What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-05-01 compared with 2025-02-04 · 172 added, 100 removed, 237 unchanged (53% of the section changed)

9 unchanged sentences

• trends in our business and the markets in which we operate, including expectations for those markets, our customers and their business and products;

• our ability to manage risks from operating internationally;

• our ability to manage risks from operating internationally, including the impacts of tariffs on our markets in which we operate as well as our supply chain;

• expectations regarding demand for our products, in particular our expectations with respect to natural gas trucks in China;

32 unchanged sentences

Except where we have otherwise indicated or the context otherwise requires, amounts presented in this Form 10-Q are in thousands, except per share amounts.

Global Business Conditions

As global trade dynamics continue to evolve, the impact of increased trade tensions and related tariffs with U.S.

trading partners remains a key factor in shaping global economic activity, supply chains, and market stability.

Future tariff adjustments may emerge as countries negotiate trade agreements, respond to geopolitical shifts, and address the challenges of inflation and global competition.

We expect increased cost pressure resulting from the already announced tariffs and there are uncertainties surrounding future tariff policy changes and enforcement.

However, the Company’s production and supply bases are largely in the same regions where our products are sold, which should mitigate our exposure.

Woodward is closely tracking early indicators from our end markets and customer forecasts regarding the potential impact of currently announced tariff levels, changes to such levels, and actual and potential retaliatory trade actions.

We are proactively working to mitigate cost pressure and any supply chain disruptions, as well as sales risks.

Operational Highlights

Quarter to Date Highlights

Quarter and Year to Date Highlights

Three Months Ended

Six Months Ended

Aerospace segment

22 unchanged sentences

Liquidity Highlights

Net cash provided by operating activities for the first three months of fiscal year 2025 was $34,516, compared to $46,789 for the first three months of fiscal year 2024.

The decrease in net cash provided by operating activities in the first three months of fiscal year 2025 compared to the first three months of the prior fiscal year is primarily attributable to the timing of certain cash payments for accounts payable, partially offset by timing of cash received from customers as well as increases in working capital.

For the first three months of fiscal year 2025, free cash flow was $942, compared to $4,977 for the first three months of fiscal year 2024.

Net cash provided by operating activities for the first half of fiscal year 2025 was $112,341, compared to $144,118 for the first half of fiscal year 2024.

For the first half of fiscal year 2025, free cash flow was $60,351, compared to $87,817 for the first half of fiscal year 2024.

We define free cash flow as net cash flow provided by operating activities less payments for property, plant, and equipment.

The decrease in free cash flow for the first three months of fiscal year 2025 as compared to the same period of the prior fiscal year was primarily attributable to lower earnings, partially offset by lower capital expenditures.

The decrease in free cash flow for the first half of fiscal year 2025 as compared to the same period of the prior fiscal year was primarily attributable to an increase in working capital offset by lower capital expenditures.

Free cash flow is a non-U.S.

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GAAP financial measure can be found under the caption “Non-U.S.

GAAP Financial Measures” in this Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations.

At December 31, 2024, we held $283,726 in cash and cash equivalents and had total outstanding debt of $902,174.

Financial Measures” in this Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations.

At March 31, 2025, we held $364,141 in cash and cash equivalents and had total outstanding debt of $911,910.

We have additional borrowing availability of $731,014, net of outstanding letters of credit, under our revolving credit agreement.

At December 31, 2024, we also had additional borrowing capacity of $19,730 under various foreign lines of credit and foreign overdraft facilities.

At March 31, 2025, we also had additional borrowing capacity of $22,853 under various foreign lines of credit and foreign overdraft facilities.

RESULTS OF OPERATIONS

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Three Months Ended

December 31, 2024

Six Months Ended

March 31, 2025

% of Net Sales

December 31, 2023

March 31, 2024

% of Net Sales

March 31, 2025

% of Net Sales

March 31, 2024

% of Net Sales

Costs and expenses:

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Other select financial data:

December 31, 2024

March 31, 2025

September 30, 2024

1 unchanged sentence

Total stockholders' equity

Consolidated net sales for the first quarter of fiscal year 2025 decreased by $14,005, or 1.8%, compared to the same period of fiscal year 2024.

