers offer cleaner, more reliable, and more efficient equipment. Our customers include leading original equipment manufacturers and end users of their products. Woodward is a global company headquartered in Fort Collins, Colorado, USA. Visit our website at www.woodward.com.

Cautionary Statement

Information in this press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainties. Such forward-looking statements include, but are not limited to, statements about of the recovery of global economies following the COVID-19 pandemic, our continued ability to generate strong cash flow by leveraging our operational structure and optimizing working capital in the current environment; the continued and expected or potential effects of global supply chain disruptions, regional market volatility, and the COVID-19 pandemic and new COVID-19 variants on our business; trends in airline production rates and passenger traffic, the management of our business, including our operations and strategy, and our ability to increase our investments in growth opportunities and return to our pre-COVID capital allocation strategy to drive long-term shareholder value; and the markets in which we compete and the effect of COVID-19 and other factors on such markets, and our strategies and investments, including our intended strategic and operational focus. Readers are cautioned that these forward-looking statements are only predictions and are subject to risks, uncertainties, and assumptions that are difficult to predict. Factors that could cause actual results and the timing of certain events to differ materially from the forward-looking statements include, but are not limited to, the COVID-19 pandemic, related public health measures, and the speed and effectiveness of the global rollout of COVID-19 vaccines or other therapeutics, as well as the related volatility in financial, commodities (including oil and gas) and other markets and industries (including the aviation industry), a decline in our customers’ business, or our business with, or financial distress of, Woodward’s significant customers; global economic uncertainty and instability in the financial markets; Woodward’s ability to manage product liability claims, product recalls or other liabilities associated with the products and services that Woodward provides; Woodward’s ability to obtain financing, on acceptable terms or at all, to implement its business plans, complete acquisitions, or otherwise take advantage of business opportunities or respond to business pressures; Woodward’s long sales cycle, customer evaluation process, and implementation period of some of its products and services; Woodward’s ability to implement and realize the intended effects of any restructuring and alignment efforts; Woodward’s ability to successfully manage competitive factors, including prices, promotional incentives, competitor product development, industry consolidation, and commodity and other input cost increases; Woodward’s ability to manage expenses and product mix while responding to sales increases or decreases; the ability of Woodward’s subcontractors to perform contractual obligations and its suppliers to provide Woodward with materials of sufficient quality or quantity required to meet Woodward’s production needs at favorable prices or at all; Woodward’s ability to monitor its technological expertise and the success of, and/or costs associated with, its product development activities; consolidation in the aerospace market and our participation in a strategic joint venture with General Electric Company may make it more difficult to secure long-term sales in certain aerospace markets; Woodward’s debt obligations, debt service requirements, and ability to operate its business, pursue its business strategies and incur additional debt in light of covenants contained in its outstanding debt agreements; Woodward’s ability to manage additional tax expense and exposures; risks related to Woodward’s U.S. Government contracting activities, including liabilities resulting from legal and regulatory proceedings, inquiries, or investigations related to such activities; the potential of a significant reduction in defense sales due to decreases in the amount of U.S. Federal defense spending or other specific budget cuts impacting defense programs in which Woodward participates; changes in government spending patterns, priorities, subsidy programs and/or regulatory requirements; future impairment charges resulting from changes in the estimates of fair value of reporting units or of long-lived assets; future results of Woodward’s subsidiaries; environmental liabilities related to manufacturing activities and/or real estate acquisitions; Woodward’s continued access to a stable workforce and favorable labor relations with its employees; physical and other risks related to Woodward’s operations and suppliers, including natural disasters and COVID-19 related impacts, which could disrupt production; Woodward’s ability to successfully manage regulatory, tax, and legal matters; changes in accounting standards that could adversely impact our profitability or financial position; risks related to Woodward’s common stock, including changes in prices and trading volumes; impacts of tariff regulations; risks from operating internationally, including the impact on reported earnings from fluctuations in foreign currency exchange rates, and compliance with and changes in the legal and regulatory environments of the United States and the countries in which Woodward operates; fair value of defined benefit plan assets and assumptions used in determining Woodward’s retirement pension and other postretirement benefit obligations and related expenses; industry risks, including increases in natural gas prices, unforeseen events that may reduce commercial aviation, such as diseases, epidemics, pandemics and natural disasters, and increasing emissions standards; any adverse effects on Woodward’s operations due to information systems interruptions or intrusions; certain provisions of Woodward’s charter documents and Delaware law that could discourage or prevent others from acquiring the company; and other risk factors described in Woodward's filings with the Securities and Exchange Commission, including its Quarterly Report on Form 10-Q for the quarter ended June 30, 2021, which we expect to file shortly, and its Annual Report on Form 10-K for the year ended September 30, 2020 and any subsequently filed Quarterly Report on Form 10-Q, and other risks described in Woodward’s filings with the Securities and Exchange Commission.

