10-Q 1 wwd-20140331x10q.htm 10-Q a48adad2795e432

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2014

or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____ to _____

 

 

 

Commission file number 0-8408

WOODWARD, INC.

(Exact name of registrant as specified in its charter)

 

Delaware

 

36-1984010

 

(State or other jurisdiction of incorporation or organization)

 

(I.R.S. Employer Identification No.)

 

1000 East Drake Road, Fort Collins, Colorado

 

80525

 

(Address of principal executive offices)

 

(Zip Code)

Registrant’s telephone number, including area code:

 

(970) 482-5811

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes ☒  No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☒    Accelerated filer ☐      Non-accelerated filer ☐    Smaller reporting company ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

As of April 18, 2014, 66,304,270 shares of the common stock with a par value of $0.001455 per share were outstanding.

 

 

1

 

 

 

 

 

 

TABLE OF CONTENTS

 

 

Page

PART I – FINANCIAL INFORMATION 

Item 1.

Financial Statements

2

 

Condensed Consolidated Statements of Earnings

2

 

Condensed Consolidated Statements of Comprehensive Earnings

3

 

Condensed Consolidated Balance Sheets

4

 

Condensed Consolidated Statements of Cash Flows

5

 

Condensed Consolidated Statements of Stockholders’ Equity

6

 

Notes to Condensed Consolidated Financial Statements

7

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

28

 

Forward Looking Statements

28

 

Overview

31

 

Results of Operations

32

 

Liquidity and Capital Resources

37

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

39

Item 4.

Controls and Procedures

40

 

PART II – OTHER INFORMATION

 

Item 1.

Legal Proceedings

40

Item 1A.

Risk Factors

40

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

41

Item 6.

Exhibits

41

 

Signatures

42

 

 

1

 

 

PART I – FINANCIAL INFORMATION

Item 1.Financial Statements

 

WOODWARD, INC.

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

(In thousands, except per share amounts)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three-Months Ended

 

Six-Months Ended

 

March 31,

 

March 31,

 

2014

 

2013

 

2014

 

2013

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

$
482,467 

 

$
485,513 

 

$
911,509 

 

$
893,852 

Costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

    Cost of goods sold

 
340,028 

 

 
348,100 

 

 
655,494 

 

 
637,673 

    Selling, general and administrative expenses

 
35,283 

 

 
37,206 

 

 
72,611 

 

 
73,624 

    Research and development costs

 
35,805 

 

 
34,000 

 

 
65,229 

 

 
64,018 

    Amortization of intangible assets

 
8,657 

 

 
9,813 

 

 
17,141 

 

 
17,480 

    Interest expense

 
6,185 

 

 
7,017 

 

 
12,247 

 

 
13,473 

    Interest income

 
(57)

 

 
(69)

 

 
(116)

 

 
(137)

    Other (income) expense, net (Note 16)

 
(190)

 

 
(890)

 

 
(797)

 

 
(1,152)

Total costs and expenses

 
425,711 

 

 
435,177 

 

 
821,809 

 

 
804,979 

Earnings before income taxes

 
56,756 

 

 
50,336 

 

 
89,700 

 

 
88,873 

Income tax expense

 
11,958 

 

 
7,890 

 

 
21,519 

 

 
19,059 

Net earnings

$
44,798 

 

$
42,446 

 

$
68,181 

 

$
69,814 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share (Note 3):

 

 

 

 

 

 

 

 

 

 

 

Basic earnings per share

$
0.67 

 

$
0.62 

 

$
1.01 

 

$
1.02 

Diluted earnings per share

$
0.66 

 

$
0.61 

 

$
1.00 

 

$
1.00 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted Average Common Shares Outstanding (Note 3):

 

 

 

 

 

 

 

 

 

 

 

Basic

 
66,633 

 

 
68,737 

 

 
67,182 

 

 
68,597 

Diluted

 
67,905 

 

 
69,935 

 

 
68,463 

 

 
69,831 

Cash dividends per share paid to Woodward common stockholders

$
0.08 

 

$
0.08 

 

$
0.16 

 

$
0.16 

 

See accompanying Notes to Condensed Consolidated Financial Statements.

2

 

 

 

WOODWARD, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS

(In thousands)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three-Months Ended

 

Six-Months Ended

 

March 31,

 

March 31,

 

2014

 

2013

 

2014

 

2013

 

 

 

 

 

 

 

 

 

 

 

 

Net earnings

$
44,798 

 

$
42,446 

 

$
68,181 

 

$
69,814 

Other comprehensive earnings:

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

 
(243)

 

 
(10,509)

 

 
4,231 

 

 
(6,058)

Taxes on changes in foreign currency translation adjustments

 
(139)

 

 
(193)

 

 
294 

 

 
419 

 

 
(382)

 

 
(10,702)

 

 
4,525 

 

 
(5,639)

Reclassification of net realized losses on derivatives to earnings

 
24 

 

 
43 

 

 
49 

 

 
86 

Taxes on changes in derivative transactions

 
(9)

 

 
(16)

 

 
(18)

 

 
(33)

 

 
15 

 

 
27 

 

 
31 

 

 
53 

Minimum retirement benefit liability adjustments (Note 18)

 

 

 

 

 

 

 

 

 

 

 

Amortization of:

 

 

 

 

 

 

 

 

 

 

 

Prior service benefit

 
(22)

 

 
(23)

 

 
(44)

 

 
(46)

Net loss

 
195 

 

 
441 

 

 
389 

 

 
892 

Foreign currency exchange rate changes on minimum retirement benefit liabilities

 
(124)

 

 
1,242 

 

 
(220)

 

 
1,185 

Taxes on changes in minimum retirement liability adjustments

 
(18)

 

 
(591)

 

 
(45)

 

 
(725)

 

 
31 

 

 
1,069 

 

 
80 

 

 
1,306 

Total comprehensive earnings

$
44,462 

 

$
32,840 

 

$
72,817 

 

$
65,534 

 

See accompanying Notes to Condensed Consolidated Financial Statements.

3

 

 

WOODWARD, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except per share amounts)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31,

 

September 30,

 

2014

 

2013

ASSETS

 

 

 

 

(a)

Current assets:

 

 

 

 

 

Cash and cash equivalents

$
56,665 

 

$
48,556 

Accounts receivable, less allowance for uncollectible amounts of $7,741 and $8,872, respectively

 
320,492 

 

 
381,065 

Inventories

 
458,733 

 

 
431,744 

Income taxes receivable

 
6,820 

 

 
14,071 

Deferred income tax assets

 
43,027 

 

 
43,027 

Other current assets

 
43,514 

 

 
38,650 

Total current assets

 
929,251 

 

 
957,113 

Property, plant and equipment, net

 
401,050 

 

 
350,048 

Goodwill

 
562,617 

 

 
561,458 

Intangible assets, net

 
271,887 

 

 
288,775 

Deferred income tax assets

 
17,424 

 

 
13,926 

Other assets

 
56,211 

 

 
47,198 

Total assets

$
2,238,440 

 

$
2,218,518 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Short-term borrowings

$
21,000 

 

$

 -

Current portion of long-term debt

 

 -

 

 
100,000 

Accounts payable

 
154,372 

 

 
145,541 

Income taxes payable

 
13,726 

 

 
7,848 

Deferred income tax liabilities

 
800 

 

 
800 

Accrued liabilities

 
128,013 

 

 
161,741 

Total current liabilities

 
317,911 

 

 
415,930 

Long-term debt, less current portion

 
584,000 

 

 
450,000 

Deferred income tax liabilities

 
105,427 

 

 
104,533 

Other liabilities

 
101,304 

 

 
105,510 

Total liabilities

 
1,108,642 

 

 
1,075,973 

Commitments and contingencies (Note 20)

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

Preferred stock, par value $0.003 per share, 10,000 shares authorized, no shares issued

 

 -

 

 

 -

Common stock, par value $0.001455 per share, 150,000 shares authorized, 72,960 shares issued

 
106 

 

 
106 

Additional paid-in capital

 
108,157 

 

 
101,147 

Accumulated other comprehensive earnings

 
19,751 

 

 
15,115 

Deferred compensation

 
4,009 

 

 
4,007 

Retained earnings

 
1,251,314 

 

 
1,193,887 

 

 
1,383,337 

 

 
1,314,262 

Treasury stock at cost, 6,657  shares and 4,883 shares, respectively

 
(249,530)

 

 
(167,710)

Treasury stock held for deferred compensation, at cost, 215 shares and 232 shares, respectively

 
(4,009)

 

 
(4,007)

Total stockholders' equity

 
1,129,798 

 

 
1,142,545 

Total liabilities and stockholders' equity

$
2,238,440 

 

$
2,218,518 

(a) Retrospectively adjusted as discussed in Note 4, Business acquisitions

 

 

 

 

 

See accompanying Notes to Condensed Consolidated Financial Statements.

4

 

 

WOODWARD, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six-Months Ended March 31,

 

2014

 

2013

Cash flows from operating activities:

 

 

 

 

 

Net earnings

$
68,181 

 

$
69,814 

Adjustments to reconcile net earnings to net cash provided by operating activities:

 

 

 

 

 

Depreciation and amortization

 
38,835 

 

 
37,892 

Net (gain) loss on sales of assets

 
136 

 

 
(230)

Stock-based compensation

 
6,330 

 

 
5,379 

Excess tax benefits from stock-based compensation

 
(2,163)

 

 
(4,397)

Deferred income taxes

 
(2,306)

 

 
(3,412)

Loss on derivatives reclassified from accumulated comprehensive earnings into earnings

 
49 

 

 
86 

Changes in operating assets and liabilities, net of business acquisitions:

 

 

 

 

 

Accounts receivable

 
59,408 

 

 
25,709 

Inventories

 
(27,698)

 

 
(24,626)

Accounts payable and accrued liabilities

 
(23,884)

 

 
(16,709)

Current income taxes

 
15,158 

 

 
5,814 

Retirement benefit obligations

 
(2,486)

 

 
(2,789)

Other

 
(4,916)

 

 
456 

Net cash provided by operating activities

 
124,644 

 

 
92,987 

Cash flows from investing activities:

 

 

 

 

 

Payments for purchase of property, plant, and equipment

 
(68,560)

 

 
(47,184)

Proceeds from sale of assets

 
154 

 

 
320 

Business acquisitions, net of cash acquired

 

 -

 

 
(198,860)

Net cash used in investing activities

 
(68,406)

 

 
(245,724)

Cash flows from financing activities:

 

 

 

 

 

Cash dividends paid

 
(10,754)

 

 
(10,966)

Proceeds from sales of treasury stock

 
6,147 

 

 
6,533 

Payments for repurchases of common stock

 
(99,655)

 

 
(17,144)

Excess tax benefits from stock compensation

 
2,163 

 

 
4,397 

Borrowings on revolving lines of credit and short-term borrowings

 
256,071 

 

 
40,072 

Payments on revolving lines of credit and short-term borrowings

 
(151,069)

 

 
(35,329)

Proceeds from issuance of long-term debt

 
250,000 

 

 
200,000 

Payments of long-term debt

 
(300,000)

 

 
(41,875)

Payments of debt financing costs

 
(1,297)

 

 

 -

Net cash provided by (used in) financing activities

 
(48,394)

 

 
145,688 

Effect of exchange rate changes on cash and cash equivalents

 
265 

 

 
(122)

Net change in cash and cash equivalents

 
8,109 

 

 
(7,171)

Cash and cash equivalents at beginning of period

 
48,556 

 

 
61,829 

Cash and cash equivalents at end of period

$
56,665 

 

$
54,658 

See accompanying Notes to Condensed Consolidated Financial Statements.

 

 

5

 

 

WOODWARD, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Number of shares

 

Stockholders' equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated other comprehensive (loss) earnings

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Preferred stock

 

Common stock

 

Treasury stock

 

Treasury stock held for deferred compensation

 

Common stock

 

Additional paid-in capital

 

Foreign currency translation adjustments

 

Unrealized derivative gains (losses)

 

Minimum retirement benefit liability adjustments

 

Total accumulated other comprehensive (loss) earnings

 

Deferred compensation

 

Retained earnings

 

Treasury stock at cost

 

Treasury stock held for deferred compensation

 

Total stockholders' equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances as of October 1, 2012

 

 -

 
72,960 

 
(4,536)

 
(276)

 

$
106 

 

$
97,826 

 

$
17,447 

 

$
(376)

 

$
(28,794)

 

$
(11,723)

 

$
4,344 

 

$
1,069,811 

 

$
(147,905)

 

$
(4,344)

 

$
1,008,115 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earnings

 

 -

 

 -

 

 -

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 
69,814 

 

 

 -

 

 

 -

 

 
69,814 

Other comprehensive income (loss), net of tax

 

 -

 

 -

 

 -

 

 -

 

 

 -

 

 

 -

 

 
(5,639)

 

 
53 

 

 
1,306 

 

 
(4,280)

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 
(4,280)

Cash dividends paid

 

 -

 

 -

 

 -

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 
(10,966)

 

 

 -

 

 

 -

 

 
(10,966)

Purchases of treasury stock

 

 -

 

 -

 
(610)

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 
(23,235)

 

 

 -

 

 
(23,235)

Sales of treasury stock

   

 -

 

 -

 
693 

 

 -

 

 

 -

 

 
(11,766)

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 
20,849 

 

 

 -

 

 
9,083 

Common shares issued from treasury stock for benefit plans

 

 -

 

 -

 
250 

 

 -

 

 

 -

 

 
1,923 

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 
7,857 

 

 

 -

 

 
9,780 

Tax benefit attributable to exercise of stock options

 

 -

 

 -

 

 -

 

 -

 

 

 -

 

 
4,397 

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 
4,397 

Stock-based compensation

 

 -

 

 -

 

 -

 

 -

 

 

 -

 

 
5,379 

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 
5,379 

Transfer of stock to deferred compensation plan

 

 -

 

 -

 
2 

 
(2)

 

 

 -

 

 
23 

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 
95 

 

 

 -

 

 
71 

 

 
(95)

 

 
94 

Purchases of stock by deferred compensation plan

 

 -

 

 -

 

 -

 
(1)

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 
42 

 

 

 -

 

 

 -

 

 
(42)

 

 

 -

Distribution of stock from deferred compensation plan

 

 -

 

 -

 

 -

 
23 

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 
(268)

 

 

 -

 

 

 -

 

 
268 

 

 

 -

Balances as of March 31, 2013

 

 -

 
72,960 

 
(4,201)

 
(256)

 

$
106 

 

$
97,782 

 

$
11,808 

 

$
(323)

 

$
(27,488)

 

$
(16,003)

 

$
4,213 

 

$
1,128,659 

 

$
(142,363)

 

$
(4,213)

 

$
1,068,181 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances as of October 1, 2013

 

 -

 
72,960 

 
(4,883)

 
(232)

 

$
106 

 

$
101,147 

 

$
25,742 

 

$
43 

 

$
(10,670)

 

$
15,115 

 

$
4,007 

 

$
1,193,887 

 

$
(167,710)

 

$
(4,007)

 

$
1,142,545 

Net earnings

 

 -

 

 -

 

 -

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 
68,181 

 

 

 -

 

 

 -

 

 
68,181 

Other comprehensive income (loss), net of tax

 

 -

 

 -

 

 -

 

 -

 

 

 -

 

 

 -

 

 
4,525 

 

 
31 

 

 
80 

 

 
4,636 

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 
4,636 

Cash dividends paid

 

 -

 

 -

 

 -

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 
(10,754)

 

 

 -

 

 

 -

 

 
(10,754)

Purchases of treasury stock

 

 -

 

 -

 
(2,388)

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 
(101,241)

 

 

 -

 

 
(101,241)

Sales of treasury stock

 

 -

 

 -

 
354 

 

 -

 

 

 -

 

 
(4,203)

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 
11,065 

 

 

 -

 

 
6,862 

Common shares issued from treasury stock for benefit plans

 

 -

 

 -

 
260 

 

 -

 

 

 -

 

 
2,837 

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 
8,356 

 

 

 -

 

 
11,193 

Tax benefit attributable to exercise of stock options

 

 -

 

 -

 

 -

 

 -

 

 

 -

 

 
2,046 

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 
2,046 

Stock-based compensation

 

 -

 

 -

 

 -

 

 -

 

 

 -

 

 
6,330 

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 
6,330 

Purchases of stock by deferred compensation plan

 

 -

 

 -

 

 -

 
(6)

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 
276 

 

 

 -

 

 

 -

 

 
(276)

 

 

 -

Distribution of stock from deferred compensation plan

 

 -

 

 -

 

 -

 
23 

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 
(274)

 

 

 -

 

 

 -

 

 
274 

 

 

 -

Balances as of March 31, 2014

 

 -

 
72,960 

 
(6,657)

 
(215)

 

$
106 

 

$
108,157 

 

$
30,267 

 

$
74 

 

$
(10,590)

 

$
19,751 

 

$
4,009 

 

$
1,251,314 

 

$
(249,530)

 

$
(4,009)

 

$
1,129,798 

See accompanying Notes to Condensed Consolidated Financial Statements.

 

6

 

 

 

WOODWARD, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share amounts)

(Unaudited)

Note 1.  Basis of Presentation

The Condensed Consolidated Financial Statements of Woodward, Inc. (“Woodward” or the “Company”) as of March 31, 2014 and for the three and six-months ended March 31, 2014 and March 31, 2013, included herein, have not been audited by an independent registered public accounting firm.  These Condensed Consolidated Financial Statements reflect all normal recurring adjustments that, in the opinion of management, are necessary to present fairly Woodward’s financial position as of March 31, 2014, and the statements of earnings, comprehensive earnings, cash flows, and changes in the statement of stockholders’ equity for the periods presented herein.  The results of operations for the three and six-months ended March 31, 2014 are not necessarily indicative of the operating results to be expected for other interim periods or for the full fiscal year.  Dollar amounts contained in these Condensed Consolidated Financial Statements are in thousands, except per share amounts.

The Condensed Consolidated Balance Sheet as of September 30, 2013 was derived from Woodward’s Annual Report on Form 10-K for the fiscal year then ended.  During the three-months ended December 31, 2013, Woodward completed purchase accounting valuation estimates related to the acquisition of the Duarte Business (as defined below in Note 4, Business acquisitions) and, as a result, retrospectively adjusted the valuations of certain liabilities with a corresponding increase to goodwill and intangible assets as of the acquisition date.  The retrospective adjustments amounted to approximately $12,800 and primarily relate to long-term performance obligations and other accrued liabilities.  Changes since the acquisition date to the valuations of the assets and liabilities acquired resulted in insignificant changes to Woodward’s previously reported earnings and therefore prior reported earnings have not been restated.

The Condensed Consolidated Financial Statements included herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim reporting.  Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been condensed or omitted pursuant to such rules and regulations.

These unaudited Condensed Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and Notes thereto included in Woodward’s most recent Annual Report on Form 10-K filed with the SEC and other financial information filed with the SEC.

Management is required to use estimates and assumptions that affect the reported amount of assets and liabilities at the date of the financial statements, the reported revenues and expenses recognized during the reporting period, and certain financial statement disclosures, in the preparation of the Condensed Consolidated Financial Statements included herein.  Significant estimates in these Condensed Consolidated Financial Statements include allowances for losses on receivables, net realizable value of inventories, warranty reserves, cost of sales incentives, useful lives of property and identifiable intangible assets, the evaluation of impairments of property, valuation of identifiable intangible assets and goodwill, income tax and valuation reserves, the valuation of assets and liabilities acquired in business combinations, assumptions used in the determination of the funded status and annual expense of pension and postretirement employee benefit plans, the valuation of stock compensation instruments granted to employees and board members, and contingencies.  Actual results could vary materially from Woodward’s estimates.

 

Note 2.  Recent accounting pronouncements

From time to time, the Financial Accounting Standards Board (“FASB”) or other standards setting bodies issue new accounting pronouncements.  Updates to the FASB Accounting Standards Codification (“ASC”) are communicated through issuance of an Accounting Standards Update (“ASU”).

In February 2013, the FASB issued ASU 2013-02, “Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income.”  ASU 2013-02 does not change the current requirements for reporting net income or other comprehensive income in financial statements; however, the amendments require companies to provide information about the amounts reclassified out of accumulated comprehensive income by component.  ASU 2013-02 requires a company to present, either on the face of the statement where net income is presented or in the notes, significant amounts reclassified out of accumulated comprehensive income by respective line items of net income, but only if the amount so reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period.  For other amounts that are not required under U.S. GAAP to be reclassified in their entirety to net income, a company is required to cross-reference to other disclosures required under U.S. GAAP that provide additional detail about those amounts.  ASU 2013-02 is effective prospectively for annual reporting periods beginning after December 15, 2012 (fiscal year 2014 for Woodward).  The

7

 

 

 

disclosure requirement of ASU 2013-02, which we have adopted, had no material impact on Woodward’s Consolidated Financial Statements.

 

Note 3.  Earnings per share

Basic earnings per share is computed by dividing net earnings available to common stockholders by the weighted-average number of shares of common stock outstanding for the period.

Diluted earnings per share reflects the weighted-average number of shares outstanding after consideration of the dilutive effect of stock options.

The following is a reconciliation of net earnings to basic earnings per share and diluted earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three-Months Ended

 

Six-Months Ended

 

 

 

March 31,

 

March 31,

 

 

 

2014

 

2013

 

2014

 

2013

 

Numerator:

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earnings 

 

$
44,798 

 

$
42,446 

 

$
68,181 

 

$
69,814 

 

Denominator:

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic shares outstanding

 

 
66,633 

 

 
68,737 

 

 
67,182 

 

 
68,597 

 

Dilutive effect of stock options and restricted stock

 

 
1,272 

 

 
1,198 

 

 
1,281 

 

 
1,234 

 

Diluted shares outstanding

 

 
67,905 

 

 
69,935 

 

 
68,463 

 

 
69,831 

 

Income per common share:

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings per share

 

$
0.67 

 

$
0.62 

 

$
1.01 

 

$
1.02 

 

Diluted earnings per share

 

$
0.66 

 

$
0.61 

 

$
1.00 

 

$
1.00 

 

The following stock option grants were outstanding during the three and six-months ended March 31, 2014 and 2013, but were excluded from the computation of diluted earnings per share because their inclusion would have been anti-dilutive:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three-Months Ended

 

Six-Months Ended