Details of the changes in consolidated net sales are as follows:

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

Consolidated net sales for the period ended December 31, 2023

Six-Month Period

Consolidated net sales for the period ended March 31, 2024

Aerospace volume

2 unchanged sentences

Effects of changes in foreign currency rates

Consolidated net sales for the period ended December 31, 2024

In the Aerospace segment, the increase in net sales for the first quarter of fiscal year 2025 as compared to the same period of the prior fiscal year is primarily attributable to price realization, partially offset by inflation, unfavorable mix, and lower volumes.

In the Industrial segment, the decrease in net sales for the first quarter of fiscal year 2025 as compared to the same period of the prior fiscal year was primarily a result of lower volumes and unfavorable mix, partially offset by price realization and favorable foreign currency exchange rates.

We expect significant sales and earnings decreases in our China on-highway natural gas truck business in fiscal year 2025 due to the deteriorating local Chinese economy.

Consolidated net sales for the period ended March 31, 2025

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.

Costs and Expenses

Cost of goods sold remained flat at $583,091, or 75.5% of net sales, for the first quarter of fiscal year 2025, as compared to $582,381, or 74.0% of net sales, for the first quarter of fiscal year 2024.

Gross margin (as measured by net sales less cost of goods sold, divided by net sales) was 24.5% for the first quarter of fiscal year 2025, compared to 26.0% for the first quarter of fiscal year 2024.

The decrease in gross margin for the first quarter of fiscal year 2025 as compared to the same period of the prior fiscal year is primarily attributable to lower sales volume, partially offset by price realization.

Selling, general, and administrative expenses decreased by $4,815, or 6.5%, to $69,696 for the first quarter of fiscal year 2025, compared to $74,511 for the first quarter of fiscal year 2024.

Selling, general, and administrative expenses as a percentage of net sales decreased to 9.0% for the first quarter of fiscal year 2025, compared to 9.5% for the first quarter of fiscal year 2024.

The decrease in selling, general, and administrative expenses on an absolute basis for the first quarter of fiscal year 2025 as compared to the same period of the prior fiscal year is primarily due to the positive effects of changes in foreign currency rates and decreased expenses relating to our deferred compensation program, partially offset by increased headcount.

Research and development costs were consistent at $30,207, or 3.9% of net sales, for the first quarter of fiscal year 2025, as compared to $30,794, or 3.9% of net sales, for the first quarter of fiscal year 2024 primarily due to variability in the timing of projects and expenses.

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 $905, or 7.9%, to $12,341 for the first quarter of fiscal year 2025, compared to $11,436 for the first quarter of fiscal year 2024.

Interest expense as a percentage of net sales was 1.6% for the first quarter of fiscal year 2025, compared to 1.5% for the first quarter of fiscal year 2024.

The increase in interest expense on an absolute basis and percentage basis for the first quarter of fiscal year 2025 as compared to the same period of the prior fiscal year is primarily attributable to increased average daily borrowings on the revolving credit facility during the first quarter of fiscal year 2025.

Other income increased by $2,448 to $23,087 for the first quarter of fiscal year 2025, compared to $20,639 for the first quarter of fiscal year 2024.

The increase in other income for the first quarter of fiscal year 2025 as compared to the same period of the prior fiscal year is primarily attributable to a one-time gain related to product rationalization activities that was recognized in the current year first quarter that did not occur in the prior year first quarter, partially offset by a gain in the prior year first quarter associated with a non-recurring matter related to a previous acquisition that did not reoccur in the current year first quarter.

Income taxes were provided at an effective rate on earnings before income taxes of 14.5% for the first quarter of fiscal year 2025, and 17.9% for the first quarter of fiscal year 2024.

The decrease in the effective tax rate for the three months ended December 31, 2024 compared to the three months ended December 31, 2023 is primarily attributable to larger stock-based compensation tax benefit in the current quarter, partially offset by a smaller estimated Research and Development Credit as well as the impact of higher projected full year earnings on state income tax expense.

