WOODWARD, INC. Forward Looking Statements
This Quarterly Report on Form 10-Q, including "Management's Discussion and Analysis of Financial Condition and Results of Operations," contains forward-looking statements regarding future events and our future results within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact are statements that are deemed forward-looking statements. These statements are based on current expectations, estimates, forecasts, and projections about the industries in which we operate and the beliefs and assumptions of management. Words such as "anticipate," "believe," "estimate," "seek," "goal," "expect," "forecast," "intend," "continue," "outlook," "plan," "project," "target," "strive," "can," "could," "may," "should," "will," "would," variations of such words, and similar expressions are intended to identify such forward-looking statements. In addition, any statements that refer to projections of our future financial performance, our anticipated growth and trends in our businesses, and other characteristics of future events or circumstances are forward-looking statements. Forward-looking statements may include, among others, statements relating to:
• the impacts on our business relating to the global COVID-19 pandemic,
including the impacts thereof on our industries, to supply and demand, and
measures taken by governments and private industry in response;
• future sales, earnings, cash flow, uses of cash, and other measures of
financial performance;
• trends in our business and the markets in which we operate, including
expectations in those markets in future periods;
• our expected expenses in future periods and trends in such expenses over
time;
• descriptions of our plans and expectations for future operations;
• our expectations with regard to the status of the Boeing 737 MAX aircraft,
the related impact on our original equipment manufacturer and initial
provision sales, and the aircraft's return to service;
• plans and expectations relating to the performance of our joint venture with
General Electric Company;
• the effect of economic trends or growth;
• the expected levels of activity in particular industries or markets and the
effects of changes in those levels;
• the scope, nature, or impact of acquisition activity and integration of such
acquisition into our business;
• the research, development, production, and support of new products and
services;
• restructuring and alignment costs and savings;
• our plans, objectives, expectations and intentions with respect to business
opportunities that may be available to us;
• our liquidity, including our ability to meet capital spending requirements
and operations;
• future repurchases of common stock;
• future levels of indebtedness and capital spending;
• the stability of financial institutions, including those lending to us;
• pension and other postretirement plan assumptions and future contributions;
and
• our tax rate and other effects of changes in applicable tax laws.
We undertake no obligation to revise or update any forward-looking statements for any reason, except as required by applicable law.
Unless we have indicated otherwise or the context otherwise requires, references in this Form 10-Q to "Woodward," "the Company," "we," "us," and "our" refer toWoodward, Inc. and its consolidated subsidiaries.
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.
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--------------------------------------------------------------------------------OVERVIEW COVID-19 Pandemic InMarch 2020 , theWorld Health Organization declared COVID-19 to be a global pandemic. The pandemic has led to significant volatility in financial, commodities (including oil and gas) and other markets and industries (including the aviation industry) and has negatively affected our business and results of operations. We reacted quickly to navigate the uncertain market environment, increase our focus on operational excellence, and prioritize diligent cash management. Although we continue to see recovery across most of our end markets, our financial performance during the first half of fiscal year 2022 was adversely affected by ongoing industry-wide COVID-19 related disruptions, including supply chain constraints, labor shortages, and some customer-initiated shipment delays, and net inflationary impacts in the current market environment. We are unable to predict the extent to which the pandemic and related impacts will continue to adversely affect our business, including our operational performance, results of operations, financial position, and the achievement of our strategic objectives. Nonetheless, we believe the current industry-wide COVID-19 related disruptions will improve, and that our end markets will continue to recover during the remainder of the fiscal year. We will continue to actively monitor the situation and may take further actions to alter our business operations if we determine such actions are in the best interests of our shareholders, employees, customers, communities, business partners, and suppliers, or as required by federal, state, or local authorities. It is not clear what the potential effects of any such alterations or modifications may have on our business in future periods, including the effects on our customers, employees, and prospects, or on our financial results.
The Russia-Ukraine Conflict
InFebruary 2022 , in response to the military conflict betweenRussia andUkraine ,the United States , otherNorth Atlantic Treaty Organization ("NATO") members, as well as other non-members, announced targeted economic sanctions onRussia and Russian enterprises. The continuation of the conflict may trigger additional economic and other sanctions enacted bythe United States , otherNATO member states, and other countries. Our sales toRussia during each of the first six months of fiscal years 2022 and 2021 were less than 1% of our total sales. The impact of any additional bans, sanction programs, and boycotts is uncertain at the current time due to the fluid nature of the military conflict as it is unfolding. The potential impacts could include supply chain and logistics disruptions, volatility in foreign exchange rates and interest rates, inflationary pressures on raw materials and energy, heightened cybersecurity threats and other restrictions.