  
Woodward, Inc. and Subsidiaries 
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS 
(Unaudited - in thousands except per share amounts) 
                 
  Three-Months Ended  Nine-Months Ended 
  June 30,  June 30, 
  2021  2020  2021  2020 
                 
Net sales $556,675  $523,826  $1,675,615  $1,964,401 
Costs and expenses:                
Cost of goods sold  422,457   395,511   1,258,340   1,447,942 
Selling, general, and administrative expenses  48,021   57,361   148,461   177,035 
Research and development costs  29,765   34,522   89,388   106,029 
Impairment of assets sold  -   -   -   37,902 
Restructuring charges  -   19,040   -   19,040 
Gain on cross-currency interest rate swaps, net  -   (30,481)  -   (30,481)
Interest expense  8,397   8,737   25,552   26,502 
Interest income  (308)  (377)  (1,086)  (1,340)
Other (income) expense, net  (10,355)  (5,503)  (29,809)  (31,991)
Total costs and expenses  497,977   478,810   1,490,846   1,750,638 
Earnings before income taxes  58,698   45,016   184,769   213,763 
Income taxes  9,837   6,551   26,025   30,607 
Net earnings $48,861  $38,465  $158,744  $183,156 
                 
Earnings per share amounts:                
Basic earnings per share $0.77  $0.62  $2.51  $2.95 
Diluted earnings per share $0.74  $0.61  $2.42  $2.85 
Weighted average common shares outstanding:                
Basic  63,559   62,309   63,215   62,188 
Diluted  65,910   63,427   65,499   64,273 
                 
Cash dividends per share paid to Woodward common stockholders $0.1625  $0.0813  $0.4063  $0.5238 


  
Woodward, Inc. and Subsidiaries 
CONDENSED CONSOLIDATED BALANCE SHEETS 
(Unaudited - in thousands) 
         
  June 30,  September 30, 
  2021  2020 
Assets        
Current assets:        
Cash and cash equivalents $362,007  $153,270 
Accounts receivable  571,943   537,987 
Inventories  427,492   437,943 
Income taxes receivable  31,329   28,879 
Other current assets  50,757   52,786 
Total current assets  1,443,528   1,210,865 
Property, plant, and equipment, net  952,800   997,415 
Goodwill  812,516   808,252 
Intangible assets, net  582,213   606,711 
Deferred income tax assets  14,582   14,658 
Other assets  283,016   265,435 
Total assets $4,088,655  $3,903,336 
         
Liabilities and stockholders’ equity        
Current liabilities:        
Current portion of long-term debt $1,050  $101,634 
Accounts payable  163,248   134,242 
Income taxes payable  12,699   4,662 
Accrued liabilities  163,580   151,794 
Total current liabilities  340,577   392,332 
Long-term debt, less current portion  739,062   736,849 
Deferred income tax liabilities  165,652   163,573 
Other liabilities  641,677   617,905 
Total liabilities  1,886,968   1,910,659 
Stockholders’ equity  2,201,687   1,992,677 
Total liabilities and stockholders’ equity $4,088,655  $3,903,336 