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 December 31,

Three Months Ended March 31,

Six Months Ended March 31,

Consolidated net sales

The following table presents earnings by segment and reconciles segment earnings to consolidated net earnings:

Three Months Ended December 31,

Three Months Ended March 31,

Six Months Ended March 31,

Nonsegment expenses

4 unchanged sentences

The following table presents segment earnings as a percent of segment net sales:

Three Months Ended December 31,

Aerospace segment net sales increased by $33,126, or 7.2%, to $493,882 for the first quarter of fiscal year 2025, compared to $460,756 for the first quarter of fiscal year 2024.

The increase in Aerospace segment net sales in the first quarter of fiscal year 2025 as compared to the same period of the prior fiscal year is primarily attributable to price realization, partially offset by inflation, unfavorable mix, and lower volumes.

Commercial OEM sales decreased in the first quarter of fiscal year 2025 as compared to the same period of the prior fiscal year, primarily driven by the impacts from the Boeing work stoppage.

Commercial aftermarket sales increased in the first quarter of fiscal year 2025 as compared to the same period of the prior fiscal year, primarily due to high aircraft utilization rates.

Defense OEM and defense aftermarket sales increased in the first quarter of fiscal year 2025 as compared to the same period of the prior fiscal year, primarily driven by increased demand for smart defense and fixed wing aircraft, respectively.

Aerospace segment earnings increased by $15,723, or 19.9%, to $94,725 for the first quarter of fiscal year 2025, compared to $79,002 for the first quarter of fiscal year 2024.

Three Months Ended March 31,

Six Months Ended March 31,

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.

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

Earnings for the period ended December 31, 2023

Six-Month Period

Earnings for the period ended March 31, 2024

Sales volume and mix

Price, inflation, and productivity

Earnings for the period ended December 31, 2024

Aerospace segment earnings as a percentage of segment net sales were 19.2% for the first quarter of fiscal year 2025, compared to 17.2% for the first quarter of fiscal year 2024.

Industrial segment net sales decreased by $47,131, or 14.5%, to $278,843 for the first quarter of fiscal year 2025, compared to $325,974 for the first quarter of fiscal year 2024.

The decrease in Industrial segment net sales in the first quarter of fiscal year 2025 as compared to the same period of the prior fiscal year was primarily attributable to lower volumes and unfavorable mix, partially offset by price realization and favorable foreign currency exchange rates.

In the first quarter of fiscal year 2025 as compared to the same period of the prior year, we saw a substantial sales decline in our on-highway natural gas truck business in China due to the deteriorating local Chinese economy.

Industrial segment earnings decreased by $26,684, or 39.9%, to $40,197 for the first quarter of fiscal year 2025, compared to $66,881 for the first quarter of fiscal year 2024.

Earnings for the period ended March 31, 2025

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 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.

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

Earnings for the period ended December 31, 2023

Six-Month Period

Earnings for the period ended March 31, 2024

Sales volume and mix

1 unchanged sentence

Effects of changes in foreign currency rates

Earnings for the period ended December 31, 2024

Industrial segment earnings as a percentage of segment net sales were 14.4% for the first quarter of fiscal year 2025, compared to 20.5% for the first quarter of fiscal year 2024.

Industrial earnings were significantly impacted by the sales decline in our on-highway natural gas truck business in China, partially offset by price realization, volume increases in

power generation and oil and gas, as well as operational improvements, including increased output and other efficiency gains.

Earnings for the period ended March 31, 2025

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.

Nonsegment expenses decreased by $4,096 to $22,104 for the first quarter of fiscal year 2025, compared to $26,200 for the first quarter of fiscal year 2024.

The significant items that impacted nonsegment expenses in the current year first quarter compared to the prior year first quarter are as follows:

Three Months Ended December 31,

We also continue to monitor the evolving trade policy between the U.S.

