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Woodward Reports Second Quarter Fiscal Year 2021 Results
Source: Nasdaq GlobeNewswire / 03 May 2021 15:05:01 America/Chicago
FORT COLLINS, Colo., May 03, 2021 (GLOBE NEWSWIRE) -- Woodward, Inc. (NASDAQ: WWD) today reported financial results for its second 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. Sequential comparisons are made to the first quarter of 2021.
Second Quarter Overview
- Net sales were $581 million, compared to $720 million.
- Net earnings and adjusted net earnings1 were both $68 million, or $1.04 per share. For the second quarter of fiscal 2020, net earnings were $91 million, or $1.41 per share, and adjusted net earnings were $104 million, or $1.61 per share.
- Sequentially, net sales and net earnings were up 8 percent and 64 percent, respectively.
- Net cash provided by operating activities was $219 million for the first half of fiscal 2021, compared to $52 million for the same period of the prior year. Free cash flow1 and adjusted free cash flow1 for the first half of fiscal 2021 were both $206 million. For the first half of fiscal 2020, free cash flow was $23 million and adjusted free cash flow was $55 million.
“Our second quarter continued to show encouraging signs of a market recovery on the horizon with sales and earnings showing sequential improvement. The gradual increase in aircraft build rates and utilization drove improved results in our Aerospace segment, and conditions in many of our Industrial markets are showing signs of improvement. COVID-19 cases remain persistent across the globe, though many countries have begun aggressive rollouts of vaccines in recent weeks, leading to further optimism for the back half of 2021,” said Thomas A. Gendron, Chairman and Chief Executive Officer.
“We have demonstrated our resilience throughout this pandemic and are emerging with a stronger balance sheet and robust cash flow. Although uncertainty continues across the industry, we will remain vigilant in this dynamic environment and capitalize on future market opportunities,” concluded Mr. Gendron.
Second Quarter Company Results
Net sales for the second quarter of fiscal 2021 were $581 million, compared to $720 million for the second quarter of last year, a decrease of 19 percent.
Net earnings and adjusted net earnings were both $68 million, or $1.04 per share, for the second quarter of 2021. For the second quarter of 2020, net earnings were $91 million, or $1.41 per share, and adjusted net earnings were $104 million, or $1.61 per share.
EBIT1 and adjusted EBIT1 were both $86 million for the second quarter of 2021. For the second quarter of 2020, EBIT was $115 million and adjusted EBIT was $132 million.
The effective tax rate and the adjusted effective tax rate1 were both 13.0 percent for the second quarter of 2021. For the second quarter of 2020, the effective tax rate was 14.8 percent and the adjusted effective tax rate was 16.2 percent.
Segment Results
Aerospace
Aerospace segment net sales for the second quarter of fiscal 2021 were $365 million, compared to $474 million for the second quarter a year ago. Sequentially, Aerospace segment net sales for the second quarter of 2021 increased 13 percent.
Aerospace sales for the second quarter remained pressured by the pandemic-induced decline in passenger travel. Both commercial aftermarket and OEM decreased significantly compared to the prior year; however, both showed sequential improvement. While defense sales were down slightly compared to the prior year, our backlog remains healthy.
Segment earnings for the second quarter of 2021 were $69 million, compared to $118 million for the second quarter of last year. Segment earnings as a percent of segment net sales were 18.9 percent for the second quarter of 2021, compared to 24.8 percent in the same quarter of the prior year. The decline in segment earnings was primarily the result of lower volume, including a significant decline in commercial aftermarket, partially offset by cost reduction initiatives.
Industrial
Industrial segment net sales for the second quarter of fiscal 2021 were $217 million, compared to $246 million for the second quarter a year ago. For the second quarter of 2020, Industrial segment net sales excluding renewable power systems and related businesses1 (“RPS”) were $215 million. RPS was divested on April 30, 2020. Foreign currency exchange rates had a favorable impact on Industrial sales of approximately $10 million for the current year quarter.