  
Woodward, Inc. and Subsidiaries 
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS 
(Unaudited - in thousands) 
         
  Nine-Months Ended 
  June 30, 
  2021  2020 
Net cash provided by operating activities $317,915  $212,416 
         
Cash flows from investing activities:        
Payments for purchase of property, plant, and equipment  (21,347)  (39,072)
Proceeds from sale of assets  141   18,844 
Proceeds from business divestiture  -   10,443 
Proceeds from sales of short-term investments  16,566   12,700 
Payments for purchases of short-term investments  (14,326)  (13,109)
Net cash used in investing activities  (18,966)  (10,194)
         
Cash flows from financing activities:        
Cash dividends paid  (25,734)  (32,587)
Proceeds from sales of treasury stock  32,219   14,790 
Payments for repurchases of common stock  -   (13,346)
Borrowings on revolving lines of credit and short-term borrowings  74,400   1,027,342 
Payments on revolving lines of credit and short-term borrowings  (74,400)  (1,191,319)
Payments of long-term debt and finance lease obligations  (101,214)  (1,187)
Net cash used in financing activities  (94,729)  (196,307)
Effect of exchange rate changes on cash and cash equivalents  4,517   (3,625)
Net change in cash and cash equivalents  208,737   2,290 
Cash and cash equivalents at beginning of year  153,270   99,073 
Cash and cash equivalents at end of period $362,007  $101,363 


  
Woodward, Inc. and Subsidiaries 
SEGMENT NET SALES AND EARNINGS 
(Unaudited - in thousands) 
                 
  Three-Months Ended  Nine-Months Ended 
  June 30,  June 30, 
  2021  2020  2021  2020 
Net sales:                
Aerospace $340,912  $306,494  $1,027,285  $1,254,655 
Industrial  215,763   217,332   648,330   709,746 
Total consolidated net sales $556,675  $523,826  $1,675,615  $1,964,401 
Segment earnings*:                
Aerospace $53,167  $41,096  $168,641  $251,645 
As a percent of segment net sales  15.6%  13.4%  16.4%  20.1%
Industrial  27,166   27,438   87,925   81,640 
As a percent of segment net sales  12.6%  12.6%  13.6%  11.5%
Total segment earnings  80,333   68,534   256,566   333,285 
Nonsegment expenses  (13,546)  (15,158)  (47,331)  (94,360)
EBIT  66,787   53,376   209,235   238,925 
Interest expense, net  (8,089)  (8,360)  (24,466)  (25,162)
Consolidated earnings before income taxes $58,698  $45,016  $184,769  $213,763 
                 
*This schedule reconciles segment earnings, which exclude certain costs, to consolidated earnings before taxes. 
                 
Payments for property, plant and equipment $8,034  $9,711  $21,347  $39,072 
Depreciation expense $21,717  $22,378  $66,244  $68,101 


  
Woodward, Inc. and Subsidiaries 
RECONCILIATION OF EARNINGS TO ADJUSTED EARNINGS1 
(Unaudited - in thousands, except per share amounts) 
                       
  Three-Months Ended  Three-Months Ended 
  June 30, 2021  June 30, 2020 
  Before Income
Tax
 Net of Income
Tax
 Per Share,
Net of
Income Tax
  Before
Income Tax
  Net of
Income Tax
  Per Share,
Net of
Income Tax
 
Earnings (U.S. GAAP) $58,698 $48,861 $0.74  $45,016  $38,465  $0.61 
Non-U.S. GAAP adjustments:                      
Merger and divestiture transaction costs3  -  -  -   1,732   1,304   0.02 
Restructuring charges related to COVID-19  -  -  -   19,040   14,200   0.22 
Loss on sale of disposal group  -  -  -   2,540   1,801   0.02 
Acceleration of stock compensation  -  -  -   2,376   1,788   0.03 
Net gain on cross-currency interest rate swaps4  -  -  -   (27,481)  (26,904)  (0.42)
Total non-U.S. GAAP adjustments  -  -  -   (1,793)  (7,811)  (0.13)
Adjusted earnings (Non-U.S. GAAP) $58,698 $48,861 $0.74  $43,223  $30,654  $0.48 
                       