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,

Nonsegment expenses

2 unchanged sentences

Non-recurring gain related to a previous acquisition

Nonsegment expenses excluding infrequent significant charges

Excluding these items, nonsegment expenses increased $1,182 in the first quarter of fiscal year 2025 as compared to the same period of the prior fiscal year.

The remaining increase in nonsegment expenses is due to increased headcount.

Certain non-recurring separation costs

Nonsegment expenses excluding infrequent significant items

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.

LIQUIDITY AND CA PITAL RESOURCES

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For further discussion of our revolving credit facility and our other credit facilities, see Note 15, Credit facilities, short-term borrowings and long-term debt in the Notes to the Condensed Consolidated Financial Statements included in Part I, Item I of this Form 10-Q.

At December 31, 2024, we had total outstanding debt of $902,174 consisting of various series of unsecured notes due between 2025 and 2033 and obligations under our finance leases.

At December 31, 2024, we had $258,000 outstanding on our revolving credit facility, all of which is classified as short-term borrowings based on our intent and ability to repay this amount in the next twelve months.

Revolving credit facility and short-term borrowing activity during the three months ended December 31, 2024 were as follows:

At March 31, 2025, we had total outstanding debt of $911,910 consisting of various series of unsecured notes due between 2025 and 2033 and obligations under our finance leases.

At March 31, 2025, we had $261,100 outstanding on our revolving credit facility, all of which is classified as short-term borrowings based on our intent and ability to repay this amount in the next twelve months.

Revolving credit facility and short-term borrowing activity during the six months ended March 31, 2025 were as follows:

Maximum daily balance during the period

1 unchanged sentence

Weighted average interest rate on average daily balance

At December 31, 2024, we had additional borrowing availability of $734,108 under our revolving credit facility, net of outstanding letters of credit, and additional borrowing availability of $19,730 under various foreign credit facilities.

To our knowledge, we were in compliance with all our debt covenants as of December 31, 2024.

At March 31, 2025, we had additional borrowing availability of $731,014 under our revolving credit facility, net of outstanding letters of credit, and additional borrowing availability of $22,853 under various foreign credit facilities.

To our knowledge, we were in compliance with all our debt covenants as of March 31, 2025.

See Note 15, Credit facilities, short-term borrowings and long-term debt in the Notes to the Consolidated Financial Statements included in Part II, Item 8 our Annual Report on Form 10-K for fiscal year 2024, for more information about our covenants.

1 unchanged sentence

From time to time, the Company enters into various factoring agreements with third-party financial institutions to sell certain of its receivables.

Factoring activity resulted in a decrease of approximately $3,856 in cash provided by operating activities during the three months ended December 31, 2024, compared to a decrease in cash provided by operating activities of approximately $5,161 during the three months ended December 31, 2023.

Our ability to service our long-term debt, to remain in compliance with the various restrictions and covenants contained in our debt agreements, and to fund working capital, capital expenditures and product development efforts will depend on our ability to generate cash from operating activities, which in turn is subject to, among other things, future operating performance as well as general economic, financial, competitive, legislative, regulatory, and other conditions, some of which may be beyond our control.

Factoring activity resulted in an increase of approximately $2,457 in cash provided by operating activities during the six months ended March 31, 2025, compared to an increase in cash provided by operating activities of approximately $1,917 during the six months ended March 31, 2024.

depend on our ability to generate cash from operating activities, which in turn is subject to, among other things, future operating performance as well as general economic, financial, competitive, legislative, regulatory, and other conditions, some of which may be beyond our control.

We believe that cash flows from operations, along with our contractually committed borrowings and other borrowing capability, will continue to be sufficient to fund anticipated capital spending requirements and our operations for the foreseeable future.

1 unchanged sentence

We believe the lending institutions participating in our credit arrangements are financially stable and do not currently foresee adverse impacts to financial institutions supporting our capital requirements.