Departure of Directors or Certain Officers
On
In connection withMr. Gendron's retirement, Mr.Charles ("Chip") Blankenship , Jr. has been appointed as Chief Executive Officer and President of the Company effectiveMay 9, 2022 .Mr. Blankenship has also been appointed to the Board and as Chairman effectiveMay 9, 2022 , and he will serve in the class of directorswho have been elected to hold office until Woodward's 2023 annual meeting of stockholders (to be held in or aboutJanuary 2024 ) and until his successor has been duly elected and qualified. At the Board's request,Mr. Gendron has committed to remain a director, officer and employee of the Company throughJuly 11, 2022 in order to facilitate an effective transition, while allowing the executive management team to maintain its focus on executing the Company's strategic priorities. 28 --------------------------------------------------------------------------------
Operational Highlights
Quarter and Year to Date Highlights
Three-Months Ended Six-Months Ended
March 31, March 31,
2022 2021 2022 2021
Net Sales :
Aerospace segment $ 372,757 $ 364,706 $ 709,192 $ 686,373
Industrial segment 214,082 216,615 419,233 432,567
Total consolidated net sales $ 586,839 $ 581,321 Earnings:
Aerospace segment$ 59,809 $ 69,008 $ 110,892 $ 115,474 Segment earnings as a percent of segment net sales 16.0 % 18.9 % 15.6 % 16.8 % Industrial segment$ 17,234 $ 27,871 $ 40,927 $ 60,759 Segment earnings as a percent of segment net sales 8.1 % 12.9 % 9.8 % 14.0 % Consolidated net earnings$ 47,906 $ 68,313 $ 78,211 $ 109,883 Adjusted net earnings$ 46,610 $ 68,313
Effective tax rate 11.4 % 13.0 % 14.8 % 12.8 % Adjusted effective tax rate 11.0 % 13.0 % 15.5 % 12.8 % Consolidated diluted earnings per share$ 0.74 $ 1.04 $ 1.21 $ 1.68 Consolidated adjusted diluted earnings per share$ 0.72 $ 1.04
Earnings before interest and taxes ("EBIT")
$ 60,065 $ 86,453 $ 113,458 $ 142,448 Earnings before interest, taxes, depreciation, and amortization ("EBITDA")$ 92,403 $ 118,932 $ 168,535 $ 208,004 Adjusted EBITDA$ 90,675 $ 118,932 $ 174,789 $ 208,004 Adjusted net earnings, adjusted earnings per share, adjusted effective tax rate, EBIT, adjusted EBIT, EBITDA, and adjusted EBITDA are non-U.S. GAAP financial measures. A description of these measures as well as a reconciliation of these non-U.S. GAAP financial measures to the closestU.S. GAAP financial measures 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.
Liquidity Highlights
Net cash provided by operating activities for the first half of fiscal year 2022 was$50,108 , compared to$218,997 for the first half of fiscal year 2021. The decrease in net cash provided by operating activities in the first half of fiscal year 2022 compared to the first half of the prior fiscal year is primarily attributable to increases in working capital (excluding cash) to support the growth we anticipate in the second half of this fiscal year. For the first half of fiscal year 2022, free cash flow, which we define as net cash flow from operating activities less payments for property, plant and equipment, was$25,958 , compared to$205,684 for the first half of fiscal year 2021. Adjusted free cash flow, which we define as free cash flow, plus the payments for costs related to business development activities and restructuring activities, was$27,233 . No adjustments were made to free cash flow for the first half of fiscal year 2021. The decrease in free cash flow for the first half of fiscal year 2022 as compared to the same period of the prior fiscal year was primarily due to increases in working capital (excluding cash) to support the growth we anticipate in the second half of this fiscal year, including the timing of cash payments to suppliers, and higher payments for property, plant and equipment. Free cash flow and adjusted free cash flow are non-U.S. GAAP financial measures. A description of these measures as well as a reconciliation of these non-U.S. GAAP financial measures to the closestU.S. GAAP financial measures 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
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--------------------------------------------------------------------------------RESULTS OF OPERATIONS
The following table sets forth condensed consolidated statements of earnings data as a percentage of net sales for each period indicated:
Three-Months Ended Six-Months Ended
March 31, % of Net March 31, % of Net March 31, % of Net March 31, % of Net
2022 Sales 2021 Sales 2022 Sales 2021 Sales
Net sales $ 586,839 100 % $ 581,321 100 % $ 1,128,425 100 % $ 1,118,940 100 %
Costs and expenses:
Cost of goods sold 453,425 77.3 % 434,243 74.7 % 872,576 77.3 % 835,883 74.7 %
Selling, general, and
administrative expenses 44,124 7.5 % 44,329 7.6 % 106,430 9.4 % 100,440 9.0 %
Research and development
costs 32,384 5.5 % 27,627 4.8 % 57,776 5.1 % 59,623 5.3 %
Interest expense 8,197 1.4 % 8,249 1.4 % 16,503 1.5 % 17,155 1.5 %
Interest income (500 ) (0.1 )% (283 ) (0.1 )% (1,141 ) (0.1 )% (778 ) (0.1 )% Other (income) expense, net
(4,887 ) (0.8 )% (11,331 ) (1.9 )% (15,561 ) (1.4 )% (19,454 ) (1.7 )% Total costs and expenses 532,743
90.8 % 502,834 86.5 % 1,036,583 91.9 % 992,869 88.7 %
Earnings before income
taxes 54,096 9.2 % 78,487 13.5 % 91,842 8.1 % 126,071 11.3 %
Income tax expense 6,190 1.1 % 10,174 1.8 % 13,631 1.2 % 16,188 1.4 %
Net earnings $ 47,906 8.2 % $ 68,313 11.8 % $ 78,211 6.9 % $ 109,883 9.8 %
Other select financial data:
March 31, September 30,
2022 2021
Working capital $ 962,344 $ 1,098,466
Total debt 728,706 734,850
Total stockholders' equity 2,051,879 2,214,781
Net Sales
Consolidated net sales for the second quarter of fiscal year 2022 increased by
$5,518 , or 1.0%, compared to the same period of fiscal year 2021. Consolidated
net sales for the first half of fiscal year 2022 increased by $9,485 , or 1.0%
compared to the same period of fiscal year 2021.
Details of the changes in consolidated net sales are as follows:
Three-Month Six-Month
Period Period
Consolidated net sales for the period ended
$ 1,118,940 Aerospace volume (5,038 ) 7,192 Industrial volume 4,533 (3,675 ) Noncash consideration 654 (898 ) Effects of changes in price and sales mix 13,973
19,552
Effects of changes in foreign currency rates (8,604 ) (12,686 ) Consolidated net sales for the period ended March 31, 2022$ 586,839
The increase in consolidated net sales for the second quarter of fiscal year 2022 as compared to the same period of the prior fiscal year is primarily due to an increase in prices and a favorable product mix. The increase for the first half of fiscal year 2022 as compared to the same period of the prior fiscal year is primarily attributable to an increase in aerospace sales volume as well as price increases and a favorable product mix. In the Aerospace segment, the increases in net sales for the second quarter of fiscal year 2022 and first half of fiscal year 2022 as compared to the same periods of the prior fiscal year is primarily attributable to a significant increase in commercial OEM and aftermarket sales driven by higher OEM production rates, continued recovery in passenger traffic and increasing aircraft utilization, partially offset by lower defense OEM sales primarily driven by lower sales of guided weapons. As of the second quarter of fiscal year 2022, Aerospace segment net sales were negatively impacted by approximately$60,000 due to ongoing industry-wide COVID-19 related disruptions, including supply chain constraints, labor shortages, and some customer-initiated shipment delays. 30 -------------------------------------------------------------------------------- In the Industrial segment, the decreases in net sales for the second quarter of fiscal year 2022 and first half of fiscal year 2022 as compared to the same periods of the prior fiscal year were primarily attributable to weakness in natural gas engines inChina and unfavorable foreign currency impacts, partially offset by higher marine sales driven by increased utilization of the in-service fleet. As of the second quarter of fiscal year 2022, Industrial segment net sales were negatively impacted by approximately$40,000 due to ongoing industry-wide COVID-19 related disruptions, including supply chain constraints and labor shortages. Costs and Expenses Cost of goods sold increased by$19,182 to$453,425 , or 77.3% of net sales, for the second quarter of fiscal year 2022, from$434,243 , or 74.7% of net sales, for the second quarter of fiscal year 2021. Cost of goods sold increased by$36,693 to$872,576 , or 77.3% of net sales, for the first half of fiscal year 2022, from$835,883 , or 74.7% of net sales, for the first half of fiscal year 2021. The increase in cost of goods sold as a percentage of net sales in the second quarter and first half of fiscal year 2022 compared to the same periods of the prior fiscal year was primarily due to increased Aerospace commercial OEM sales volume, which traditionally have lower margins than other Aerospace segment sales, and higher manufacturing costs related to support this fiscal year's anticipated growth as well as increases in manufacturing related costs associated with COVID-19 disruptions and inefficiencies related to hiring and training. Gross margin (as measured by net sales less cost of goods sold, divided by net sales) was 22.7% the second quarter and first half of fiscal year 2022, compared to 25.3% for the second quarter and first half of fiscal year 2021. The decrease in gross margin for the second quarter and first half of fiscal year 2022 as compared to the same period of the prior fiscal year is primarily attributable to increased Aerospace commercial OEM sales volume, which traditionally have lower margins than other Aerospace segment sales, as well as increases in manufacturing related costs associated with COVID-19 disruptions and inefficiencies related to hiring and training. Selling, general and administrative expenses decreased by$205 , or 0.5%, to$44,124 for the second quarter of fiscal year 2022, compared to$44,329 for the second quarter of fiscal year 2021. Selling, general, and administrative expenses as a percentage of net sales decreased to 7.5% for the second quarter of fiscal year 2022, compared to 7.6% for the second quarter of fiscal year 2021. During the second quarter of fiscal year 2022, we reversed a portion of a certain expense pertaining to a non-recurring matter unrelated to the ongoing operations of the business. Without this partial reversal of a certain expense, selling, general, and administrative expenses would have increased by$1,523 , or 3.4%, for the second quarter of fiscal year 2022 as compared to the same period of the prior fiscal year. Selling, general, and administrative expenses increased by$5,990 , or 6.0%, to$106,430 for the first half of fiscal year 2022, compared to$100,440 for the first half of fiscal year 2021. Selling, general, and administrative expenses as a percentage of net sales increased to 9.4% for the first half of fiscal year 2022, compared to 9.0% for the first half of fiscal year 2021. The increase in selling, general and administrative expenses, both in dollars and as a percentage of net sales, for the first half of fiscal year 2022 as compared to the same period of the prior fiscal year is primarily due to the incurrence of a certain expense in the first half of fiscal year 2022 in connection with a non-recurring matter unrelated to the ongoing operations of the business, as well as certain business development activities, which in each case did not occur in the prior fiscal year period. Research and development costs increased by$4,757 , or 17.2%, to$32,384 for the second quarter of fiscal year 2022, as compared to$27,627 for the second quarter of fiscal year 2021. As a percentage of net sales, research and development costs increased to 5.5% for the second quarter of fiscal year 2022, as compared to 4.8% for the same period of the prior fiscal year. The increase in research and development costs, both in dollars and as a percentage of net sales, for the second quarter of fiscal year 2022 as compared to the same period of the prior fiscal year is primarily due to variability in the timing of projects and expenses. Research and development costs decreased by$1,847 , or 3.1%, to$57,776 for the first half of fiscal year 2022, as compared to$59,623 for the first half of fiscal year 2021. Research and development costs decreased as a percentage of net sales to 5.1% for the first half of fiscal year 2022, as compared to 5.3% for the first half of fiscal year 2021. The decrease in research and development costs, both in dollars and as a percentage of net sales, for the first half of fiscal year 2022 as compared to the same period of the prior fiscal year is primarily due to variability in the timing of projects and expenses. Our research and development activities extend across almost all of our customer base, and we anticipate ongoing variability in research and development due to the timing of customer business needs on current and future programs. 31 -------------------------------------------------------------------------------- Interest expense decreased by$52 , or 0.6%, to$8,197 for the second quarter of fiscal year 2022, compared to$8,249 for the second quarter of fiscal year 2021. Interest expense as a percentage of net sales was 1.4% for the second quarter of fiscal year 2022, consistent with the prior year period. Interest expense decreased by$652 , or 3.8%, to$16,503 for the first half of fiscal year 2022, compared to$17,155 for first half of fiscal year 2021. Interest expense as a percentage of net sales was 1.5% for the first half of fiscal year 2022, consistent with the prior year period. The decrease in interest expense for the second quarter and first half of fiscal year 2022 as compared to the same periods of the prior year is primarily attributable to reduced long-term debt balances and reduced borrowings from the revolving credit facility. In the first half of fiscal year 2021, we paid the entire balance of two series of private placement notes totaling$100,000 , primarily using cash from operations and proceeds from our revolving credit facility. Other income decreased by$6,444 to$4,887 for the second quarter of fiscal year 2022, compared to$11,331 for the second quarter of fiscal year 2021. Other income decreased by$3,893 to$15,561 for the first half of fiscal year 2022, compared to$19,454 for the first half of fiscal year 2021. The decrease in other income for the second quarter and first half of 2022 as compared to the same period of the prior year is primarily attributable to a loss on investments in our deferred compensation program, whereas a gain on investments were recognized in the prior fiscal year. Income taxes were provided at an effective rate on earnings before income taxes of 11.4% for the second quarter and 14.8% for the first half of fiscal year 2022, and 13.0% for the second quarter and 12.8% for the first half of fiscal year 2021. The decrease in the effective tax rate for the second quarter of fiscal year 2022 compared to the same period of the prior year is primarily attributable to increased stock-based compensation tax benefit as a percent of quarterly pre-tax earnings and a reduction inU.S. tax on international activities. These favorable impacts to the effective tax rate were partially offset by a smaller research and development credit relative to full-year projected earnings. The increase in the effective tax rate for the first half of fiscal year 2022 compared to the same period of the prior year is primarily decreased stock-based compensation tax benefit as a percent of year-to-date pre-tax earnings. Additionally, the effective tax rate increased as a result of a smaller research and development credit and increased state income taxes relative to full-year projected earnings. These unfavorable impacts to the effective tax rate were partially offset by a reduction in theU.S. tax on international activities.
Segment Results
The following table presents sales by segment:
Three-Months Ended March 31, Six-Months Ended March 31,
2022 2021 2022 2021
Net sales:
Aerospace $ 372,757 63.5 % $ 364,706 62.7 % $ 709,192 62.8 % $ 686,373 61.3 %
Industrial 214,082 36.5 % 216,615 37.3 % 419,233 37.2 % 432,567 38.7 %
Consolidated net sales $ 586,839 100 % $ 581,321 100 % $ 1,128,425 100 % $ 1,118,940 100 %
The following table presents earnings by segment and reconciles segment earnings
to consolidated net earnings:
Three-Months Ended March 31, Six-Months Ended March 31,
2022 2021 2022 2021
Aerospace $ 59,809 $ 69,008 $ 110,892 $ 115,474
Industrial 17,234 27,871 40,927 60,759
Nonsegment expenses (15,250 ) (10,426 ) (44,615 ) (33,785 )
Interest expense, net (7,697 ) (7,966 ) (15,362 ) (16,377 )
Consolidated earnings before
income taxes 54,096 78,487 91,842 126,071
Income tax expense (6,190 ) (10,174 ) (13,631 ) (16,188 )
Consolidated net earnings $ 47,906 $ 68,313
The following table presents segment earnings as a percent of segment net sales:
Three-Months Ended March 31, Six-Months Ended March 31,
2022 2021 2022 2021
Aerospace 16.0 % 18.9 % 15.6 % 16.8 %
Industrial 8.1 % 12.9 % 9.8 % 14.0 %
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Aerospace
Aerospace segment net sales increased by$8,051 , or 2.2%, to$372,757 for the second quarter of fiscal year 2022, compared to$364,706 for the second quarter of fiscal year 2021. Aerospace segment net sales increased by$22,819 , or 3.3%, to$709,192 for the first half of fiscal year 2021, compared to$686,373 for the first half of fiscal year 2021. The increase in segment net sales in the second quarter and first half of fiscal year 2022 as compared to the same period of the prior fiscal year is primarily a result of increased commercial OEM and aftermarket sales due to recovering global passenger traffic, increased aircraft production rates, increased fleet utilization, and the return to service of the Boeing 737 MAX aircraft in certain jurisdictions, partially offset by lower defense sales resulting from reduced guided weapons sales. Defense OEM sales decreased in the second quarter and first half of fiscal year 2022 as compared to the same period of the prior fiscal year, primarily driven by softening demand for guided weapons. Our defense aftermarket sales decreased in the second quarter and first half of fiscal year 2022 as compared to the same periods of the prior fiscal year primarily due to COVID-19 related disruptions. However, with the exception of guided weapons, defense demand remained stable at elevated levels.
As of the second quarter fiscal year 2022, Aerospace segment net sales were
negatively impacted by approximately
Aerospace segment earnings decreased by$9,199 , or 13.3%, to$59,809 for the second quarter of fiscal year 2022, compared to$69,008 for the second quarter of fiscal year 2021. Aerospace segment earnings decreased by$4,582 , or 4.0%, to$110,892 for the first half of fiscal year 2022, compared to$115,474 for the first half of fiscal year 2021. The decrease in Aerospace segment earnings for the second quarter and first half of fiscal year 2022 compared to the same period of the prior fiscal year was due to the following: Three-Month Six-Month Period Period
Earnings for the period ended
966 7,717
Price, sales mix and productivity (288 ) (4,597 ) Manufacturing costs related to hiring and training (4,569 ) (4,569 ) Annual variable incentive compensation costs (2,555 ) (2,555 ) Other, net (2,753 )
(578 )
Earnings for the period ended
Aerospace segment earnings as a percentage of segment net sales were 16.0% for the second quarter and 15.6% for the first half of fiscal year 2022, compared to 18.9% for the second quarter and 16.8% for the first half of fiscal year 2021. The decrease in Aerospace segment earnings in the second quarter of fiscal year 2022 as compared to the same period of the prior fiscal year was primarily due to net inflationary impacts, including material and labor cost increases, as well as increases in manufacturing related costs related to COVID-19 disruptions and inefficiencies related to hiring and training. The decrease in Aerospace segment earnings for the first half of fiscal year 2022 as compared to the same period of the prior year was primarily due to net inflationary impacts, including material and production labor cost increases, as well as increases in manufacturing costs related to COVID-19 disruptions and inefficiencies related to hiring and training, partially offset by higher volume.
Industrial
Industrial segment net sales decreased by$2,533 , or 1.2%, to$214,082 for the second quarter of fiscal year 2022, compared to$216,615 for the second quarter of fiscal year 2021. Industrial segment net sales decreased by$13,334 , or 3.1%, to$419,233 for the first half of fiscal year 2022, compared to$432,567 for the first half of fiscal year 2021. Foreign currency exchange rates had an unfavorable impact on segment net sales of$8,265 and$12,402 for the second quarter and first half of fiscal year 2022, respectively, as compared to the same periods of the prior fiscal year. The decrease in Industrial segment net sales in the second quarter and first half of fiscal year 2022 was primarily due to lower sales of natural gas-powered engines inChina and unfavorable foreign currency impacts, partially offset by higher marine sales driven by higher utilization of the in-service fleet.
As of the second quarter of fiscal year 2022, Industrial segment net sales were
negatively impacted by approximately
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Industrial segment earnings decreased by $10,637 , or 38.2%, to $17,234 for the
second quarter of fiscal year 2022, compared to $27,871 for the second quarter
of fiscal year 2021. Segment earnings decreased by $19,832 , or 32.6%, to $40,927
for the first half of fiscal year 2022, compared to $60,759 for the first half
of fiscal year 2021.
The decrease in Industrial segment earnings for the second quarter and first
half of fiscal year 2022 compared to the same periods of the prior fiscal year
was due to the following:
Three-Month Six-Month
Period Period
Earnings for the period ended
2,361 (1,579 )
Price, sales mix and productivity (6,462 ) (11,669 )
Effects of changes in foreign currency rates (1,617 ) (1,876 )
Annual variable incentive compensation costs (1,095 ) (1,095 )
Other, net (3,824 ) (3,613 )
Earnings for the period ended
Industrial segment earnings as a percentage of segment net sales were 8.1% for the second quarter and 9.8% for the first half of fiscal year 2022, compared to 12.9% for the second quarter and 14.0% for the first half of fiscal year 2021. The decrease in Industrial segment earnings in the second quarter was primarily due to net inflationary impacts, including materials, as well as increases in manufacturing costs related to COVID-19 disruptions and inefficiencies related to hiring and training. The decrease in Industrial segment earnings for the first half of fiscal year 2022 as compared to the same period of the prior year was primarily due to unfavorable product mix, as well as net inflationary impacts.
Nonsegment
Nonsegment expenses increased by$4,824 to$15,250 for the second quarter of fiscal year 2022, compared to$10,426 for the second quarter of fiscal year 2021. Nonsegment expenses increased by$10,830 to$44,615 for the first half of fiscal year 2022, compared to$33,785 for the first half of fiscal year 2021. During the second quarter of fiscal year 2022, we reversed a portion of a certain expense related to a non-recurring matter unrelated to the ongoing operations of the business. The increases in nonsegment expenses in the second quarter and first half of fiscal year 2022 compared to the same periods in the prior year was primarily a result of the timing of certain expenses, the return of annual variable incentive compensation costs, as well as the non-recurring matter unrelated to the ongoing operations of the business and certain business development activities, neither of which occurred in the second quarter or first half of fiscal year 2021.
LIQUIDITY AND CAPITAL RESOURCES
Historically, we have satisfied our working capital needs, as well as capital expenditures, product development and other liquidity requirements associated with our operations, with cash flow provided by operating activities and borrowings under our credit facilities. From time to time, we have also issued debt to supplement our cash needs, repay our other indebtedness, or finance our acquisitions. We continue to expect that cash generated from our operating activities, together with borrowings under our revolving credit facility and other borrowing capacity, will be sufficient to fund our continuing operating needs for the foreseeable future. In addition to our revolving credit facility, we have various foreign credit facilities, some of which are tied to net amounts on deposit at certain foreign financial institutions. These foreign credit facilities are reviewed annually for renewal. We use borrowings under these foreign credit facilities to finance certain local operations on a periodic basis. For further discussion of our revolving credit facility and our other credit facilities, see Note 14, 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. AtMarch 31, 2022 , we had total outstanding debt of$728,706 consisting of various series of unsecured notes due between 2023 and 2033 and obligations under our finance leases. AtMarch 31, 2022 , we had additional borrowing availability of$989,643 under our revolving credit facility, net of outstanding letters of credit, and additional borrowing availability of$27,674 under various foreign credit facilities. AtMarch 31, 2022 , we had no borrowings outstanding under our revolving credit facility. We also had no borrowings outstanding under our revolving credit facility during the second quarter of fiscal year 2022. 34
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To our knowledge, we were in compliance with all our debt covenants as ofMarch 31, 2022 . Additionally, we do not believe the current known impacts of the COVID-19 pandemic will affect our ability to remain in compliance with our debt covenants. 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 of our most recently filed Form 10-K, for more information about our covenants. In addition to utilizing our cash resources to fund the working capital needs of our business, we evaluate additional strategic uses of our funds, including the repurchase of our common stock, payment of dividends, significant capital expenditures, consideration of strategic acquisitions and other potential uses of cash. 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. We do not believe the current known impacts of the COVID-19 pandemic will impact our ability to satisfy our long-term debt obligations. InNovember 2019 , the Board authorized a program for the repurchase of up to$500,000 of Woodward's outstanding shares of common stock on the open market or in privately negotiated transactions over a three-year period that was scheduled to expire inNovember 2022 (the "2019 Authorization"). During the the first half of fiscal year 2022, we repurchased 233 shares of our common stock for$26,742 under the 2019 Authorization. During the first half of fiscal year 2021, we repurchased no shares of our common stock under the 2019 Authorization. InJanuary 2022 , the Board terminated the 2019 Authorization and concurrently authorized a program for the repurchase of up to$800,000 of Woodward's outstanding shares of common stock on the open market or in privately negotiated transactions over a two-year period that will end inJanuary 2024 (the "2022 Authorization"). During the first half of fiscal year 2022, we repurchased 2,047 shares of our common stock for$245,357 under the 2022 Authorization. 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. However, we could be adversely affected if the financial institutions providing our capital requirements refuse to honor their contractual commitments, cease lending, or declare bankruptcy. 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 as a result of the COVID-19 pandemic or otherwise.
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