(3) Merger and divestiture transaction costs include, as applicable, (i) merger-related transactions costs associated with the now-terminated merger with Hexcel, (ii) divestiture-related transaction costs associated with the divestiture of the disposal groups
(4) The net gain on cross-currency interest rate swaps includes (i) the net realized gains on termination of the instruments and (ii) the swap breakage fees associated with termination of the instruments
 


  
Woodward, Inc. and Subsidiaries 
RECONCILIATION OF EARNINGS TO ADJUSTED EARNINGS1 
(Unaudited - in thousands, except per share amounts) 
                       
  Nine-Months Ended  Nine-Months Ended 
  June 30, 2021  June 30, 2020 
  Before Income
Tax
 Net of
Income Tax
 Per Share,
Net of
Income Tax
  Before
Income Tax
  Net of
Income Tax
  Per Share,
Net of
Income Tax
 
Earnings (U.S. GAAP) $184,769 $158,744 $2.42  $213,763  $183,156  $2.85 
Non-U.S. GAAP adjustments:                      
Gain on sale of Duarte facility  -  -  -   (13,522)  (10,175)  (0.16)
Impairment from assets sold  -  -  -   37,902   28,016   0.44 
Merger and divestiture transaction costs3  -  -  -   18,654   14,038   0.22 
Restructuring charges related to COVID-19  -  -  -   19,040   14,200   0.22 
Loss on sale of disposal group  -  -  -   2,540   1,801   0.02 
Acceleration of stock compensation  -  -  -   2,376   1,788   0.03 
Net gain on cross-currency interest rate swaps4  -  -  -   (27,481)  (26,904)  (0.42)
Total non-U.S. GAAP adjustments  -  -  -   39,509   22,764   0.35 
Adjusted earnings (Non-U.S. GAAP) $184,769 $158,744 $2.42  $253,272  $205,920  $3.20 
                       
(3) Merger and divestiture transaction costs include, as applicable, (i) merger-related transactions costs associated with the now-terminated merger with Hexcel, (ii) divestiture-related transaction costs associated with the divestiture of the disposal groups
(4) The net gain on cross-currency interest rate swaps includes (i) the net realized gains on termination of the instruments and (ii) the swap breakage fees associated with termination of the instruments
 


  
Woodward, Inc. and Subsidiaries 
RECONCILIATION OF NET EARNINGS TO EBIT1 AND ADJUSTED EBIT1 
(Unaudited - in thousands) 
  Three-Months Ended  Nine-Months Ended 
  June 30,  June 30, 
  2021  2020  2021  2020 
Net earnings (U.S. GAAP) $48,861  $38,465  $158,744  $183,156 
Income taxes  9,837   6,551   26,025   30,607 
Interest expense  8,397   8,737   25,552   26,502 
Interest income  (308)  (377)  (1,086)  (1,340)
EBIT (Non-U.S. GAAP)  66,787   53,376   209,235   238,925 
Non-U.S. GAAP adjustments*  -   (1,793)  -   39,509 
Adjusted EBIT (Non-U.S. GAAP) $66,787  $51,583  $209,235  $278,434 
                 
*See Reconciliation of Earnings to Adjusted Earnings1 tables above for the list of Non-U.S. GAAP adjustments made in the applicable periods. 