Three Months Ended December 31,

Six Months Ended March 31,

Net cash provided by operating activities

Net cash (used in) investing activities

Net cash provided by (used in) financing activities

Net cash (used in) provided by financing activities

Effect of exchange rate changes on cash and cash equivalents

2 unchanged sentences

Cash and cash equivalents at end of period

Net cash flows provided by operating activities for the first three months of fiscal year 2025 was $34,516, compared to $46,789 for the same period of fiscal year 2024.

The decrease in net cash provided by operating activities in the first three months of fiscal year 2025 as compared to the first three months of the prior fiscal year is primarily attributable to the timing of certain cash payments for accounts payable, partially offset by timing of cash received from customers as well as increases in working capital.

Net cash flows used in investing activities for the first three months of fiscal year 2025 was $32,100, compared to $41,776 for the same period of fiscal year 2024.

The decrease in cash flows used in investing activities in the first three months of fiscal year 2025 as compared to the first three months of the prior fiscal year is primarily due to decreased payments for property, plant, and equipment.

Net cash flows provided by financing activities for the first three months of fiscal year 2025 was $19,386, compared to net cash flows used in financing activities of $8,091 for the same period of fiscal year 2024.

The increase in net cash flows provided by financing activities in the first three months of fiscal year 2025 as compared to the first three months of the prior fiscal year is primarily attributable to the change in net debt borrowings as compared to payments partially offset by an increase in repurchases of common stock.

During the first three months of fiscal year 2025, we had net debt borrowings in the amount of $40,764, compared to net debt payments of $10,149 in the first three months of fiscal year 2024.

During the first three months of fiscal year 2025, we repurchased $35,473 of our common stock, whereas in the first three months of fiscal year 2024, we did not repurchase any common stock.

Net cash flows provided by operating activities for the first half of fiscal year 2025 was $112,341, compared to $144,118 for the same period of fiscal year 2024.

The decrease in net cash flows provided by operating activities in the first half of fiscal year 2025 as compared to the first half of the prior fiscal year was primarily attributable to an increase in working capital.

Net cash flows used in investing activities for the first half of fiscal year 2025 was $4,138, compared to $49,641 for the same period of fiscal year 2024.

The decrease in net cash flows used in investing activities in the first half of fiscal year 2025 as compared to the first half of the prior fiscal year was primarily due to proceeds received from certain business divestitures as part of our product rationalization efforts, as well as decreased payments for property, plant, and equipment.

Net cash flows used in financing activities for the first half of fiscal year 2025 was $17,602, compared to net cash flows provided by financing activities of $80,588 for the same period of fiscal year 2024.

The change to net cash flows used in financing activities for the first half of fiscal year 2025 from net cash flows provided by financing activities for the first half of the prior fiscal year was primarily attributable to repurchases of common stock as well as a decrease in net debt borrowings.

During the first half of fiscal year 2025, we repurchased $79,493 of our common stock, whereas in the first half of fiscal year 2024, we did not repurchase any common stock.

During the first half of fiscal year 2025, we had net debt borrowings in the amount of $43,627, compared to net debt borrowings of $65,828 in the first half of fiscal year 2024.

GAAP Financial Measures

Adjusted net earnings, adjusted earnings per share, adjusted effective tax rate, EBIT, adjusted EBIT, EBITDA, adjusted EBITDA, and free cash flow are financial measures not prepared and presented in accordance with U.S.

Adjusted net earnings, adjusted earnings per share, adjusted income tax expense, adjusted effective tax rate, EBIT, adjusted EBIT, EBITDA, adjusted EBITDA, and free cash flow are financial measures not prepared and presented in accordance with U.S.

However, we believe these non-U.S.

2 unchanged sentences

GAAP financial measures

Adjusted net earnings is defined by the Company as net earnings excluding, as applicable, (i) a non-recurring gain related to a previous acquisition, (ii) costs related to business development activities, and (iii) product rationalization.

product rationalization adjustment pertains to the divestiture of certain product lines.

The Company believes that these excluded items are short‐term in nature, not directly related to the ongoing operations of the business, and therefore, the exclusion of them illustrates more clearly how the underlying business of Woodward is performing.