Industrial segment net sales excluding RPS for the second quarter of 2021 slightly increased primarily due to strength in China natural gas engines and the favorable foreign currency exchange rates impact, partially offset by weakness in many of our other markets.
Industrial segment earnings for the second quarter of 2021 were $28 million, or 12.9 percent of segment net sales, compared to $26 million, or 10.6 percent of segment net sales, for the prior year quarter. Industrial segment earnings increased primarily as a result of cost reduction initiatives.
Industrial segment earnings of $28 million for the second quarter of 2021 were up compared to $25 million of Industrial segment earnings excluding RPS1, or 11.6 percent of Industrial segment sales excluding RPS, for the same period last year.
Nonsegment
Nonsegment expenses and adjusted nonsegment expenses1 were both $10 million for the second quarter of fiscal 2021. For the second quarter of 2020, nonsegment expenses were $28 million and adjusted nonsegment expenses were $11 million.
Year-to-Date Results
Net sales for the first half of 2021 were $1.12 billion, compared to $1.44 billion for the same period last year. Net earnings and adjusted net earnings for the first half of 2021 were both $110 million or $1.68 per share. For the first half of 2020 net earnings were $145 million, or $2.24 per share, and adjusted net earnings were $175 million, or $2.71 per share.
The effective tax rate and the adjusted effective tax rate for the first half of 2021 were both 12.8 percent. For the first half of 2020, the effective tax rate was 14.3 percent and the adjusted effective tax rate was 16.6 percent.
Aerospace segment net sales for the first half of 2021 were $686 million, compared to $948 million for the same period last year. Aerospace segment earnings for the first half of 2021 were $115 million, or 16.8 percent of segment net sales, compared to $211 million, or 22.2 percent of segment net sales, for the same period last year.
Industrial segment net sales for the first half of 2021 were $433 million, compared to $492 million for the same period last year. Industrial segment earnings for the first half of 2021 were $61 million, or 14.0 percent of segment net sales, compared to Industrial segment earnings of $54 million, or 11.0 percent of segment net sales, for the same period last year.
Industrial segment net sales excluding RPS for the first half of 2020 were $432 million. Industrial segment earnings excluding RPS for the first half of 2020 were $51 million, or 11.8 percent of segment net sales excluding RPS.
Nonsegment expenses and adjusted nonsegment expenses were both $34 million for the first half of 2021. For the first half of 2020, nonsegment expenses were $79 million and adjusted nonsegment expenses were $38 million.
Cash Flow and Financial Position
Net cash provided by operating activities for the first half of fiscal year 2021 was $219 million, compared to $52 million for the same period of the prior year. Payments for property, plant, and equipment for the first half of 2021 were $13 million, compared to $29 million for the same period of 2020.
Free cash flow and adjusted free cash flow for the first half of 2021 were both $206 million. For the first half of 2020, free cash flow was $23 million and adjusted free cash flow was $55 million. The increase in free cash flow and adjusted free cash flow was primarily related to effective working capital management and lower capital expenditures.
Total debt was $737 million at March 31, 2021, compared to $1.07 billion at March 31, 2020. Debt-to-EBITDA1 leverage at March 31, 2021, was 1.7 times EBITDA, compared to 1.9 times EBITDA at March 31, 2020.
Fiscal Year 2021 Outlook
The ongoing rollout of vaccines across many countries is driving optimism for economic recovery, but the enduring turbulence caused by the COVID-19 pandemic, including significantly reduced global passenger travel and new viral variants, continues to cloud near-term forecasts. While we believe many of our markets will improve for the remainder of this year and into 2022, we will continue to withhold guidance as we navigate the uncertain economic landscape.
Conference Call
Woodward will hold an investor conference call at 4:30 p.m. EDT, May 3, 2021, to provide an overview of the financial performance for the first half 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 7934739. An audio replay will be available by telephone from 7:30 p.m. EDT on May 3, 2021 until 11:59 p.m. EDT on May 17, 2021. The telephone number to access the replay is 1-855-859-2056 (domestic) or 1-404-537-3406 (international), reference access code 7934739.
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 the trends in our business and industry with respect to recovery following the COVID-19 pandemic, encouraging signs of a market recovery on the horizon, optimism with respect to market improvements for the back half of 2021, the continued and expected or potential effects of the COVID-19 pandemic and new COVID-19 viral variants on our business, and the management of our business, including our operations and strategy, and our ability to capitalize on future market opportunities, as well as any potential benefits with respect to a vaccine or therapeutics for COVID-19 and the speed and effectiveness of any associated global rollout thereof; 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 March 31, 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 Six-Months Ended March 31, March 31, 2021 2020 2021 2020 Net sales $ 581,321 $ 720,220 $ 1,118,940 $ 1,440,575 Costs and expenses: Cost of goods sold 434,243 517,514 835,883 1,052,431 Selling, general, and administrative expenses 44,329 57,629 100,440 119,674 Research and development costs 27,627 34,661 59,623 71,507 Impairment of assets sold - - - 37,902 Interest expense 8,249 8,756 17,155 17,765 Interest income (283 ) (476 ) (778 ) (963 ) Other (income) expense, net (11,331 ) (5,063 ) (19,454 ) (26,488 ) Total costs and expenses 502,834 613,021 992,869 1,271,828 Earnings before income taxes 78,487 107,199 126,071 168,747 Income taxes 10,174 15,881 16,188 24,056 Net earnings $ 68,313 $ 91,318 $ 109,883 $ 144,691 Earnings per share amounts: Basic earnings per share $ 1.08 $ 1.47 $ 1.74 $ 2.33 Diluted earnings per share $ 1.04 $ 1.41 $ 1.68 $ 2.24 Weighted average common shares outstanding: Basic 63,278 62,266 63,043 62,128 Diluted 65,654 64,564 65,274 64,622 Cash dividends per share paid to Woodward common stockholders $ 0.1625 $ 0.2800 $ 0.2438 $ 0.4425 Woodward, Inc. and Subsidiaries CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited - in thousands) March 31, September 30, 2021 2020 Assets Current assets: Cash and cash equivalents $ 287,595 $ 153,270 Accounts receivable 588,064 537,987 Inventories 422,321 437,943 Income taxes receivable 30,459 28,879 Other current assets 39,723 52,786 Total current assets 1,368,162 1,210,865 Property, plant, and equipment, net 965,205 997,415 Goodwill 807,974 808,252 Intangible assets, net 584,948 606,711 Deferred income tax assets 14,873 14,658 Other assets 279,610 265,435 Total assets $ 4,020,772 $ 3,903,336 Liabilities and stockholders’ equity Current liabilities: Current portion of long-term debt $ 1,398 $ 101,634 Accounts payable 162,715 134,242 Income taxes payable 12,945 4,662 Accrued liabilities 164,350 151,794 Total current liabilities 341,408 392,332 Long-term debt, less current portion 736,095 736,849 Deferred income tax liabilities 164,068 163,573 Other liabilities 645,900 617,905 Total liabilities 1,887,471 1,910,659 Stockholders’ equity 2,133,301 1,992,677 Total liabilities and stockholders’ equity $ 4,020,772 $ 3,903,336 Woodward, Inc. and Subsidiaries CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited - in thousands) Six-Months Ended March 31, 2021 2020 Net cash provided by operating activities $ 218,997 $ 52,179 Cash flows from investing activities: Payments for purchase of property, plant, and equipment (13,313 ) (29,361 ) Proceeds from sale of assets 86 18,831 Proceeds from sales of short-term investments 16,566 12,684 Payments for purchases of short-term investments (2,750 ) (23 ) Net cash provided by investing activities 589 2,131 Cash flows from financing activities: Cash dividends paid (15,404 ) (27,525 ) Proceeds from sales of treasury stock 28,454 12,726 Payments for repurchases of common stock - (13,346 ) Borrowings on revolving lines of credit and short-term borrowings 74,400 788,306 Payments on revolving lines of credit and short-term borrowings (74,400 ) (807,869 ) Payments of long-term debt and finance lease obligations (100,835 ) (754 ) Net cash used in financing activities (87,785 ) (48,462 ) Effect of exchange rate changes on cash and cash equivalents 2,524 (2,072 ) Net change in cash and cash equivalents 134,325 3,776 Cash and cash equivalents at beginning of year 153,270 99,073 Cash and cash equivalents at end of period $ 287,595 $ 102,849 Woodward, Inc. and Subsidiaries SEGMENT NET SALES AND EARNINGS (Unaudited - in thousands) Three-Months Ended Six-Months Ended March 31, March 31, 2021 2020 2021 2020 Net sales: Aerospace $ 364,706 $ 474,236 $ 686,373 $ 948,161 Industrial 216,615 245,984 432,567 492,414 Total consolidated net sales $ 581,321 $ 720,220 $ 1,118,940 $ 1,440,575 Segment earnings*: Aerospace $ 69,008 $ 117,638 $ 115,474 $ 210,549 As a percent of segment net sales 18.9 % 24.8 % 16.8 % 22.2 % Industrial 27,871 25,972 60,759 54,202 As a percent of segment net sales 12.9 % 10.6 % 14.0 % 11.0 % Total segment earnings 96,879 143,610 176,233 264,751 Nonsegment expenses (10,426 ) (28,131 ) (33,785 ) (79,202 ) EBIT 86,453 115,479 142,448 185,549 Interest expense, net (7,966 ) (8,280 ) (16,377 ) (16,802 ) Consolidated earnings before income taxes $ 78,487 $ 107,199 $ 126,071 $ 168,747 *This schedule reconciles segment earnings, which exclude certain costs, to consolidated earnings before taxes. Payments for property, plant and equipment $ 6,050 $ 12,129 $ 13,313 $ 29,361 Depreciation expense $ 21,919 $ 23,177 $ 44,527 $ 45,723 Woodward, Inc. and Subsidiaries RECONCILIATION OF EARNINGS TO ADJUSTED EARNINGS1 (Unaudited - in thousands, except per share amounts) Three-Months Ended Three-Months Ended March 31, 2021 March 31, 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) $ 78,487 $ 68,313 $ 1.04 $ 107,199 $ 91,318 $ 1.41 Non-U.S. GAAP adjustments: Merger and divestiture transaction costs* - - - 16,922 12,734 0.20 Total non-U.S. GAAP adjustments - - - 16,922 12,734 0.20 Adjusted earnings (Non-U.S. GAAP) $ 78,487 $ 68,313 $ 1.04 $ 124,121 $ 104,052 $ 1.61 *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 Woodward, Inc. and Subsidiaries RECONCILIATION OF EARNINGS TO ADJUSTED EARNINGS1 (Unaudited - in thousands, except per share amounts) Six-Months Ended Six-Months Ended March 31, 2021 March 31, 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) $ 126,071 $ 109,883 $ 1.68 $ 168,747 $ 144,691 $ 2.24 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 0.43 Merger and divestiture transaction costs* - - - 16,922 12,734 0.20 Total non-U.S. GAAP adjustments - - - 41,302 30,575 0.47 Adjusted earnings (Non-U.S. GAAP) $ 126,071 $ 109,883 $ 1.68 $ 210,049 $ 175,266 $ 2.71 *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 Woodward, Inc. and Subsidiaries RECONCILIATION OF NET EARNINGS TO EBIT1 AND ADJUSTED EBIT1 (Unaudited - in thousands) Three-Months Ended Six-Months Ended March 31, March 31, 2021 2020 2021 2020 Net earnings (U.S. GAAP) $ 68,313 $ 91,318 $ 109,883 $ 144,691 Income taxes 10,174 15,881 16,188 24,056 Interest expense 8,249 8,756 17,155 17,765 Interest income (283 ) (476 ) (778 ) (963 ) EBIT (Non-U.S. GAAP) 86,453 115,479 142,448 185,549 Non-U.S. GAAP adjustments* - 16,922 - 41,302 Adjusted EBIT (Non-U.S. GAAP) $ 86,453 $ 132,401 $ 142,448 $ 226,851 *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 Six-Months Ended March 31, March 31, 2021 2020 2021 2020 Net earnings (U.S. GAAP) $ 68,313 $ 91,318 $ 109,883 $ 144,691 Income taxes 10,174 15,881 16,188 24,056 Interest expense 8,249 8,756 17,155 17,765 Interest income (283 ) (476 ) (778 ) (963 ) Amortization of intangible assets 10,560 9,848 21,029 19,753 Depreciation expense 21,919 23,177 44,527 45,723 EBITDA (Non-U.S. GAAP) 118,932 148,504 208,004 251,025 Non-U.S. GAAP adjustments* - 16,922 - 41,302 Adjusted EBITDA (Non-U.S. GAAP) $ 118,932 $ 165,426 $ 208,004 $ 292,327 *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 Six-Months Ended March 31, March 31, 2021 2020 2021 2020 Industrial segment net sales $ 216,615 $ 245,984 $ 432,567 $ 492,414 Renewable power systems and related businesses sales - 31,367 - 59,934 Industrial segment net sales excluding renewable power systems and related businesses $ 216,615 $ 214,617 $ 432,567 $ 432,480 Woodward, Inc. and Subsidiaries RECONCILIATION OF INDUSTRIAL SEGMENT EARNINGS
EXCLUDING RENEWABLE POWER SYSTEMS AND RELATED BUSINESSES1(Unaudited - in thousands) Three-Months Ended Six-Months Ended March 31, March 31, 2021 2020 2021 2020 Industrial segment earnings $ 27,871 $ 25,972 $ 60,759 $ 54,202 Renewable power systems and related businesses earnings - 1,102 - 3,350 Industrial segment earnings excluding renewable power systems and related businesses $ 27,871 $ 24,870 $ 60,759 $ 50,852 Woodward, Inc. and Subsidiaries RECONCILIATION OF NONSEGMENT EXPENSES TO ADJUSTED NONSEGMENT EXPENSES1 (Unaudited - in thousands) Three-Months Ended Six-Months Ended March 31, March 31, 2021 2020 2021 2020 Nonsegment expenses (U.S. GAAP) $ 10,426 $ 28,131 $ 33,785 $ 79,202 Gain on sale of Duarte facility - - - 13,522 Impairment from assets sold - - - (37,902 ) Merger and divestiture transaction costs - (16,922 ) - (16,922 ) Adjusted nonsegment expenses (Non-U.S. GAAP) $ 10,426 $ 11,209 $ 33,785 $ 37,900 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) Six-Months Ended March 31, 2021 2020 Net cash provided by operating activities (U.S. GAAP) $ 218,997 $ 52,179 Payments for property, plant, and equipment (13,313 ) (29,361 ) Free cash flow (Non-U.S. GAAP) 205,684 22,818 Cash proceeds from the sale of the Duarte facility - 18,767 Cash paid for merger and divestiture transaction costs - 13,074 Adjusted free cash flow (Non-U.S. GAAP) $ 205,684 $ 54,659 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 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, (iii) renewable power systems and related businesses sales, (iv) renewable power systems (also referred to as the disposal groups) and related businesses earnings, (v) costs associated with the previously proposed merger with Hexcel Corporation, which merger agreement was terminated on April 5, 2020, and (vii) transaction costs associated with the completed divestiture of our renewable power systems portfolio. 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 and cash payments added back for merger and divestiture transaction costs. 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