  
Woodward, Inc. and Subsidiaries 
RECONCILIATION OF NET EARNINGS TO EBITDA1 AND ADJUSTED EBITDA1 
(Unaudited - in thousands) 
                 
  Three-Months Ended  Nine-Months Ended 
  June 30,  June 30, 
  2021  2020  2021  2020 
Net earnings (U.S. GAAP) $48,861  $38,465  $158,744  $183,156 
Income taxes  9,837   6,551   26,025   30,607 
Interest expense  8,397   8,737   25,552   26,502 
Interest income  (308)  (377)  (1,086)  (1,340)
Amortization of intangible assets  10,526   9,728   31,555   29,481 
Depreciation expense  21,717   22,378   66,244   68,101 
EBITDA (Non-U.S. GAAP)  99,030   85,482   307,034   336,507 
Non-U.S. GAAP adjustments*  -   (1,793)  -   39,509 
Adjusted EBITDA (Non-U.S. GAAP) $99,030  $83,689  $307,034  $376,016 
                 
*See Reconciliation of Earnings to Adjusted Earnings1 tables above for the list of Non-U.S. GAAP adjustments made in the applicable periods. 


  
Woodward, Inc. and Subsidiaries 
RECONCILIATION OF INDUSTRIAL SEGMENT NET SALES
EXCLUDING RENEWABLE POWER SYSTEMS AND RELATED BUSINESSES1
 
(Unaudited - in thousands) 
         
  Three-Months Ended Nine-Months Ended
  June 30, June 30,
  2021 2020 2021 2020
Industrial segment net sales $215,763 $217,332 $648,330 $709,746
Renewable power systems and related businesses sales  -  7,730  -  67,663
Industrial segment net sales excluding renewable power systems and related businesses $215,763 $209,602 $648,330 $642,083


   
Woodward, Inc. and Subsidiaries
RECONCILIATION OF INDUSTRIAL SEGMENT EARNINGS
EXCLUDING RENEWABLE POWER SYSTEMS AND RELATED BUSINESSES1
(Unaudited - in thousands)
             
  Three-Months Ended Nine-Months Ended
  June 30, June 30,
  2021 2020 2021 2020
Industrial segment earnings $27,166 $27,438 $87,925 $81,640
Renewable power systems and related businesses earnings  -  252  -  3,602
Industrial segment earnings excluding renewable power systems and related businesses $27,166 $27,186 $87,925 $78,038


  
Woodward, Inc. and Subsidiaries 
RECONCILIATION OF NONSEGMENT EXPENSES TO ADJUSTED NONSEGMENT EXPENSES1 
(Unaudited - in thousands) 
               
  Three-Months Ended  Nine-Months Ended 
  June 30,  June 30, 
  2021 2020  2021 2020 
Nonsegment expenses (U.S. GAAP) $13,546 $15,158  $47,331 $94,360 
Gain on sale of Duarte facility  -  -   -  13,522 
Impairment from assets sold  -  -   -  (37,902)
Merger and divestiture transaction costs  -  (1,732)  -  (18,654)
Restructuring charges related to COVID-19  -  (19,040)  -  (19,040)
Net gain on cross-currency interest rate swaps  -  27,481   -  27,481 
Acceleration of stock compensation  -  (2,376)  -  (2,376)
Loss on sale of disposal group  -  (2,540)  -  (2,540)
Adjusted nonsegment expenses (Non-U.S. GAAP) $13,546 $16,951  $47,331 $54,851 


  
Woodward, Inc. and Subsidiaries 
RECONCILIATION OF CASH FLOW FROM OPERATING ACTIVITIES TO FREE CASH FLOW1 AND ADJUSTED FREE CASH FLOW1 
(Unaudited - in thousands, except per share amounts) 
         
  Nine-Months Ended 
  June 30, 
  2021  2020 
         
Net cash provided by operating activities (U.S. GAAP) $317,915  $212,416 
Payments for property, plant, and equipment  (21,347)  (39,072)
Free cash flow (Non-U.S. GAAP)  296,568   173,344 
Cash proceeds from the sale of the Duarte facility  -   18,767 
Cash paid for merger and divestiture transaction costs  -   17,624 
Cash paid for restructuring charges  -   14,052 
Net cash proceeds from cross-currency interest rate swaps  -   (55,191)
Adjusted free cash flow (Non-U.S. GAAP) $296,568  $168,596 

1Adjusted and Non-U.S. GAAP Financial Measures: Adjusted net earnings, adjusted earnings per share, adjusted EBIT, adjusted EBITDA, adjusted effective tax rate, Industrial segment net sales excluding RPS, Industrial segment earnings excluding RPS, and adjusted nonsegment expenses exclude, as applicable, (i) the gain on sale of assets associated with the sale of the Company’s real property, (ii) the charge from the impairment of assets held for sale, and the losses from assets sold, associated with the Company’s divestiture of the renewable power systems and related businesses (which we refer to as “RPS” or the disposal group), (iii) restructuring charges related to the COVID-19 pandemic, (iv) RPS and related sales and earnings, (v) costs associated with the previously proposed merger with Hexcel Corporation, which merger agreement was terminated on April 5, 2020, (vi) acceleration of stock compensation expense related to restructuring activities, and (vii) the net gain on settlement of cross-currency interest rate swaps. Woodward believes that these items are short-term costs/benefits or are otherwise not related to the ongoing operations of the business and therefore, uses them to illustrate more clearly how the underlying business of Woodward is performing. Adjusted free cash flow is free cash flow (defined below) plus the cash proceeds from the sale of real property at our former Duarte operations, cash payments added back for merger and divestiture transaction costs, and cash payments made for restructuring charges, less net cash proceeds from cross-currency interest rate swaps. Management believes these adjustments to free cash flow better portrays Woodward’s operating performance.

EBIT (earnings before interest and taxes), EBITDA (earnings before interest, taxes, depreciation and amortization), free cash flow, adjusted free cash flow, adjusted net earnings, adjusted net earnings per share, adjusted EBIT, adjusted EBITDA, adjusted effective tax rate, Industrial segment sales excluding RPS, Industrial segment earnings excluding RPS, and adjusted nonsegment expenses are financial measures not prepared and presented in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP). Management uses EBIT and adjusted EBIT to evaluate Woodward’s operating performance without the impacts of financing and tax related considerations. Management uses EBITDA and adjusted EBITDA in evaluating Woodward’s operating performance, making business decisions, including developing budgets, managing expenditures, forecasting future periods, and evaluating capital structure impacts of various strategic scenarios. Management also uses free cash flow, which is derived from net cash provided by or used in operating activities less payments for property, plant, and equipment, as well as adjusted free cash flow (as described above), in reviewing the financial performance of Woodward’s various business segments and evaluating cash generation levels. Securities analysts, investors, and others frequently use EBIT, EBITDA and free cash flow in their evaluation of companies, particularly those with significant property, plant, and equipment, and intangible assets that are subject to amortization. The use of any of these non-U.S. GAAP financial measures is not intended to be considered in isolation of, or as a substitute for, the financial information prepared and presented in accordance with U.S. GAAP. Because EBIT, EBITDA, adjusted EBIT, and adjusted EBITDA exclude certain financial information compared with net earnings, the most comparable U.S. GAAP financial measure, users of this financial information should consider the information that is excluded. Free cash flow does not necessarily represent funds available for discretionary use and is not necessarily a measure of our ability to fund our cash needs. Management’s calculations of EBIT, EBITDA, adjusted net earnings, adjusted earnings per share, adjusted EBIT, adjusted EBITDA, adjusted effective tax rate, adjusted nonsegment expenses, free cash flow, and adjusted free cash flow may differ from similarly titled measures used by other companies, limiting their usefulness as comparative measures.

2Website, Facebook, Twitter: Woodward has used, and intends to continue to use, its Investor Relations website, its Facebook page and its Twitter handle as means of disclosing material non-public information and for complying with its disclosure obligations under Regulation FD.

Contact:Don Guzzardo
Vice President, Investor Relations & Treasurer
970-498-3580
Don.Guzzardo@woodward.com