Adjusted net earnings is defined by the Company as net earnings excluding, as applicable, (i) product rationalization, (ii) a non-recurring gain related to a previous acquisition, (iii) costs related to business development activities, and (iv) certain non-restructuring separation costs.

The product rationalization adjustment pertains to the divestiture of certain product lines.

The Company believes that these excluded items are short‐term in nature, not directly related to the ongoing operations of the business, and therefore, their exclusion illustrates more clearly how the underlying business of Woodward is performing.

Management uses adjusted net earnings to evaluate the Company’s performance excluding these infrequent or unusual period expenses that are not necessarily indicative of the Company’s operating performance for the period.

Management defines adjusted earnings per share as adjusted net earnings, as defined above, divided by the weighted‐average number of diluted shares of common stock outstanding for the period.

Adjusted income tax expense is defined by the Company as income tax expense excluding, as applicable, (i) a non-recurring gain related to a previous acquisition, (ii) costs related to business development activities, and (iii) product rationalization.

Adjusted income tax expense is defined by the Company as income tax expense excluding, as applicable, (i) product rationalization, (ii) a non-recurring gain

related to a previous acquisition, (iii) costs related to business development activities, and (iv) certain non-restructuring separation costs.

The product rationalization adjustment pertains to the divestiture of certain product lines.

Management uses adjusted net earnings, adjusted earnings per share, and the adjusted effective tax rate when comparing operating performance to other periods.

Management uses adjusted net earnings, adjusted earnings per share, adjusted effective tax rate, and adjusted income tax expense when comparing operating performance to other periods.

The reconciliation of net earnings and earnings per share to adjusted net earnings and adjusted earnings per share, respectively, is shown in the tables below:

Three Months Ended December 31,

Three Months Ended March 31,

Earnings Per Share

3 unchanged sentences

Product rationalization 1

Certain non-restructuring separation costs 2

Business development activities 2

Non-recurring gain related to a previous acquisition 1

Tax effect of Non-U.S.

3 unchanged sentences

(1) Presented in the line item "Other (income) expense, net" in Woodward's Condensed Consolidated Statement of Earnings.

(2) Presented in item "Selling, general and administrative" expenses in Woodward's Condensed Consolidated Statement of Earnings.

(2) Presented in the line item "Selling, general and administrative expenses" in Woodward's Condensed Consolidated Statement of Earnings.

Six Months Ended March 31,

Earnings Per Share

Earnings per share (U.S.

GAAP adjustments, net of tax:

Product rationalization 1

Non-recurring gain related to a previous acquisition 1

Business development activities 2

Certain non-restructuring separation costs 2

Tax effect of Non-U.S.

GAAP net earnings adjustments

Total non-U.S.

GAAP adjustments

Adjusted earnings per share (Non-U.S.

(1) Presented in the line item "Other (income) expense, net" in Woodward's Condensed Consolidated Statement of Earnings.

(2) Presented in the line item "Selling, general and administrative expenses" in Woodward's Condensed Consolidated Statement of Earnings.

The reconciliation of income tax expense to adjusted income tax expense and the adjusted effective tax rate respectively, is shown in the tables below:

Three Months Ended December 31,

Three Months Ended March 31,

Six Months Ended March 31,

Income tax expense (U.S.

9 unchanged sentences

Adjusted EBIT and adjusted EBITDA represent further non-U.S.

GAAP adjustments to EBIT and EBITDA, in each case adjusted to exclude, as applicable, (i) a non-recurring gain related to a previous acquisition, (ii) costs related to business development activities, and (iii) product rationalization.

GAAP adjustments to EBIT and EBITDA, in each case adjusted to exclude, as applicable, (i) product rationalization, (ii) a non-recurring gain related to a previous acquisition, (iii) costs related to business development activities, and (iv) certain non-restructuring separation costs.

The product rationalization adjustment pertains to the divestiture of certain product lines.

1 unchanged sentence

EBIT and adjusted EBIT reconciled to net earnings were as follows:

Three Months Ended December 31,

Three Months Ended March 31,

Six Months Ended March 31,

Net earnings (U.S.

5 unchanged sentences

Product rationalization 1

Business development activities 2

Non-recurring gain related to a previous acquisition 1

Business development activities 2

Certain non-recurring separation costs 2

Total non-U.S.

2 unchanged sentences

(1) Presented in the line item "Other (income) expense, net" in Woodward's Condensed Consolidated Statement of Earnings.

(2) Presented in item "Selling, general and administrative" expenses in Woodward's Condensed Consolidated Statement of Earnings.

(2) Presented in the line item "Selling, general and administrative expenses" in Woodward's Condensed Consolidated Statement of Earnings.

EBITDA and adjusted EBITDA reconciled to net earnings were as follows:

Three Months Ended December 31,

Three Months Ended March 31,

Six Months Ended March 31,

Net earnings (U.S.

7 unchanged sentences

Product rationalization 1

Business development activities 2

Non-recurring gain related to a previous acquisition 1

Business development activities 2

Certain non-recurring separation costs 2

Total non-U.S.

2 unchanged sentences

(1) Presented in the line item "Other (income) expense, net" in Woodward's Condensed Consolidated Statement of Earnings.

(2) Presented in item "Selling, general and administrative" expenses in Woodward's Condensed Consolidated Statement of Earnings.

(2) Presented in the line item "Selling, general and administrative expenses" in Woodward's Condensed Consolidated Statement of Earnings.

The use 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.

As adjusted net earnings, adjusted net earnings per share, adjusted effective tax rate, EBIT, adjusted EBIT, EBITDA, and adjusted EBITDA exclude certain financial information compared with net earnings, the most directly comparable U.S.

As adjusted net earnings, adjusted net earnings per share, adjusted income tax expense, adjusted effective tax rate, EBIT, adjusted EBIT, EBITDA, and adjusted EBITDA exclude certain financial information compared with net earnings, the most directly comparable U.S.

GAAP financial measure, users of this financial information should consider the information that is excluded.

Our calculations of adjusted net earnings, adjusted net earnings per share, adjusted effective tax rate, EBIT, adjusted EBIT, EBITDA, and adjusted EBITDA may differ from similarly titled measures used by other companies, limiting their usefulness as comparative measures.

Our calculations of adjusted net earnings, adjusted net earnings per share, adjusted income tax expense, adjusted effective tax rate, EBIT, adjusted EBIT, EBITDA, and adjusted EBITDA may differ from similarly titled measures used by other companies, limiting their usefulness as comparative measures.

Cash flow‐based non‐U.S.

1 unchanged sentence

Management uses free cash flow, which is defined by the Company as net cash flows provided by operating activities less payments for property, plant, and equipment, in reviewing the financial performance of and cash generation by Woodward’s various business groups and evaluating cash levels.

We believe free cash flow is a useful measure for investors because it portrays our ability to grow organically and generate cash from our businesses for purposes such as paying interest on our indebtedness, repaying maturing debt, funding business acquisitions, purchasing our common stock, paying dividends, and investing in additional research and development.

We believe free cash flow is a useful measure for investors because it portrays our ability to grow organically and generate cash from our businesses for purposes such as paying interest on our indebtedness, repaying maturing debt, funding business acquisitions, repurchasing our common stock, paying dividends, and investing in additional research and development.

In addition, securities analysts, investors, and others frequently use free cash flow in their evaluation of companies.

The use of these non‐U.S.

GAAP financial measures is not intended to be considered in isolation of, or as substitutes for, the financial information prepared and presented in accordance with U.S.

The use of this non‐U.S.

GAAP financial measure is not intended to be considered in isolation of, or as substitutes for, the financial information prepared and presented in accordance with U.S.

Free cash flow does not necessarily represent funds available for discretionary use and are not necessarily a measure of our ability to fund our cash needs.

1 unchanged sentence

Free cash flow reconciled to net cash provided by operating activities were as follows:

Three Months Ended December 31,

Six Months Ended March 31,

Net cash provided by operating activities (U.S.

13 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis