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

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

For the quarterly period ended ~~December~~March 31, ~~2017~~2024

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

~~☐ 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 000-08408

WOODWARD, INC.

(Exact name of registrant as specified in its charter)


Delaware		36-1984010


~~Commission file number~~ ~~000-08408~~
~~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.)
~~1081 Woodward Way, Fort Collins, Colorado~~		~~80524~~
1081 Woodward Way, Fort Collins, Colorado		80524
(Address of principal executive offices)		(Zip Code)


(970) 482-5811
~~(970) 482-5811~~
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered

Common Stock, par value $0.001455 per share	WWD	NASDAQ Global Select Market

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 ☐

~~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 ☐

~~Yes~~ ☒ No ☐

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

Large ~~accelerated filer~~☒Accelerated ~~filer~~ Filer☒ Accelerated Filer ☐ Non-accelerated ~~filer~~ Filer ☐ Smaller ~~reporting company~~ Reporting Company ☐

Emerging ~~growth company~~ Growth Company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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 ~~January 18, 2018, 61,272,503~~May 2, 2024, 60,919,845 shares of the registrant’s common stock with a par value of $0.001455 per share were outstanding.

TABLE OF CONTENTS


			Page
~~TABLE OF CONTENTS~~
	~~Page~~
PART I – FINANCIAL INFORMATION
Item 1.	Financial Statements	2	1
	Condensed Consolidated Statements of Earnings	2	1
	Condensed Consolidated Statements of Comprehensive Earnings	3	2
	Condensed Consolidated Balance Sheets	4	3
	Condensed Consolidated Statements of Cash Flows	5	4
	Condensed Consolidated Statements of Stockholders’ Equity	6	5
	Notes to Condensed Consolidated Financial Statements		7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		27
	Forward Looking Statements		27
	Overview	29	28
	Results of Operations	30	29
	Liquidity and Capital Resources	34	33
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	37	38
Item 4.	Controls and Procedures		38
PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	38	39
Item 1A.	Risk Factors	38	39
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		39
Item 6.5.	~~Exhibits~~Other Information	39	40
Item 6.	~~Signatures~~Exhibits		40
	Signatures		41

PART I – FINANCIAL INFORMATION

Item 1.~~Financial~~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,
	2024			2023			2024			2023
Net sales	$	835,343		$	718,214		$	1,622,073		$	1,336,833
Costs and expenses:
Cost of goods sold		600,954			559,149			1,183,335			1,051,812
Selling, general and administrative expenses		81,447			75,578			155,958			138,765
Research and development costs		36,465			37,777			67,259			66,411
Restructuring charges		—			5,172			—			5,172
Interest expense		11,530			12,845			22,966			23,987
Interest income		(1,293	)		(508	)		(2,766	)		(874	)
Other (income) expense, net		(14,384	)		(12,040	)		(35,023	)		(20,430	)
Total costs and expenses		714,719			677,973			1,391,729			1,264,843
Earnings before income taxes		120,624			40,241			230,344			71,990
Income tax expense		23,068			4,730			42,744			6,873
Net earnings	$	97,556		$	35,511		$	187,600		$	65,117

Earnings per share:
Basic earnings per share	$	1.61		$	0.59		$	3.12		$	1.09
Diluted earnings per share	$	1.56		$	0.58		$	3.02		$	1.07

Weighted Average Common Shares Outstanding:
Basic		60,427			59,807			60,223			59,736
Diluted		62,365			61,227			62,106			61,083

Three-Months Ended

December 31,

2017

2016

Net sales
$
470,148

$
442,894
Costs and expenses:

    Cost of goods sold

346,784

329,148
    Selling, general and administrative expenses

46,276

38,300
    Research and development costs

34,786

26,540
    Interest expense

6,750

6,840
    Interest income

(363)

(405)
    Other (income) expense, net (Note 16)

(1,572)

(4,588)
Total costs and expenses

432,661

395,835
Earnings before income taxes

37,487

47,059
Income tax expense

19,227

511
Net earnings
$
18,260

$
46,548

Earnings per share (Note 3):

Basic earnings per share
$
0.30

$
0.76
Diluted earnings per share
$
0.29

$
0.73

Weighted Average Common Shares Outstanding (Note 3):

Basic

61,246

61,559
Diluted

63,709

63,671
Cash dividends per share paid to Woodward common stockholders
$
0.125

$
0.110

See accompanying Notes to Condensed Consolidated Financial Statements

WOODWARD, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS

(In thousands)

(Unaudited)


	Three Months Ended						Six Months Ended
	March 31,						March 31,
	2024			2023			2024			2023
Net earnings	$	97,556		$	35,511		$	187,600		$	65,117

Other comprehensive earnings:
Foreign currency translation adjustments		(11,759	)		8,495			12,082			38,722
Net gain (loss) on foreign currency transactions designated as hedges of net investments in foreign subsidiaries		978			(807	)		(888	)		(4,432	)
Taxes on changes in foreign currency translation adjustments		108			928			(179	)		2,272
Foreign currency translation and transactions adjustments, net of tax		(10,673	)		8,616			11,015			36,562

Unrealized gain (loss) on fair value adjustment of derivative instruments		7,349			(2,096	)		(11,161	)		(34,684	)
Reclassification of net realized (gain) loss on derivatives to earnings		(8,875	)		7,620			9,024			45,806
Taxes on changes in derivative transactions		414			(221	)		414			(334	)
Derivative adjustments, net of tax		(1,112	)		5,303			(1,723	)		10,788

Amortization of pension and other postretirement plan:
Net prior service cost		180			181			360			360
Net (gain)		(254	)		(204	)		(504	)		(403	)
Foreign currency exchange rate changes on pension and other postretirement benefit plan liabilities		(243	)		70			79			511
Taxes on changes in pension and other postretirement benefit plan liability adjustments, net of foreign currency exchange rate changes		85			48			43			127
Pension and other postretirement benefit plan adjustments, net of tax		(232	)		95			(22	)		595
Total comprehensive earnings	$	85,539		$	49,525		$	196,870		$	113,062

Three-Months Ended

December 31,

2017

2016

Net earnings
$
18,260

$
46,548

Other comprehensive earnings:

Foreign currency translation adjustments

5,103

(18,635)
Net (loss) gain on foreign currency transactions designated as hedges of net
investments in foreign subsidiaries (Note 6)

(743)

3,830
Taxes on changes in foreign currency translation adjustments

187

(306)
Foreign currency translation and transactions adjustments, net of tax

4,547

(15,111)

Reclassification of net realized gains on derivatives to earnings (Note 6)

(18)

(18)
Taxes on changes in derivative transactions

7

7
Derivative adjustments, net of tax

(11)

(11)

Curtailment of postretirement benefit plan arising during the period

59

-
Amortization of pension and other postretirement plan:

Net prior service cost

137

56
Net loss

246

641
Foreign currency exchange rate changes on pension and other postretirement
benefit plan liabilities

(99)

1,255
Taxes on changes in pension and other postretirement benefit plan liability
adjustments, net of foreign currency exchange rate changes

(132)

(693)
Pension and other postretirement benefit plan adjustments, net of tax

211

1,259
Total comprehensive earnings
$
23,007

$
32,685

See accompanying Notes to Condensed Consolidated Financial Statements

WOODWARD, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except per share amounts)

(Unaudited)


	March 31,			September 30,
	2024			2023
ASSETS
Current assets:
Cash and cash equivalents	$	316,932		$	137,447
Accounts receivable, less allowance for uncollectible amounts of $7,126 and $5,847, respectively		831,777			749,859
Inventories		580,377			517,843
Income taxes receivable		32,816			14,120
Other current assets		50,072			50,183
Total current assets		1,811,974			1,469,452
Property, plant and equipment, net		921,355			913,094
Goodwill		796,706			791,468
Intangible assets, net		443,414			452,363
Deferred income tax assets		58,911			58,550
Other assets		333,899			325,276
Total assets	$	4,366,259		$	4,010,203
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt	$	141,300		$	—
Current portion of long-term debt		699			75,817
Accounts payable		258,670			234,328
Income taxes payable		54,242			44,435
Accrued liabilities		236,944			262,616
Total current liabilities		691,855			617,196
Long-term debt, less current portion		649,039			645,709
Deferred income tax liabilities		135,022			132,819
Other liabilities		560,930			543,490
Total liabilities		2,036,846			1,939,214
Commitments and contingencies (Note 21)
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		374,278			327,941
Accumulated other comprehensive losses		(61,401	)		(70,671	)
Deferred compensation		3,032			2,776
Retained earnings		3,067,847			2,908,574
		3,383,862			3,168,726
Treasury stock at cost, 12,185 shares and 13,070 shares, respectively		(1,051,417	)		(1,094,961	)
Treasury stock held for deferred compensation, at cost, 53 shares and 55 shares, respectively		(3,032	)		(2,776	)
Total stockholders' equity		2,329,413			2,070,989
Total liabilities and stockholders' equity	$	4,366,259		$	4,010,203

December 31,

September 30,

2017

2017
ASSETS

Current assets:

Cash and cash equivalents
$
85,779

$
87,552
Accounts receivable, less allowance for uncollectible amounts of $3,793 and $3,776, respectively

331,438

402,182
Inventories

503,523

473,505
Income taxes receivable

18,842

19,376
Other current assets

39,660

38,574
Total current assets

979,242

1,021,189
Property, plant and equipment, net

930,158

922,043
Goodwill

556,759

556,545
Intangible assets, net

165,633

171,882
Deferred income tax assets

20,473

19,950
Other assets

72,909

65,500
Total assets
$
2,725,174

$
2,757,109
LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Short-term borrowings
$
66,300

$
32,600
Accounts payable

182,144

232,788
Income taxes payable

5,891

6,774
Accrued liabilities

98,785

155,072
Total current liabilities

353,120

427,234
Long-term debt, less current portion

583,339

580,286
Deferred income tax liabilities

21,901

33,408
Other liabilities

366,268

344,798
Total liabilities

1,324,628

1,385,726
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

176,473

163,836
Accumulated other comprehensive losses

(48,439)

(53,186)
Deferred compensation

8,173

7,135
Retained earnings

1,830,872

1,820,268

1,967,185

1,938,159
Treasury stock at cost, 11,706 shares and 11,739 shares, respectively

(558,466)

(559,641)
Treasury stock held for deferred compensation, at cost, 200 shares and 186 shares, respectively

(8,173)

(7,135)
Total stockholders' equity

1,400,546

1,371,383
Total liabilities and stockholders' equity
$
2,725,174

$
2,757,109

~~See accompanying Notes to Condensed Consolidated Financial Statements.~~

~~WOODWARD, INC.~~

~~CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS~~

~~(In thousands)~~

~~(Unaudited)~~

Three-Months Ended December 31,

2017

2016
Cash flows from operating activities:

Net earnings
$
18,260

$
46,548
Adjustments to reconcile net earnings to net cash provided by operating activities:

Depreciation and amortization

21,070

18,913��
Gain due to curtailment of postretirement plan

(330)

-
Net gain on sales of assets

(58)

(3,699)
Stock-based compensation

12,423

1,261
Deferred income taxes

(11,681)

4,777
Gain on derivatives reclassified from accumulated comprehensive earnings into earnings

(18)

(18)
Changes in operating assets and liabilities:

Accounts receivable

72,714

87,615
Inventories

(28,796)

(37,632)
Accounts payable and accrued liabilities

(104,150)

(54,563)
Income taxes

25,597

(5,731)
Retirement benefit obligations

(673)

(897)
Other

(6,891)

(4,223)
Net cash (used in) provided by operating activities

(2,533)

52,351
Cash flows from investing activities:

Payments for purchase of property, plant, and equipment

(28,450)

(21,058)
Proceeds from sale of assets

132

3,682
Proceeds from sales of short-term investments

-

758
Payments for purchases of short-term investments

(791)

-
Net cash used in investing activities

(29,109)

(16,618)
Cash flows from financing activities:

Cash dividends paid

(7,656)

(6,779)
Proceeds from sales of treasury stock

1,389

4,843
Payments for repurchases of common stock

-

(24,004)
Borrowings on revolving lines of credit and short-term borrowings

458,950

316,650
Payments on revolving lines of credit and short-term borrowings

(425,250)

(312,800)
Payments of long-term debt and capital lease obligations

(106)

(102)
Net cash provided by (used in) financing activities

27,327

(22,192)
Effect of exchange rate changes on cash and cash equivalents

2,542

(13,746)
Net change in cash and cash equivalents

(1,773)

(205)
Cash and cash equivalents at beginning of year

87,552

81,090
Cash and cash equivalents at end of period
$
85,779

$
80,885

See accompanying Notes to Condensed Consolidated Financial Statements

WOODWARD, INC.

CONDENSED CONSOLIDATED ~~STATEMENTS~~STATEMENTS OF ~~STOCKHOLDERS’ EQUITY~~CASH FLOWS

(In thousands)

(Unaudited)


	Six Months Ended March 31,
	2024			2023
Cash flows from operating activities:
Net earnings	$	187,600		$	65,117
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization		58,050			59,257
Net (gain) loss on sales of assets and businesses		(872	)		890
Stock-based compensation		19,903			15,538
Deferred income taxes		43			545
Changes in operating assets and liabilities:
Trade accounts receivable		(40,619	)		(26,467	)
Unbilled receivables (contract assets)		(39,289	)		(18,015	)
Costs to fulfill a contract		(7,572	)		(4,193	)
Inventories		(59,841	)		(42,408	)
Accounts payable and accrued liabilities		12,131			5,426
Contract liabilities		26,748			9,769
Income taxes		(14,210	)		(34,886	)
Retirement benefit obligations		(1,240	)		(615	)
Other		3,286			10,192
Net cash provided by operating activities		144,118			40,150

Cash flows from investing activities:
Payments for purchase of property, plant, and equipment		(56,301	)		(44,046	)
Proceeds from sale of assets		51			199
Proceeds from business divestiture		600			—
Business acquisition, net of cash acquired		—			878
Payments for short-term investments		(3,723	)		—
Proceeds from sales of short-term investments		9,732			7,733
Net cash (used in) investing activities		(49,641	)		(35,236	)

Cash flows from financing activities:
Cash dividends paid		(28,327	)		(24,537	)
Proceeds from sales of treasury stock		43,087			14,067
Payments for repurchases of common stock		—			(26,369	)
Borrowings on revolving lines of credit and short-term borrowings		1,539,100			1,031,800
Payments on revolving lines of credit and short-term borrowings		(1,397,800	)		(968,100	)
Payments of debt financing costs		—			(2,236	)
Payments of long-term debt and finance lease obligations		(75,472	)		(288	)
Net cash provided by financing activities		80,588			24,337
Effect of exchange rate changes on cash and cash equivalents		4,420			(7,668	)
Net change in cash and cash equivalents		179,485			21,583
Cash and cash equivalents at beginning of year		137,447			107,844
Cash and cash equivalents at end of period	$	316,932		$	129,427

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, 2016

-

72,960

(11,374)

(157)

$
106

$
141,570

$
(25,971)

$
179

$
(39,913)

$
(65,705)

$
5,089

$
1,649,506

$
(512,882)

$
(5,089)

$
1,212,595
Net earnings

-

-

-

-

-

-

-

-

-

-

-

46,548

-

-

46,548
Other comprehensive income (loss), net of tax

-

-

-

-

-

-

(15,111)

(11)

1,259

(13,863)

-

-

-

-

(13,863)
Cash dividends paid ($0.110 per share)

-

-

-

-

-

-

-

-

-

-

-

(6,779)

-

-

(6,779)
Purchases of treasury stock

-

-

(350)

-

-

-

-

-

-

-

-

-

(24,004)

-

(24,004)
Sales of treasury stock

-

-

139

-

-

(907)

-

-

-

-

-

-

5,750

-

4,843
Common shares issued from treasury stock to settle employee liabilities

-

-

26

(26)

-

740

-

-

-

-

1,767

-

1,027

(1,767)

1,767
Stock-based compensation

-

-

-

-

-

1,261

-

-

-

-

-

-

-

-

1,261
Purchases and transfers of stock by/to deferred compensation plan

-

-

-

-

-

-

-

-

-

-

37

-

-

(37)

-
Distribution of stock from deferred compensation plan

-

-

-

-

-

-

-

-

-

-

(4)

-

-

4

-
Balances as of December 31, 2016

-

72,960

(11,559)

(183)

$
106

$
142,664

$
(41,082)

$
168

$
(38,654)

$
(79,568)

$
6,889

$
1,689,275

$
(530,109)

$
(6,889)

$
1,222,368

Balances as of October 1, 2017

-

72,960

(11,739)

(186)

$
106

$
163,836

$
(27,280)

$
135

$
(26,041)

$
(53,186)

$
7,135

$
1,820,268

$
(559,641)

$
(7,135)

$
1,371,383
Net earnings

-

-

-

-

-

-

-

-

-

-

-

18,260

-

-

18,260
Other comprehensive income (loss), net of tax

-

-

-

-

-

-

4,547

(11)

211

4,747

-

-

-

-

4,747
Cash dividends paid ($0.125 per share)

-

-

-

-

-

-

-

-

-

-

-

(7,656)

-

-

(7,656)
Sales of treasury stock

-

-

33

-

-

214

-

-

-

-

-

-

1,175

-

1,389
Stock-based compensation

-

-

-

-

-

12,423

-

-

-

-

-

-

-

-

12,423
Purchases and transfers of stock by/to deferred compensation plan

-

-

-

(14)

-

-

-

-

-

-

1,041

-

-

(1,041)

-
Distribution of stock from deferred compensation plan

-

-

-

-

-

-

-

-

-

-

(3)

-

-

3

-
Balances as of December 31, 2017

-

72,960

(11,706)

(200)

$
106

$
176,473

$
(22,733)

$
124

$
(25,830)

$
(48,439)

$
8,173

$
1,830,872

$
(558,466)

$
(8,173)

$
1,400,546

See accompanying Notes to Condensed Consolidated Financial Statements

WOODWARD, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands)

(Unaudited)


	Stockholders' equity
					Accumulated other comprehensive (loss) earnings
	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 January 1, 2023	$	106	$	305,100	$	(58,548	)	$	(730	)	$	646		$	(58,632	)	$	5,975		$	2,745,484		$	(1,052,623	)	$	(5,975	)	$	1,939,435
Net earnings		—		—		—			—			—			—			—			35,511			—			—			35,511
Other comprehensive earnings (loss), net of tax		—		—		8,616			5,303			95			14,014			—			—			—			—			14,014
Cash dividends paid ($0.22 per share)		—		—		—			—			—			—			—			(13,182	)		—			—			(13,182	)
Sales of treasury stock		—		1,259		—			—			—			—			—			—			11,488			—			12,747
Common shares issued for benefit plans		—		10,860		—			—			—			—			—			—			8,447			—			19,307
Stock-based compensation		—		4,222		—			—			—			—			—			—			—			—			4,222
Purchases of stock by deferred compensation		—		—		—			—			—			—			42			—			—			(42	)		—
Distribution of stock from deferred compensation		—		—		—			—			—			—			(2,698	)		—			—			2,698			—
Balances as of March 31, 2023	$	106	$	321,441	$	(49,932	)	$	4,573		$	741		$	(44,618	)	$	3,319		$	2,767,813		$	(1,032,688	)	$	(3,319	)	$	2,012,054

Balances as of January 1, 2024	$	106	$	337,038	$	(45,705	)	$	(10,330	)	$	6,651		$	(49,384	)	$	3,049		$	2,985,409		$	(1,083,107	)	$	(3,049	)		2,190,062
Net earnings		—		—		—			—			—			—			—			97,556			—			—			97,556
Other comprehensive earnings (loss), net of tax		—		—		(10,673	)		(1,112	)		(232	)		(12,017	)		—			—			—			—			(12,017	)
Cash dividends paid ($0.25 per share)		—		—		—			—			—			—			—			(15,118	)		—			—			(15,118	)
Sales of treasury stock		—		8,308		—			—			—			—			—			—			23,769			—			32,077
Common shares issued for benefit plans		—		13,966		—			—			—			—			—			—			7,921			—			21,887
Stock-based compensation		—		14,966		—			—			—			—			—			—			—			—			14,966
Purchases of stock by deferred compensation		—		—		—			—			—			—			47			—			—			(47	)		—
Distribution of stock from deferred compensation		—		—		—			—			—			—			(64	)		—			—			64			—
Balances as of March 31, 2024	$	106	$	374,278	$	(56,378	)	$	(11,442	)	$	6,419		$	(61,401	)	$	3,032		$	3,067,847		$	(1,051,417	)	$	(3,032	)	$	2,329,413

See accompanying Notes to Condensed Consolidated Financial Statements

WOODWARD, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands)

(Unaudited)


	Stockholders' equity
					Accumulated other comprehensive (loss) earnings
	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 September 30, 2022	$	106	$	293,540	$	(86,494	)	$	(6,215	)	$	146		$	(92,563	)	$	6,781		$	2,727,233		$	(1,027,194	)	$	(6,781	)	$	1,901,122
Net earnings		—		—		—			—			—			—			—			65,117			—			—			65,117
Other comprehensive earnings (loss), net of tax		—		—		36,562			10,788			595			47,945			—			—			—			—			47,945
Cash dividends paid ($0.41 per share)		—		—		—			—			—			—			—			(24,537	)		—			—			(24,537	)
Sales of treasury stock		—		1,420		—			—			—			—			—			—			12,351			—			13,771
Common shares issued for benefit plans		—		10,943		—			—			—			—			—			—			8,524			—			19,467
Purchase of treasury stock		—		—		—			—			—			—			—			—			(26,369	)		—			(26,369	)
Stock-based compensation		—		15,538		—			—			—			—			—			—			—			—			15,538
Purchases of stock by deferred compensation		—		—		—			—			—			—			112			—			—			(112	)		—
Distribution of stock from deferred compensation		—		—		—			—			—			—			(3,574	)		—			—			3,574			—
Balances as of March 31, 2023	$	106	$	321,441	$	(49,932	)	$	4,573		$	741		$	(44,618	)	$	3,319		$	2,767,813		$	(1,032,688	)	$	(3,319	)	$	2,012,054

Balances as of September 30, 2023	$	106	$	327,941	$	(67,393	)	$	(9,719	)	$	6,441		$	(70,671	)	$	2,776		$	2,908,574		$	(1,094,961	)	$	(2,776	)	$	2,070,989
Net earnings		—		—		—			—			—			—			—			187,600			—			—			187,600
Other comprehensive earnings (loss), net of tax		—		—		11,015			(1,723	)		(22	)		9,270			—			—			—			—			9,270
Cash dividends paid ($0.47 per share)		—		—		—			—			—			—			—			(28,327	)		—			—			(28,327	)
Sales of treasury stock		—		12,468		—			—			—			—			—			—			35,623			—			48,091
Common shares issued for benefit plans		—		13,966		—			—			—			—			—			—			7,921			—			21,887
Stock-based compensation		—		19,903		—			—			—			—			—			—			—			—			19,903
Purchases of stock by deferred compensation		—		—		—			—			—			—			79			—			—			(79	)		—
Distribution of stock from deferred compensation		—		—		—			—			—			—			177			—			—			(177	)		—
Balances as of March 31, 2024	$	106	$	374,278	$	(56,378	)	$	(11,442	)	$	6,419		$	(61,401	)	$	3,032		$	3,067,847		$	(1,051,417	)	$	(3,032	)	$	2,329,413

See accompanying Notes to Condensed Consolidated Financial Statements

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 ~~December~~March 31, ~~2017~~2024 and for the three and six months ended ~~December~~March 31, ~~2017~~2024 and ~~December 31, 2016,~~2023, included herein, have not been audited by an independent registered public accounting firm. These unaudited 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 ~~December~~March 31, ~~2017,~~2024, and the statements of earnings, comprehensive earnings, cash flows, and changes in stockholders’ equity for the periods presented herein. The results of operations for the three and six months ended ~~December~~March 31, ~~2017~~2024 and 2023 are not necessarily indicative of the operating results to be expected for other interim periods or for the full fiscal year. Dollar and share amounts contained in these unaudited Condensed Consolidated Financial Statements are in thousands, except per share ~~amounts.~~amounts, unless otherwise noted.

The unaudited 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~~ Accordingly, 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 amounts 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 unaudited Condensed Consolidated Financial Statements included herein. Significant estimates in these unaudited Condensed Consolidated Financial Statements include allowances for ~~uncollectible amounts,~~credit losses; net realizable value of ~~inventories,~~inventories; variable consideration including customer rebates earned and payable and early payment discounts; warranty ~~reserves,~~reserves; useful lives of property and identifiable intangible ~~assets,~~assets; the evaluation of impairments of property, intangible assets, and goodwill; the provision for income tax and related valuation ~~reserves,~~reserves; the valuation of derivative instruments; assumptions used in the determination of the funded status and annual expense of pension and postretirement employee benefit ~~plans,~~plans; the valuation of stock compensation instruments granted to employees, ~~and~~ board members and any other eligible recipients; estimates of incremental borrowing rates used when estimating the present value of future lease payments; assumptions used when including renewal options or non-exercise of termination options in lease terms; estimates of total lifetime sales used in the recognition of revenue of deferred material rights and balance sheet classification of the related contract liability; estimates of total sales contract costs when recognizing revenue under the cost-to-cost method; and contingencies. Actual results could vary from Woodward’s estimates.

~~As disclosed in Note 1,~~ ~~Operations and summary of significant accounting policies~~ in the Notes to the Consolidated Financial Statements in Part II, Item 8 of Woodward’s most recent Annual Report on Form 10-K, the amortization of intangible assets has been reclassified from a separate line in the condensed consolidated statement of earnings for the three-months ended December 31, 2016 to an allocated expense/cost component of cost of goods sold and selling, general and administrative expenses based on the nature of the intangible asset that is being amortized. The reclassification of these amounts conforms to the current period presentation.

Note 2. New accounting standards

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 ~~August 2017,~~November 2023, the FASB issued ASU ~~2017-12, “Derivatives and Hedging (Topic 815): Targeted Improvements~~2023-07, "Improvements to ~~Accounting for Hedging Activities.”~~Reportable Segment Disclosures." The purpose of ASU ~~2017-12~~2023-07 is ~~intended~~ to more closely align the financial statement reporting of hedging relationships with the economic results of an entity’s risk management activities and to make certain targeted improvements to simplify the application of hedge accounting guidance in current U.S. GAAP. ASU 2017-12 is also intended to increase standardization of financial statementprovide enhanced disclosures including requiring a tabular disclosure of the income statement effects of fair value and cash flow hedges. Woodward early adopted the new guidance in the first quarter of fiscal year 2018. The application of the new guidance did not have any impact on Woodward’s current hedging arrangements or on the disclosures related to such arrangements.

In March 2017, the FASB issued ASU 2017-07, “Compensation – Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost.” ASU 2017-07 requires that the service cost component of net periodic benefit costs from defined benefit and other postretirement benefit plans be included

in the same statement of earnings captions as other compensation costs arising from services rendered by the covered employees during the period. The other components of net benefit cost will be presented in the statement of earnings separately from service costs. ASU 2017-07 is effective for fiscal years beginning after December 31, 2017 (fiscal year 2019 for Woodward). Following adoption, only service costs will be eligible for capitalization into manufactured inventories, which should reduce diversity in practice.about significant segment expenses. The amendments ofin ASU 2017-07 should be applied retrospectively for the presentation of the service cost component and the other components of net periodic benefit costs from defined benefit and other postretirement benefit plans in the statement of earnings and prospectively, on and after the effective date, for the capitalization of the service cost component into manufactured inventories. Early adoption is permitted as of the beginning of Woodward’s fiscal year 2018. Woodward will adopt the new guidance in fiscal year 2019, and expects changes to earnings before income taxes to be insignificant in the year of adoption.

In October 2016, the FASB issued ASU 2016-16, “Accounting for Income Taxes: Intra-Entity Asset Transfers of Assets Other than Inventory.” ASU 2016-16 eliminates the current U.S. GAAP exception deferring the tax effects of intercompany asset transfers (other than inventory) until the transferred asset is sold to a third party or otherwise recovered through use. After adoption of ASU 2016-16, Woodward will recognize the tax consequences of intercompany asset transfers in the buyer’s and seller’s tax jurisdictions when the transfer occurs, even though the pre-tax effects of these transactions2023-07 are ~~eliminated in consolidation. ASU 2016-16 is~~ effective for fiscal years beginning after December 15, ~~2017~~2023 (fiscal year ~~2019~~2025 for Woodward), ~~including~~and interim periods within ~~the~~fiscal years beginning after December 15, 2024 (fiscal year ~~of adoption. Early~~2026 for Woodward), with early adoption is permitted, as of the beginning of Woodward’s fiscal year 2018. Woodward will adopt the new guidance in fiscal year 2019. Modified retrospective adoption is required with any cumulative-effect adjustment recorded to retained earnings as of the beginning of the period of adoption. Woodward has not determined in which period it will adopt the new guidance. Woodward currently anticipates the adoption of ASU 2016-16 will result in balance sheet reclassifications, but based on Woodward’s current transactional activity, such adjustmentsand are ~~not expected~~ to be ~~significant.~~applied on a retrospective basis to all periods presented. Woodward is currently assessing the impact on its segment reporting disclosures.

In ~~June 2016,~~December 2023, the FASB issued ASU ~~2016-13, “Measurement~~2023-09, "Improvements to Income Tax Disclosures." The purpose of ~~Credit Losses on Financial Instruments.”~~ ASU ~~2016-13 adds a current expected credit loss (“CECL”) impairment model~~2023-09 is to ~~U.S. GAAP that is based on expected losses rather than incurred losses. Modified retrospective adoption is required with any cumulative-effect adjustment recorded~~provide enhanced disclosures surrounding income taxes by requiring consistent categories and greater disaggregation of information in the rate reconciliation, the disaggregation of income taxes paid by jurisdiction, as well as several other changes to ~~retained earnings as of~~ the ~~beginning of the period of adoption.~~income tax disclosure. The amendments in ASU ~~2016-13 is~~2023-09 are effective for fiscal years beginning after December 15, ~~2019~~2024 (fiscal year ~~2021~~2026 for Woodward), ~~including interim periods within the year of adoption. Early~~with early adoption is permitted, for fiscal years beginning after December 15, 2018 (fiscal year 2020 for Woodward), including interim periods within those fiscal years. Woodward has not determined in which period it will adopt the new guidance but does not expect the application of the CECL impairment model to have a significant impact on Woodward’s allowance for uncollectible amounts for accounts receivable and ~~notes receivable from municipalities.~~

~~In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842).” The purpose of ASU 2016-02~~ is to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. In addition, ASU 2016-02 modifies the definition of a lease to clarify that an arrangement contains a lease when such arrangement conveys the right to control the use of an identified asset. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018 (fiscal year 2020 for Woodward), including interim periods within the year of adoption. In transition, Woodward will be required to recognize and measure leases beginning in the earliest period presented using a modified retrospective approach; therefore, Woodward anticipates restating its Consolidated Financial Statements for the two fiscal years prior to the year of adoption. However, during December 2017, the FASB proposed amending ASU 2016-02 such that restatement of fiscal years 2018 and 2019 would not be required upon adoption. Although early adoption is permitted, Woodward expects to adopt the new guidance in fiscal year 2020 and is currently assessing the impact this guidance may have on its Consolidated Financial Statements, including which of its existing lease arrangements will be impacted by the new guidance and whether other arrangements not currently classified as leases may become subject to the guidance of ASU 2016-02. Rent expense for all operating leases in fiscal year 2017, none of which was recognized on the balance sheet, was $8,302. As of September 30, 2017, future minimum rental payments required under operating leases, none of which were recognized on the balance sheet, were $23,215.

In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers” and has subsequently issued several supplemental and/or clarifying ASUs (collectively “ASC 606”). ASC 606 prescribes a single common revenue standard that replaces most existing U.S. GAAP revenue recognition guidance. ASC 606 outlines a five-step model, under which Woodward will recognize revenue as performance obligations within a customer contract are satisfied. ASC 606 is intended to provide more consistent interpretation and application of the principles outlined in the standard across filers in multiple industries and within the same industries compared to current practices, which should improve comparability. Adoption of ASC 606 is required for annual reporting periods beginning after December 15, 2017 (fiscal year 2019 for Woodward), including interim periods within the reporting period. Woodward has determined it will elect to adopt using the cumulative effect transition methodapplied prospectively with the ~~cumulative effect~~option of ~~initial adoption recognized at the date of initial~~retrospective application.

Further, under the cumulative effect transition method, Woodward will disclose the impact of changes to financial statement line items as a result of applying ASC 606 (rather than previous U.S. GAAP) and include an explanation of the reasons for significant changes.

Woodward is currently assessing the impact ~~that~~on its income tax disclosures.

Note 3. Revenue

The amount of revenue recognized as point in time or over time follows:


	Three Months Ended March 31, 2024						Three Months Ended March 31, 2023
	Aerospace		Industrial		Consolidated		Aerospace		Industrial		Consolidated
Point in time	$	229,171	$	203,232	$	432,403	$	188,248	$	177,660	$	365,908
Over time		268,341		134,599		402,940		248,769		103,537		352,306
Total net sales	$	497,512	$	337,831	$	835,343	$	437,017	$	281,197	$	718,214


	Six Months Ended March 31, 2024						Six Months Ended March 31, 2023
	Aerospace		Industrial		Consolidated		Aerospace		Industrial		Consolidated
Point in time	$	417,674	$	389,862	$	807,536	$	358,088	$	317,499	$	675,587
Over time		540,594		273,943		814,537		474,614		186,632		661,246
Total net sales	$	958,268	$	663,805	$	1,622,073	$	832,702	$	504,131	$	1,336,833

Accounts Receivable

Accounts receivable consisted of the ~~future adoption~~following:


	March 31, 2024			September 30, 2023
Billed receivables
Trade accounts receivable	$	478,207		$	434,287
Other (Chinese financial institutions)		51,920			50,940
Total billed receivables		530,127			485,227
Current unbilled receivables (contract assets)		308,776			270,479
Total accounts receivable		838,903			755,706
Less: Allowance for uncollectible amounts		(7,126	)		(5,847	)
Total accounts receivable, net	$	831,777		$	749,859

As of ~~ASC 606 may have~~March 31, 2024, “Other assets” on ~~its~~the Condensed Consolidated Balance Sheets includes $8,953 of unbilled receivables not expected to be invoiced and collected within a period of twelve months, compared to $7,332 as of September 30, 2023.

Accounts receivable in Woodward’s Condensed Consolidated Financial Statements represent the net amount expected to be collected, and an allowance for uncollectible amounts related to credit losses is established based on expected losses. Expected losses are estimated by ~~analyzing its~~reviewing specific customer accounts, taking into consideration accounts receivable aging, credit risk of the customers, and historical payment history, as well as current ~~portfolio~~and forecasted economic conditions and other relevant factors.

The allowance for uncollectible amounts and change in expected credit losses for trade accounts receivable and unbilled receivables (contract assets) consisted of ~~customer contracts, including a review~~the following:


	Three Months Ended March 31,						Six Months Ended March 31,
	2024			2023			2024			2023
Balance, beginning	$	5,777		$	4,203		$	5,847		$	3,922
Changes in estimates		1,398			6,042			1,696			6,470
Write-offs		(16	)		(247	)		(475	)		(330	)
Other1		(33	)		(49	)		58			(113	)
Balance, ending	$	7,126		$	9,949		$	7,126		$	9,949

(1)

Includes effects of ~~historical accounting policies~~foreign exchange rate changes during the period.

Contract liabilities

Contract liabilities consisted of the following:


	March 31, 2024				September 30, 2023
	Current		Noncurrent		Current		Noncurrent
Deferred revenue from material rights from GE joint venture formation	$	6,364	$	235,837	$	6,147	$	233,997
Deferred revenue from advanced invoicing and/or prepayments from customers		17,414		4,333		6,868		2,196
Liability related to customer supplied inventory		17,941		—		14,543		—
Deferred revenue from material rights related to engineering and development funding		7,102		186,640		6,190		178,464
Net contract liabilities	$	48,821	$	426,810	$	33,748	$	414,657

Woodward recognized revenue of $8,232 in the three months and ~~practices to identify potential differences~~$21,265 in ~~applying~~ the ~~guidance~~six months ended March 31, 2024 from contract liabilities balances recorded as of ~~ASC 606. Woodward is also performing a comprehensive review of its current processes and systems to determine and implement changes required to support the adoption of ASC 606 on~~ October 1, ~~2018,~~2023, compared to $5,299 in the ~~first day~~three months and $14,184 in the six months ended March 31, 2023 from contract liabilities balances recorded as of ~~Woodward’s fiscal year 2019. As part~~October 1, 2022.

Remaining performance obligations

Remaining performance obligations related to the aggregate amount of ~~this review process, Woodward is implementing new software solutions~~the total contract transaction price of firm orders for which the performance obligation has not yet been recognized in revenue as of March 31, 2024 was $2,376,029, compared to ~~support revenue reporting after adoption.~~

~~Based on Woodward’s review~~$2,325,533 as of ~~its customer contracts, Woodward has determined that revenue on~~September 30, 2023, the majority of ~~its customer contracts will continue~~which relates to Woodward’s Aerospace segment in both periods. Woodward expects to recognize almost all of these remaining performance obligations within two years after March 31, 2024.

Remaining performance obligations related to material rights that have not yet been recognized in revenue as of March 31, 2024 was $519,887 of which $8,471 is expected to be recognized ~~at a point~~ in ~~time, generally upon shipment~~the remainder of ~~products, consistent with Woodward’s current revenue recognition model. Upon adoption of ASC 606, however, Woodward also believes some of its revenues from sales of products~~fiscal year 2024, $15,986 is expected to be recognized in fiscal year 2025, and ~~services~~the remaining balance is expected to ~~customers will~~ be recognized over time, rather than at a point in time, due primarily to the terms of certain customer contracts. As a result of recognizing some revenue over time, various balance sheet line items will be impacted. As such, Woodward believes the adoption of ASC 606 will have an impact on both the timing of revenue recognition and various line items within the Consolidated Balance Sheet.

Woodward generally expenses costs as incurred for the engineering and development of new products. Customer funding received for such engineering and development efforts is currently recognized as revenue when earned, with the corresponding costs recognized as cost of sales. ASC 606 requires customer funding of product engineering and development to be deferred and recognized as revenue as the related products are delivered to the customer. ASC 606 also requires product engineering and development costs to be capitalized as contract fulfillment costs, to the extent recoverable from the deferred customer funding, and subsequently amortized as the related products are delivered to the customer. Therefore, under ASC 606,thereafter. Woodward expects to ~~record both contract assets and contract liabilities~~recognize revenue from performance obligations related to ~~such funded engineering~~material rights over the life of the underlying programs, which may be as long as forty years.

Disaggregation of Revenue

Woodward designs, produces, and ~~development efforts, which are expected to become material over time. Recognized revenues~~services reliable, efficient, low-emission, and ~~research~~high-performance energy control products for diverse applications in markets throughout the world. Woodward reports financial results for each of its Aerospace and development costs are both expected to decrease in the year of adoption and for at least several years thereafter, due to the recognition of these contract assets and liabilities. However, recognition of these contract assets and liabilities are expected to have an immaterial impact on pre-tax earnings in future periods.

~~In addition, ASC 606 will require more comprehensive disclosures about~~Industrial reportable segments. Woodward further disaggregates its revenue ~~streams and~~from contracts with customers ~~including significant judgments required.~~by primary market as Woodward ~~is currently implementing changes~~believes this best depicts how the nature, amount, timing, and uncertainty of its revenue and cash flows are affected by economic factors.

Revenue by primary market for the Aerospace reportable segment was as follows:


	Three Months Ended March 31,				Six Months Ended March 31,
	2024		2023		2024		2023
Commercial OEM	$	183,517	$	159,271	$	354,871	$	298,146
Commercial aftermarket		163,886		139,445		301,430		266,088
Defense OEM		91,017		87,807		184,442		177,569
Defense aftermarket		59,092		50,494		117,525		90,899
Total Aerospace segment net sales	$	497,512	$	437,017	$	958,268	$	832,702

Revenue by primary market for the Industrial reportable segment was as follows:


	Three Months Ended March 31,				Six Months Ended March 31,
	2024		2023		2024		2023
Power generation	$	106,811	$	94,013	$	204,917	$	175,590
Transportation		173,786		118,777		348,255		207,692
Oil and gas		57,234		68,407		110,633		120,849
Total Industrial segment net sales	$	337,831	$	281,197	$	663,805	$	504,131

During fiscal year 2023, for purposes of how we assess performance, we determined that certain revenue was better aligned with our markets consisting of power generation, transportation, and oil and gas, rather than the reciprocating engines and industrial turbines, as previously reported. For comparability, we have reclassified revenue for the three

months and six months ended March 31, 2023 to ~~its processes for preparing required disclosures and to information systems that support the financial reporting process.~~

~~Woodward is also evaluating implications~~conform to the ~~Company’s system~~new presentation. This reclassification of ~~internal controls, relative to~~ revenue ~~recognition and the related revenue disclosures, which are based~~had no impact on ~~the criteria outlined in the Committee of Sponsoring Organizations of the Treadway Commission’s 2013 Internal Control – Integrated Framework.~~

our consolidated financial results.

9The customers who each account for approximately 10% or more of net sales of each of Woodward’s reportable segments are as follows:


	Three Months Ended March 31, 2024	Three Months Ended March 31, 2023
Aerospace	RTX Corporation, General Electric Company	RTX Corporation, General Electric Company, The Boeing Company
Industrial	Weichai Westport, Rolls-Royce PLC	Rolls-Royce PLC, Caterpillar, Inc.


	Six Months Ended March 31, 2024	Six Months Ended March 31, 2023
Aerospace	General Electric Company, RTX Corporation, The Boeing Company	RTX Corporation, General Electric Company, The Boeing Company
Industrial	Weichai Westport, Rolls-Royce PLC	Rolls-Royce PLC, Caterpillar, Inc., Wartsila

Note 3.4. 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 and restricted stock.

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


	Three Months Ended March 31,				Six Months Ended March 31,
	2024		2023		2024		2023
Numerator:
Net earnings	$	97,556	$	35,511	$	187,600	$	65,117
Denominator:
Basic shares outstanding		60,427		59,807		60,223		59,736
Dilutive effect of stock options, restricted units, and performance units		1,938		1,420		1,883		1,347
Diluted shares outstanding		62,365		61,227		62,106		61,083
Income per common share:
Basic earnings per share	$	1.61	$	0.59	$	3.12	$	1.09
Diluted earnings per share	$	1.56	$	0.58	$	3.02	$	1.07

Three-Months Ended

December 31,

2017

2016
Numerator:

Net earnings

$
18,260

$
46,548
Denominator:

Basic shares outstanding

61,246

61,559
Dilutive effect of stock options and restricted stock

2,463

2,112
Diluted shares outstanding

63,709

63,671
Income per common share:

Basic earnings per share

$
0.30

$
0.76
Diluted earnings per share

$
0.29

$
0.73

The following stock option grants were outstanding ~~during the three-months ended December 31, 2017 and 2016,~~ but were excluded from the computation of diluted earnings per share because their inclusion would have been ~~anti-dilutive.~~anti-dilutive:


	Three Months Ended March 31,				Six Months Ended March 31,
	2024		2023		2024		2023
Options		14		1,560		37		1,592
Weighted-average option price	$	122.38	$	102.01	$	131.03	$	101.95

Three-Months Ended

December 31,

2017

2016
Options

754

-
Weighted-average option price

$
78.75

$
n/a

The weighted-average shares of common stock outstanding for basic and diluted earnings per share included the weighted-average treasury stock shares held for deferred compensation obligations of the following:


	Three Months Ended March 31,				Six Months Ended March 31,
	2024		2023		2024		2023
Weighted-average treasury stock shares held for deferred compensation obligations		54		94		54		109

Three-Months Ended

December 31,

2017

2016
Weighted-average treasury stock shares held for
deferred compensation obligations

193

170

Note 5. Leases

Lessee arrangements

Woodward has entered into operating leases for certain facilities and equipment with terms in excess of one year under agreements that expire at various dates. Some leases require the payment of property taxes, insurance, maintenance costs, or other similar costs in addition to rental payments. Woodward has also entered into finance leases for equipment with terms in excess of one year under agreements that expire at various dates.

Lease-related assets and liabilities were as follows:


	Classification on the Condensed Consolidated Balance Sheets	March 31, 2024		September 30, 2023
Assets:
Operating lease	Other assets	$	23,326	$	24,680
Finance lease	Property, plant, and equipment, net		2,863		3,337
Total lease assets			26,189		28,017

Current liabilities:
Operating lease	Accrued liabilities		4,567		4,594
Finance lease	Current portion of long-term debt		699		817
Noncurrent liabilities:
Operating lease	Other liabilities		19,202		20,685
Finance lease	Long-term debt, less current portion		2,380		2,733
Total lease liabilities		$	26,848	$	28,829

Lease-related expenses were as follows:


	Three Months Ended March 31,				Six Months Ended March 31,
	2024		2023		2024		2023
Operating lease expense	$	1,656	$	1,586	$	3,288	$	3,073
Amortization of finance lease assets		222		156		470		412
Interest on finance lease liabilities		32		40		73		74
Variable lease expense		301		245		529		455
Short-term lease expense		45		51		83		108
Total lease expense	$	2,256	$	2,078	$	4,443	$	4,122

Lease-related supplemental cash flow information was as follows:


	Six Months Ended March 31,
	2024		2023
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases	$	2,660	$	2,621
Operating cash flows for finance leases		73		74
Financing cash flows for finance leases		472		284
Right-of-use assets obtained in exchange for recorded lease obligations:
Operating leases		966		714
Finance leases		—		43

Lessor arrangements

Woodward has assessed its manufacturing contracts and concluded that certain of the contracts for the manufacture of customer products met the criteria to be considered a leasing arrangement (“embedded leases”) with Woodward as the lessor. The specific manufacturing contracts that met the criteria were those that utilized Woodward property, plant, and equipment and which are substantially (more than 90%) dedicated to the manufacturing of the product(s) for a single customer. Woodward has dedicated manufacturing lines with four of its customers representing embedded leases, all of which qualified as operating leases with undefined quantities of future customer purchase commitments.

Although Woodward expects to allocate some portion of future net sales to these customers to embedded lessor arrangements, it cannot provide expected future undiscounted lease payments from property, plant, and equipment leased to customers as of March 31, 2024. If, in the future, customers reduce purchases of related products from Woodward, the Company believes it will derive additional value from the underlying equipment by repurposing its use to support other customer arrangements.

Revenue from contracts with customers that included embedded operating leases, which is included in “Net sales” in the Condensed Consolidated Statements of Earnings, was $1,365 for the three months and $2,729 for the six months ended March 31, 2024, compared to $1,398 for the three months and $2,786 for the six months ended March 31, 2023.

The carrying amount of property, plant, and equipment leased to others through embedded leasing arrangements, included in “Property, plant, and equipment, net” on the Condensed Consolidated Balance Sheets, follows:


	March 31, 2024			September 30, 2023
Property, plant, and equipment	$	46,544		$	45,766
Less accumulated depreciation		(29,981	)		(28,128	)
Property, plant, and equipment, net	$	16,563		$	17,638

Note 4.6. Joint venture

~~On January 4,~~In fiscal year 2016, Woodward and General Electric Company (“GE”), acting through its GE Aviation business unit at the time, consummated the formation of a strategic joint venture between Woodward and GE (the “JV”) to ~~design,~~ develop, manufacture, and ~~source~~support fuel systems for specified existing and all future GE commercial aircraft engines that produce thrust in excess of fifty thousand pounds.

Unamortized deferred revenue from material rights in connection with the JV formation included:


	March 31, 2024		September 30, 2023
Accrued liabilities	$	6,364	$	6,147
Other liabilities		235,837		233,997

Amortization of the deferred revenue (material right) recognized as an increase to sales was $1,502 for the three months and $2,837 for the six months ended March 31, 2024, and $1,203 for the three months and $2,034 for the six months ended March 31, 2023.

As part of the JV formation, ~~Woodward contributed to the JV certain contractual rights and intellectual property applicable to the existing~~ GE commercial aircraft engine programs within the scope of the JV. Woodward had no initial cost basis in the JV because Woodward had no cost basis in the contractual rights and intellectual property contributed to the JV. GE purchased from Woodward a 50% ownership interest in the JV for a $250,000 cash payment to Woodward. In addition, GE will paypays contingent consideration to Woodward consisting of fifteen annual payments of ~~$4,894~~$4,894 per year, which began ~~on January 4,~~in the second quarter of fiscal year 2017, subject to certain claw-back conditions. Woodward ~~records~~received its annual payments ~~received~~of $4,894 during the three-months ended March 31, 2024 and 2023, which were recorded as deferred income and ~~includes them~~included in ~~Net~~“Net cash provided by operating ~~activities under the caption “Other”~~activities” on the Condensed Consolidated ~~Statement~~Statements of Cash Flows. ~~Neither Woodward nor GE contributed any tangible assets to the JV.~~

Woodward determined that the JV formation was not the culmination of an earnings event because Woodward has significant performance obligations to support the future operations of the JV. Therefore, Woodward recorded the $250,000 consideration received from GE, in January of 2016, for its purchase of a 50% equity interest in the JV as deferred income. The $250,000 deferred income will be recognized as an increase to net sales in proportion to revenue realized on sales of applicable fuel systems within the scope of the JV in a particular period as a percentage of total revenue expected to be realized by Woodward over the estimated remaining lives of the underlying commercial aircraft engine programs assigned to the JV. Unamortized deferred income recorded in connection with the JV formation included accrued liabilities of $6,439 as of December 31, 2017 and $6,451 as of September 30, 2017, and other liabilities of $235,855 as of December 31, 2017 and $236,896 as of September 30, 2017. Amortization of the deferred income recognized as an increase to sales was $1,053 for the three-months ended December 31, 2017, and $1,496 for the three-months ended December 31, 2016.

Woodward and GE jointly manage the JV and any significant decisions and/or actions of the JV require the mutual consent of both parties. Neither Woodward nor GE has a controlling financial interest in the JV, but both Woodward and GE do have the ability to significantly influence the operating and financial decisions of the JV. Therefore, Woodward is accounting for its 50% ownership interest in the JV using the equity method of accounting. The JV is a related party to Woodward. Other income ~~includes income of $596 for the three-months ended December 31, 2017, and income of $684 for the three-months ended December 31, 2016~~ related to Woodward’s equity interest in the earnings of the ~~JV.~~JV was as follows:


	Three Months Ended March 31,				Six Months Ended March 31,
	2024		2023		2024		2023
Other income	$	8,701	$	8,468	$	18,856	$	13,041

Cash distributions to Woodward ~~received no cash distributions~~ from the JV, recognized in “Other, net” in “Net cash provided by operating activities” on the ~~three-months ended December 31, 2017 or 2016. Woodward’s net investment in the JV, which is included in other assets, was $6,868~~Condensed Consolidated Statements of Cash Flows, were as ~~of December 31, 2017 and $6,272 as of September 30, 2017.~~ follows:


	Three Months Ended March 31,				Six Months Ended March 31,
	2024		2023		2024		2023
Cash distributions	$	12,000	$	5,500	$	18,500	$	10,000

~~Woodward’s net sales include $12,975 for the three-months ended December 31, 2017 of~~Net sales to the JV ~~compared to $15,302~~were as follows:


	Three Months Ended March 31,				Six Months Ended March 31,
	2024		2023		2024		2023
Net sales1	$	22,080	$	7,320	$	42,352	$	13,797

(1)

Net sales included a reduction of $14,992 for the ~~three-months ended December 31, 2016. Woodward recorded a reduction to sales of $5,408~~three months and $29,531 for the ~~three-months~~six months ended ~~December~~March 31, ~~2017~~2024 related to royalties ~~paid~~owed to the JV by Woodward on sales by Woodward directly to third party aftermarket customers, compared to ~~$5,403~~a reduction to sales of $12,888 for the ~~three-months~~three months and $20,458 for the six months ended ~~December~~March 31, ~~2016.~~ 2023.

The Condensed Consolidated Balance Sheets include “Accounts receivable” ~~of $6,728 at December 31, 2017, and $8,554 at September 30, 2017,~~ related to amounts the JV owed Woodward, ~~and include~~ “Accounts payable” ~~of $3,984 at December 31, 2017, and $6,741 at September 30, 2017,~~ related to amounts Woodward owed the ~~JV.~~JV, and “Other assets” related to Woodward’s net investment in the JV, as follows:


	March 31, 2024		September 30, 2023
Accounts receivable	$	5,279	$	3,666
Accounts payable		7,324		6,276
Other assets		16,384		16,028

Note 5.7. Financial instruments and fair value measurements

Financial assets and liabilities recorded at fair value in the Condensed Consolidated Balance Sheets are categorized based upon a fair value hierarchy established by U.S. GAAP, which prioritizes the inputs used to measure fair value into the following levels:

~~Level 1: Inputs based on quoted market prices in active markets for identical assets or liabilities at the measurement date.~~

Level 2: Quoted prices included in Level 1, such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable and can be corroborated by observable market data.

Level 3: Inputs that reflect management’s best estimates and assumptions of what market participants would use in pricing the asset or liability at the measurement date. The inputs are unobservable in the market and significant to the valuation of the instruments.

The table below presents information about Woodward’s financial assets and liabilities that are measured at fair value on a recurring basis and indicates the fair value hierarchy of the valuation techniques Woodward utilized to determine such fair ~~value. Woodward had no financial liabilities required to be measured at~~value as defined by the U.S. GAAP fair value ~~on a recurring basis as of December 31, 2017 or September 30, 2017.~~hierarchy.



	At December 31, 2017								At September 30, 2017								At March 31, 2024								At September 30, 2023
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Financial assets:
Cash	$	77,411	$	-	$	-	$	77,411	$	79,822	$	-	$	-	$	79,822
Investments in reverse repurchase agreements		847		-		-		847		1		-		-		1
Investments in term deposits with foreign banks		7,521		-		-		7,521		7,729		-		-		7,729
Investments in banks and financial institutions																	$	204,724	$	—	$	—	$	204,724	$	28,560	$	—	$	—	$	28,560
Equity securities		19,133		-		-		19,133		16,600		-		-		16,600		29,902		—		—		29,902		24,913		—		—		24,913
Cross-currency interest rate swaps																		—		—		—		—		—		5,389		—		5,389
Total financial assets	$	104,912	$	-	$	-	$	104,912	$	104,152	$	-	$	-	$	104,152	$	234,626	$	—	$	—	$	234,626	$	53,473	$	5,389	$	—	$	58,862

Financial liabilities:
Cross-currency interest rate swaps																	$	—	$	4,968	$	—	$	4,968	$	—	$	—	$	—	$	—
Total financial liabilities																	$	—	$	4,968	$	—	$	4,968	$	—	$	—	$	—	$	—

Investments in ~~reverse repurchase agreements:~~banks and financial institutions: Woodward ~~sometimes invests excess cash in reverse repurchase agreements. Under the terms of Woodward’s reverse repurchase agreements, Woodward purchases an interest in a pool of securities~~ and is granted a security interest in those securities by the counterparty to the reverse repurchase agreement. At an agreed upon date, generally the next business day, the counterparty repurchases Woodward’s interest in the pool of securities at a price equal to what Woodward paid to the counterparty plus a rate of return determined daily per the terms of the reverse repurchase agreement. Woodward believes that the investments in these reverse repurchase agreements are with creditworthy financial institutions and that the funds invested are highly liquid. The investments in reverse repurchase agreements are reported at fair value, with realized gains from interest income recognized in earnings, and are included in “Cash and cash equivalents.” Since the investments are generally overnight, the carrying value is considered to be equal to the fair value as the amount is deemed to be a cash deposit with no risk of change in value as of the end of each fiscal quarter.

~~Investments in term deposits with foreign banks:~~ ~~Woodward’s foreign~~its subsidiaries sometimes invest excess cash in various highly liquid financial instruments that Woodward believes are with creditworthy financial institutions. Such investments are reported in “Cash and cash equivalents” at fair value, with realized gains from interest income recognized in earnings. The carrying value of Woodward’s investments in term deposits with foreign banks are considered equal to the fair value given the highly liquid nature of the investments.

Equity securities: Woodward holds marketable equity securities, through investments in various mutual funds, related to its deferred compensation program. Based on Woodward’s intentions regarding these instruments, marketable equity securities are classified as trading securities. The trading securities are reported at fair value, with realized gains and losses recognized in “Other (income) expense, ~~net.”~~net” on the Condensed Consolidated Statements of Earnings. The trading securities are included in “Other ~~assets.”~~assets” in the Condensed Consolidated Balance Sheets. The fair values of Woodward’s trading securities are based on the quoted market prices for the net asset value of the various mutual funds.

~~Accounts~~Cross-currency interest rate swaps: Woodward holds cross-currency interest rate swaps, which are accounted for at fair value. The swaps in an asset position are included in “Other current assets” and “Other assets,” and swaps in a liability position are included in “Accrued liabilities” and “Other liabilities” in the Condensed Consolidated Balance Sheets. The fair values of Woodward’s cross-currency interest rate swaps are determined using a market approach that is based on observable inputs other than quoted market prices, including contract terms, interest rates, currency rates, and other market factors.

Cash, trade accounts receivable, accounts payable, and short-term borrowings are not remeasured to fair value, as the carrying cost of each approximates its respective fair value.

The estimated fair values and carrying costs of other financial instruments that are not required to be remeasured at fair value in the Condensed Consolidated Balance Sheets were as follows:



		At December 31, 2017				At September 30, 2017					At March 31, 2024				At September 30, 2023
	Fair Value Hierarchy Level	Estimated Fair Value		Carrying Cost		Estimated Fair Value		Carrying Cost		Fair Value Hierarchy Level	Estimated Fair Value		Carrying Cost		Estimated Fair Value		Carrying Cost
Assets:
Notes receivable from municipalities	2	$	14,771	$	14,217	$	15,848	$	14,507	2	$	7,859	$	7,410	$	7,794	$	7,688
Investments in short-term time deposits	2		9,191		9,219		8,227		8,223	2		88		88		6,095		6,107
Liabilities:
Long-term debt	2	$	(596,136)	$	(585,059)	$	(592,317)	$	(582,080)	2		612,200		650,754		661,507		722,671

In ~~fiscal years 2014 and 2013, Woodward received long-term notes from municipalities within the states of Illinois and Colorado in~~ connection with certain economic incentives related to Woodward’s development of a second campus in the greater-Rockford, Illinois area for its Aerospace segment and Woodward’s development of ~~a new campus at~~ its corporate headquarters in Fort Collins, Colorado, Woodward received long-term notes from municipalities within the states of Illinois and Colorado. The fair value of the long-term notes was estimated based on a model that discounted future principal and interest

payments received at an interest rate available to ~~the Company~~Woodward at the end of the period for similarly rated municipal notes of similar maturity, which is a level 2 input as defined by the U.S. GAAP fair value hierarchy. The interest rates used to estimate the fair value of the long-term notes were ~~2.5%~~2.6% at ~~December~~March 31, ~~2017~~2024 and ~~2.6%~~3.6% at September 30, ~~2017.~~ 2023.

From time to time, certain of Woodward’s foreign subsidiaries will invest excess cash in short-term time deposits with a fixed maturity date of longer than three months but less than one year from the date of the deposit. Woodward believes that the investments are with creditworthy financial institutions. The fair value of the investments in short-term time deposits was estimated based on a model that discounted future principal and interest payments to be received at an interest rate available to the foreign subsidiary entering into the investment for similar short-term time deposits of similar maturity. This was determined to be a level 2 input as defined by the U.S. GAAP fair value hierarchy. The interest rates used to estimate the fair value of the short-term time deposits were ~~5.6%~~5.9% at ~~December~~March 31, ~~2017~~2024 and ~~5.3%~~6.8% at September 30, ~~2017.~~ 2023.

The fair value of long-term debt was estimated based on ~~a model that discounted future principal~~the prices of debt of comparable type and ~~interest payments at interest rates~~maturity available to ~~the Company~~Woodward at the end of the period, ~~for similar debt of the same maturity,~~ which is a level 2 input as defined by the U.S. GAAP fair value hierarchy. The weighted-average interest rates used to estimate the fair value of long-term debt were ~~2.3%~~5.2% at ~~December~~March 31, ~~2017~~2024 and ~~2.4%~~5.9% at September 30, ~~2017.~~2023.

Woodward does not have expected credit losses related to any financial assets that are not required to be remeasured at fair value.

Note 6.8. Derivative instruments and hedging activities

Derivative instruments not designated or qualifying as hedging instruments

In May 2020, Woodward ~~has exposures related to global market risks, including~~entered into a floating-rate cross-currency interest rate swap (the “2020 Floating-Rate Cross-Currency Swap”), with a notional value of $45,000, and five fixed-rate cross-currency interest rate swap agreements (the “2020 Fixed-Rate Cross-Currency Swaps”), with an aggregate notional value of $400,000, which effectively reduced the ~~effect of changes in~~ interest rates on the underlying fixed and floating-rate debt, respectively, under the 2018 Notes (as defined in 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 Woodward’s most recently filed Form 10-K) and Woodward’s then existing revolving credit agreement.

The net interest income of the cross-currency interest rate swaps is recorded as a reduction to “Interest expense” in Woodward’s Condensed Consolidated Statements of Earnings. The 2020 Floating-Rate Cross-Currency Swap expired on May 31, 2023 and, as such, is no longer recorded on the Condensed Consolidated Balance Sheets. As of March 31, 2024, the total notional value of the 2020 Fixed-Rate Cross-Currency Swaps was $400,000. See Note 7, Financial Instruments and fair value measurements for the related fair value of the derivative instruments as of March 31, 2024.

Derivatives instruments in fair value hedging relationships

In May 2020, Woodward entered into a US dollar denominated intercompany loan payable with identical terms and notional value as the 2020 Floating-Rate Cross-Currency Swap, together with a reciprocal intercompany floating-rate cross-currency interest rate swap. The agreements were entered into by Woodward Barbados Euro Financing SRL (“Euro Barbados”), a wholly owned subsidiary of Woodward. The US dollar denominated intercompany loan and reciprocal intercompany floating-rate cross-currency interest rate swap are designated as a fair value hedge under the criteria prescribed in ASC 815. The objective of the derivative instrument is to hedge against the foreign currency exchange ~~rates, changes in certain commodity prices and fluctuations in various producer indices. From time~~risk attributable to ~~time, Woodward enters into derivative instruments for risk management purposes only, including derivatives designated~~the spot remeasurement of the US dollar denominated intercompany loan, as ~~accounting hedges and/or those utilized as economic hedges. Woodward uses~~Euro Barbados maintains a Euro functional currency.

For each floating-rate intercompany cross-currency interest rate swap, only the change in the fair value related ~~derivative instruments~~ to ~~manage its exposure to fluctuations of interest rates. Woodward does not enter into~~the cross-currency basis spread, or ~~issue derivatives for trading or speculative purposes.~~

By using derivative and/or hedging instruments to manage its risk exposure, Woodward is subject, from time to time, to credit risk and market risk on those derivative instruments. Credit risk arises from the potential failure of the counterparty to perform under the termsexcluded component, of the derivative ~~and/or hedging instrument. When~~instrument is recognized in accumulated other comprehensive income (“OCI”). The remaining change in the fair value of athe derivative ~~contract~~instrument is positive, the counterparty owes Woodward, which creates credit risk for Woodward. Woodward mitigates this credit risk by entering into transactions with only counterparties that are believed to be creditworthy. Market risk arises from the potential adverse effects on the value of derivative and/or hedging instruments that result from a changerecognized in ~~interest rates, commodity prices, or~~ foreign currency ~~exchange rates. Woodward minimizes this market risk by establishing~~transaction gain or loss included in “Selling, general and ~~monitoring parameters that limit the types and degree of market risk that may be undertaken.~~

~~Woodward did not enter into any derivatives or hedging transactions during the three-months ended December 31, 2017 or 2016.~~

~~The remaining unrecognized gains and losses~~administrative costs” in Woodward’s Condensed Consolidated ~~Balance Sheets~~Statements of Earnings. The change in the fair value of the derivative instrument in foreign currency transaction gain or loss offsets the change in the spot remeasurement of the intercompany Euro and US dollar denominated loans. Hedge effectiveness is assessed based on the fair value changes of the derivative instrument, after excluding any fair value changes related to the cross-currency basis spread. The initial cost of the cross-currency basis spread is recorded in earnings each period through the swap accrual process. There are no credit-risk-related contingent features associated with derivative instruments that were previously entered into by Woodward, which are classified in accumulated other comprehensive (losses) earnings (“accumulated OCI”), were net gains of $200 as of December 31, 2017 and $218 as of September 30, 2017.

~~The following table discloses~~ the ~~impact of derivative~~intercompany floating-rate cross-currency interest rate swap.

Derivative instruments in cash flow hedging relationships on

In May 2020, Woodward entered into five US dollar intercompany loans payable, with identical terms and notional values of each tranche of the 2020 Fixed-Rate Cross-Currency Swaps, together with reciprocal fixed-rate intercompany cross-currency interest rate swaps. The agreements were entered into by Euro Barbados and are designated as cash flow hedges under the criteria prescribed in ASC 815. The objective of these derivative instruments is to hedge the risk of variability in cash flows attributable to the foreign currency exchange risk of cash flows for future principal and interest payments associated with the US dollar denominated intercompany loans over a thirteen-year period, as Euro Barbados maintains a Euro functional currency.

For each of the fixed-rate intercompany cross-currency interest rate swaps, changes in the fair values of the derivative instruments are recognized in accumulated OCI and reclassified to foreign currency transaction gain or loss included in “Selling, general and administrative costs” in Woodward’s Condensed Consolidated Statements of ~~Earnings, recognized~~Earnings. Reclassifications out of accumulated OCI of the change in ~~interest expense:~~

Three-Months Ended December 31,

2017

2016
Amount of (income) expense recognized in earnings on derivative

$
(18)

$
(18)
Amount of (gain) loss recognized in accumulated OCI on derivative

-

-
Amount of (gain) loss reclassified from accumulated OCI into earnings

(18)

(18)

~~Based~~fair value occur each reporting period based upon changes in the spot rate remeasurement of the Euro and US dollar denominated intercompany loans, including associated interest. Hedge effectiveness is assessed based on the ~~carrying~~fair value changes of the ~~realized but unrecognized gains on terminated~~ derivative instruments ~~designated as cash flow~~and such hedges ~~as of December 31, 2017, Woodward expects~~are deemed to ~~reclassify $72 of~~be highly effective in offsetting exposure to variability in foreign exchange rates. There are no credit-risk-related contingent features associated with these fixed-rate cross-currency interest rate swaps.

Derivatives instruments in net ~~unrecognized gains on terminated derivative instruments from accumulated other comprehensive (losses) earnings to earnings during the next twelve months.~~investment hedging relationships

On September 23, 2016, Woodward and Woodward International Holding B.V., a wholly owned subsidiary of Woodward organized under the laws of The Netherlands (the “BV Subsidiary”), each entered into a note purchase agreement (the “2016 Note Purchase Agreement”) relating to the sale by Woodward and the BV Subsidiary of an aggregate principal amount of ~~€160,000~~€160,000 of senior unsecured notes in a series of private placement transactions. Woodward issued ~~€40,000~~€40,000 aggregate principal amount of Woodward’s Series M Senior Notes due September 23, ~~2026.~~2026 (the “Series M Notes”). Woodward designated the ~~€40,000~~ Series M Notes as a hedge of a foreign currency exposure of Woodward’s net investment in its Euro denominated functional currency subsidiaries. OnRelated to the Series M Notes, ~~a foreign exchange loss of $743 for the three-months ended December 31, 2017 and a foreign exchange gain of $2,814 for the three-months ended December 31, 2016 are~~ included in foreign currency translation adjustments within total comprehensive (losses) ~~earnings.~~

~~In July 2016, Woodward designated an intercompany loan~~earnings is a net foreign exchange gain of ~~160,000 renminbi between two wholly owned subsidiaries as a hedge of~~$978 for the three months and a foreign ~~currency exposure~~exchange loss of $888 for the ~~net investment of the borrower in the lender. Unrealized~~six months ended March 31, 2024, compared to foreign exchange ~~gains on the loan~~losses of ~~$1,016~~$807 for the ~~three-months~~three months and $4,432 for the six months ended ~~December~~March 31, ~~2016~~2023.

Impact of derivative instruments designated as qualifying hedging instruments

The following table discloses the amount of (income) expense recognized in earnings on derivative instruments designated as qualifying hedging instruments:


		Three months ended March 31,					Six months ended March 31,
Derivatives in:	Location	2024			2023		2024		2023
Cross-currency interest rate swap agreement designated as fair value hedges	Selling, general and administrative expenses	$	—		$	36	$	—	$	937
Cross-currency interest rate swap agreements designated as cash flow hedges	Selling, general and administrative expenses		(8,875	)		7,584		9,024		44,869
		$	(8,875	)	$	7,620	$	9,024	$	45,806

The following table discloses the amount of (gain) loss recognized in accumulated OCI on derivative instruments designated as qualifying hedging instruments:


		Three months ended March 31,					Six months ended March 31,
Derivatives in:	Location	2024			2023		2024		2023
Cross-currency interest rate swap agreement designated as fair value hedges	Selling, general and administrative expenses	$	—		$	21	$	—	$	917
Cross-currency interest rate swap agreements designated as cash flow hedges	Selling, general and administrative expenses		(7,349	)		2,075		11,161		33,767
		$	(7,349	)	$	2,096	$	11,161	$	34,684

The following table discloses the amount of (gain) loss reclassified from accumulated OCI into earnings on derivative instruments designated as qualifying hedging instruments:


		Three months ended March 31,					Six months ended March 31,
Derivatives in:	Location	2024			2023		2024		2023
Cross-currency interest rate swap agreement designated as fair value hedges	Selling, general and administrative expenses	$	—		$	36	$	—	$	937
Cross-currency interest rate swap agreements designated as cash flow hedges	Selling, general and administrative expenses		(8,875	)		7,584		9,024		44,869
		$	(8,875	)	$	7,620	$	9,024	$	45,806

The remaining unrecognized gains and losses in Woodward’s Condensed Consolidated Balance Sheets associated with derivative instruments that were previously entered into by Woodward, which are ~~included~~classified in ~~foreign currency translation adjustments within total comprehensive (losses) earnings. The intercompany loan was repaid in July 2017.~~

accumulated OCI, were net losses of $11,838 as of March 31, 2024 and $9,701 as of September 30, 2023.

Note 7.9. Supplemental statement of cash flows information

Three-Months Ended December 31,

2017

2016
Interest paid, net of amounts capitalized

$
11,302

$
10,317
Income taxes paid

7,695

6,047
Income tax refunds received

1,772

59
Non-cash activities:

Purchases of property, plant and equipment on account

10,631

6,130
Common shares issued from treasury to settle employee liabilities

-

1,767


	Six Months Ended March 31,
	2024		2023
Interest paid, net of amounts capitalized	$	18,068	$	17,689
Income taxes paid		59,677		44,589
Income tax refunds received		3,662		1,392
Non-cash activities:
Purchases of property, plant and equipment on account		2,127		3,743
Common shares issued from treasury to settle benefit obligations		21,887		19,467

Note ~~8. Accounts receivable~~10. Inventories

Almost all of Woodward’s sales are made on credit and result in accounts receivable, which are recorded at the amount invoiced and are generally not collateralized. In the normal course of business, not all accounts receivable are collected and, therefore, an allowance for uncollectible amounts is provided equal to the amount


	March 31, 2024			September 30, 2023
Raw materials	$	159,355		$	133,699
Work in progress		140,322			127,438
Component parts(1)		352,269			327,522
Finished goods		88,978			74,594
Customer supplied inventory		17,941			14,543
On-hand inventory for which control has transferred to the customer		(178,488	)		(159,953	)
	$	580,377		$	517,843

(1)

Component parts include items that ~~Woodward believes ultimately will not~~can be collected. In establishing the amount of the allowance related to the credit risk of accounts receivable, customer-specific information is considered related to delinquent accounts, past loss experience, bankruptcy filings, deterioration in the customer’s operating resultssold separately as finished goods or financial position, and current economic conditions. Accounts receivable losses are deducted from the allowance, and the related accounts receivable balances are written off when the receivables are deemed uncollectible. Recoveries of accounts receivable previously written off are recognized when received. In addition, an allowance associated with anticipated future sales returns is also established and is included in the ~~allowance for uncollectible amounts.~~

~~Consistent with common business practice in China, Woodward’s Chinese subsidiary accepts from Chinese customers, in settlement~~manufacture of certain customer accounts receivable, bankers’ acceptance notes issued by Chinese banks that are believed to be creditworthy. Bankers’ acceptance notes are financial instruments issued by Chinese financial institutions as part of financing arrangements between the financial institution and a customer of the financial institution. Bankers’ acceptance notes represent a commitment by the issuing financial institution to pay a certain amount of money at a specified future maturity date to the legal owner of the bankers’ acceptance note as of the maturity date. The maturity date of bankers’ acceptance notes varies, but it is Woodward’s policy to only accept bankers’ acceptance notes with maturity dates no more than 180 days from the date of Woodward’s receipt of such draft. The issuing financial institution is the obligor, not Woodward’s customers. Upon Woodward’s acceptance of a banker’s acceptance note from a customer, such customer has no further obligation to pay Woodward for the related accounts receivable balance. Woodward only accepts bankers’ acceptance notes issued by banks that are believed to be creditworthy and to which the credit risks associated with the bankers’ acceptance notes are believed to be minimal.

~~The composition of Woodward’s accounts receivable at December 31, 2017 and September 30, 2017 follows:~~

December 31,

September 30,

2017

2017
Accounts receivable from:

Customers

$
275,433

$
367,715
Other (Chinese financial institutions)

59,798

38,243
Allowance for uncollectible customer amounts

(3,793)

(3,776)

$
331,438

$
402,182
other products.

~~Note 9. Inventories~~

December 31,

September 30,

2017

2017
Raw materials

$
60,355

$
59,034
Work in progress

106,065

103,790
Component parts (1)

285,674

262,755
Finished goods

51,429

47,926

$
503,523

$
473,505

~~(1)~~

~~Component parts include items that can be sold separately as finished goods or included in the manufacture of other products.~~

Note ~~10.~~11. Property, plant, and equipment



	December 31,		September 30,
	2017		2017		March 31, 2024			September 30, 2023
Land and land improvements	$	88,536	$	88,326	$	89,899		$	89,352
Buildings and building improvements		515,338		514,453		591,225			589,735
Leasehold improvements		16,425		16,142		21,445			21,079
Machinery and production equipment		560,264		543,641		808,980			807,244
Computer equipment and software		125,628		124,723		117,694			120,290
Office furniture and equipment		24,455		24,308		41,303			41,943
Other		19,423		19,393		38,253			20,073
Construction in progress		117,085		111,910		64,847			55,487
		1,467,154		1,442,896		1,773,646			1,745,203
Less accumulated depreciation		(536,996)		(520,853)		(852,291	)		(832,109	)
Property, plant, and equipment, net	$	930,158	$	922,043	$	921,355		$	913,094

Included in “Office furniture and equipment” and “Other” is $1,653 at each of December 31, 2017 and September 30, 2017, of gross assets acquired on capital leases, and accumulated depreciation included $844 at December 31, 2017 and $739 at September 30, 2017 of amortization associated with the capital lease assets.

In fiscal year 2015, Woodward completed and placed into service a manufacturing and office building on a second campus in the greater-Rockford, Illinois area and has occupied the new facility for its Aerospace segment. This campus is intended to support Woodward’s expected growth in its Aerospace segment over the next ten years and beyond, required as a result of Woodward being awarded a substantial number of new system platforms, particularly on narrow-body aircraft. Included in “Construction in progress” are costs of $48,971 at December 31, 2017 and $49,347 at September 30, 2017 associated with new equipment purchases for the second campus.

~~For the three-months ended December 31, 2017 and 2016,~~ Woodward had depreciation expense as follows:


	Three Months Ended March 31,				Six Months Ended March 31,
	2024		2023		2024		2023
Depreciation expense	$	20,607	$	20,535	$	40,833	$	40,661

Three-Months Ended

December 31,

2017

2016
Depreciation expense

$
14,827

$
12,455

~~For the three-months ended December 31, 2017 and 2016, Woodward capitalized interest that would have otherwise been included in interest expense of the following:~~

Three-Months Ended

December 31,

2017

2016
Capitalized interest

$
601

$
472

Note ~~11.~~12. Goodwill

September 30, 2017

Effects of Foreign Currency Translation

December 31, 2017
Aerospace

$
455,423

$
-

$
455,423
Industrial

101,122

214

101,336
Consolidated

$
556,545

$
214

$
556,759


	September 30, 2023		Effects of Foreign Currency Translation		March 31, 2024
Aerospace	$	455,423	$	—	$	455,423
Industrial		336,045		5,238		341,283
Consolidated	$	791,468	$	5,238	$	796,706

Woodward tests goodwill for impairment during the fourth quarter of each fiscal year orand at any time there is an indication that goodwill is more-likely-than-not impaired ~~commonly~~(commonly referred to as a triggering ~~events. There have been no such triggering events during any of~~event). Woodward’s goodwill impairment test in the ~~periods presented and Woodward’s~~ fourth quarter of fiscal year ~~2017 impairment test~~2023 resulted in no impairment.

Note ~~12.~~13. Intangible assets, net


													March 31, 2024							September 30, 2023
	December 31, 2017						September 30, 2017						Gross Carrying Value		Accumulated Amortization			Net Carrying Amount		Gross Carrying Value		Accumulated Amortization			Net Carrying Amount
	Gross Carrying Value		Accumulated Amortization		Net Carrying Amount		Gross Carrying Value		Accumulated Amortization		Net Carrying Amount
Intangible assets with finite lives:
Customer relationships and contracts:
Aerospace	$	282,225	$	(155,183)	$	127,042	$	282,225	$	(151,155)	$	131,070	$	281,683	$	(241,513	)	$	40,170	$	281,683	$	(236,143	)	$	45,540
Industrial		40,944		(34,615)		6,329		40,962		(34,407)		6,555		386,267		(101,363	)		284,904		378,804		(90,084	)		288,720
Total	$	323,169	$	(189,798)	$	133,371	$	323,187	$	(185,562)	$	137,625	$	667,950	$	(342,876	)	$	325,074	$	660,487	$	(326,227	)	$	334,260

Intellectual property:
Aerospace	$	-	$	-	$	-	$	-	$	-	$	-	$	—	$	—		$	—	$	—	$	—		$	—
Industrial		19,459		(18,315)		1,144		19,422		(18,196)		1,226		3,139		(3,139	)		—		3,139		(3,139	)		—
Total	$	19,459	$	(18,315)	$	1,144	$	19,422	$	(18,196)	$	1,226	$	3,139	$	(3,139	)	$	—	$	3,139	$	(3,139	)	$	—

Process technology:
Aerospace	$	76,605	$	(50,619)	$	25,986	$	76,605	$	(49,124)	$	27,481	$	44,570	$	(40,026	)	$	4,544	$	44,570	$	(39,551	)	$	5,019
Industrial		22,910		(18,118)		4,792		22,950		(17,756)		5,194		84,877		(33,676	)		51,201		83,456		(31,709	)		51,747
Total	$	99,515	$	(68,737)	$	30,778	$	99,555	$	(66,880)	$	32,675	$	129,447	$	(73,702	)	$	55,745	$	128,026	$	(71,260	)	$	56,766

Other intangibles:
Aerospace	$	-	$	-	$	-	$	-	$	-	$	-	$	—	$	—		$	—	$	—	$	—		$	—
Industrial		1,332		(992)		340		1,312		(956)		356		561		(561	)		—		554		(524	)		30
Total	$	1,332	$	(992)	$	340	$	1,312	$	(956)	$	356	$	561	$	(561	)	$	—	$	554	$	(524	)	$	30

Intangible asset with indefinite life:
Trade name:
Aerospace													$	—	$	—		$	—	$	—	$	—		$	—
Industrial														62,595		—			62,595		61,307		—			61,307
Total													$	62,595	$	—		$	62,595	$	61,307	$	—		$	61,307
Total intangibles:
Aerospace	$	358,830	$	(205,802)	$	153,028	$	358,830	$	(200,279)	$	158,551	$	326,253	$	(281,539	)	$	44,714	$	326,253	$	(275,694	)	$	50,559
Industrial		84,645		(72,040)		12,605		84,646		(71,315)		13,331		537,439		(138,739	)		398,700		527,260		(125,456	)		401,804
Consolidated Total	$	443,475	$	(277,842)	$	165,633	$	443,476	$	(271,594)	$	171,882	$	863,692	$	(420,278	)	$	443,414	$	853,513	$	(401,150	)	$	452,363

~~For~~Woodward tests the ~~three-months ended December 31, 2017~~indefinite lived trade name intangible asset for impairment during the fourth quarter of each fiscal year and ~~2016,~~ at any time there is an indication the indefinite lived trade name intangible asset is more-likely-than-not impaired (commonly referred to as a triggering event). Woodward’s impairment test for the indefinite lived trade name intangible asset in the fourth quarter of fiscal year 2023 resulted in no impairment.

Woodward recorded amortization expense associated with intangibles of the following:


	Three Months Ended March 31,				Six Months Ended March 31,
	2024		2023		2024		2023
Amortization expense	$	8,618	$	9,418	$	17,217	$	18,596

Three-Months Ended

December 31,

2017

2016
Amortization expense
$
6,243

$
6,458

Future amortization expense associated with intangibles is expected to be:


Year Ending September 30:
2024 (remaining)	$	16,305
2025		28,293
2026		28,283
2027		28,232
2028		27,636
Thereafter		252,070
	$	380,819

Year Ending September 30:

2018 (remaining)

$
18,782
2019

23,156
2020

20,373
2021

18,404
2022

16,249
Thereafter

68,669

$
165,633

Note ~~13.~~14. Credit facilities, short-term borrowings and long-term debt

Revolving credit facility

Woodward maintains a ~~$1,000,000~~$1,000,000 revolving credit facility established under a revolving credit agreement among Woodward, a syndicate of lenders and Wells Fargo Bank, National Association, as administrative agent, ~~(the “Revolving Credit Agreement”). The Revolving Credit Agreement~~which provides for the option to increase available borrowings to up to ~~$1,200,000,~~$1,500,000, subject to lenders’ ~~participation.~~participation (as amended in October 2022, the “Second Amended and Restated Revolving Credit Agreement”). Borrowings under the Second Amended and Restated Revolving Credit Agreement can be made by Woodward and certain of its foreign subsidiaries in U.S. dollars or in foreign currencies other than the U.S. dollar and generally bear interest at ~~LIBOR~~the Euro Interbank Offered Rate (“Euribor”), Sterling Overnight Index Average (“SONIA”), Tokyo Interbank Offered Rate (“TIBOR”), and Secured Overnight Financing Rate (“SOFR”) base rates plus ~~0.85%~~0.875% to ~~1.65%~~1.75%. The Revolving Credit Agreement matures ~~in April 2020.~~ on October 21, 2027.

Under the Second Amended and Restated Revolving Credit Agreement, there were ~~$66,300~~$141,300 in principal amount of borrowings outstanding as of ~~December~~March 31, ~~2017,~~2024 at an effective interest rate of ~~2.52%, and $32,600 in principal amount of~~6.46% as compared to no borrowings outstanding as of September 30, ~~2017, at an effective interest rate of 2.29%.~~2023. As of ~~December~~March 31, ~~2017 and September 30, 2017,~~2024, all of the borrowings ~~under the Revolving Credit Agreement~~outstanding were classified as short-term borrowings based on ~~Woodward’s~~Woodward's intent and ability to pay this amount in the next twelve months.

Short-term borrowings

Woodward has other foreign lines of credit and foreign overdraft facilities at various financial institutions, which are generally reviewed annually for renewal and are subject to the usual terms and conditions applied by the financial institutions. Pursuant to the terms of the related facility agreements, Woodward’s foreign performance guarantee facilities are limited in use to providing performance guarantees to third parties. There were no borrowings outstanding ~~as of December 31, 2017 and September 30, 2017~~ on Woodward’s foreign lines of credit and foreign overdraft ~~facilities.~~facilities as of March 31, 2024 and September 30, 2023.

~~Long-term debt~~

December 31,

September 30,

2017

2017
Series D notes – 6.39%, due October 2018; unsecured

$
100,000

$
100,000
Series F notes – 8.24%, due April 2019; unsecured

43,000

43,000
Series G notes – 3.42%, due November 2020; unsecured

50,000

50,000
Series H notes – 4.03%, due November 2023; unsecured

25,000

25,000
Series I notes – 4.18%, due November 2025; unsecured

25,000

25,000
Series J notes – Floating rate (LIBOR plus 1.25%), due November 2020; unsecured

50,000

50,000
Series K notes – 4.03%, due November 2023; unsecured

50,000

50,000
Series L notes – 4.18%, due November 2025; unsecured

50,000

50,000
Series M notes – 1.12% due September 2026; unsecured

48,015

47,270
Series N notes – 1.31% due September 2028; unsecured

92,428

90,995
Series O notes – 1.57% due September 2031; unsecured

51,616

50,815
Unamortized debt issuance costs

(1,720)

(1,794)
Total long-term debt

583,339

580,286
Less: Current portion of long-term debt

-

-
Long-term debt, less current portion

$
583,339

$
580,286

The Notes

~~In October 2008,~~On November 15, 2023, Woodward ~~entered into a note purchase agreement relating to~~paid the entire principal balance of $75,000 on the Series ~~D Notes. The Series D~~H and K Notes ~~mature and are payable in October 2018. As of December 31, 2017, the entire amount of debt under the Series D Notes has~~

~~been classified as long-term based on Woodward’s intent and ability to refinance this debt~~ using ~~cash~~ proceeds from borrowings under its existing revolving credit ~~facility which, in turn, is expected to be repaid beyond the next twelve months. In April 2009, Woodward entered into a note purchase agreement relating to the Series F Notes.~~ facility.

On October 1, 2013, Woodward entered into a note purchase agreement relating to the sale by Woodward of an aggregate principal amount of $250,000 of its senior unsecured notes in a series of private placement transactions. Woodward issued the Series G, H and I Notes (the “First Closing Notes”) on October 1, 2013. Woodward issued the Series J, K and L Notes (the “Second Closing Notes,” and together with the Series D Notes, the Series F Notes and the First Closing Notes, the “USD Notes”) on November 15, 2013.

On September 23, 2016, Woodward and the BV Subsidiary each entered into note purchase agreements relating to the sale by Woodward and the BV Subsidiary of an aggregate principal amount of €160,000 of senior unsecured notes in a series of private placement transactions. Woodward issued €40,000 aggregate principal amount of Woodward’s Series M Senior Notes (the “Series M Notes”). The BV Subsidiary issued (a) €77,000 aggregate principal amount of the BV Subsidiary’s Series N Senior Notes (the “Series N Notes”) and (b) €43,000 aggregate principal amount of the BV Subsidiary’s Series O Senior Notes (the “Series O Notes” and together with the Series M Notes and the Series N Notes, the “2016 Notes,” and, together with the USD Notes, collectively, the “Notes”).

Interest on the Series D Notes, the First Closing Notes, and the Series K and L Notes is payable semi-annually on April 1 and October 1 of each year until all principal is paid. Interest on the Series F Notes is payable semi-annually on April 15 and October 15 of each year until all principal is paid. Interest on the 2016 Notes is payable semi-annually on March 23 and September 23 of each year, until all principal is paid. Interest on the Series J Notes is payable quarterly on January 1, April 1, July 1 and October 1 of each year until all principal is paid. As of December 31, 2017, the Series J Notes bore interest at an effective rate of 2.69%.

~~Debt Issuance Costs~~

Unamortized debt issuance costs associated with the Notes of $1,720 as of December 31, 2017 and $1,794 as of September 30, 2017 were recorded as a reduction in “Long-term debt, less current portion” in the Condensed Consolidated Balance Sheets. Unamortized debt issuance costs of $2,041 associated with the Revolving Credit Agreement as of December 31, 2017 and $2,259 as of September 30, 2017 were recorded as “Other assets” in the Condensed Consolidated Balance Sheets. Amortization of debt issuance costs is included in operating activities in the Condensed Consolidated Statements of Cash Flows.

Note ~~14.~~15. Accrued liabilities



	December 31,		September 30,
	2017		2017		March 31, 2024		September 30, 2023
Salaries and other member benefits	$	43,844	$	91,285	$	98,019	$	146,713
Warranties		13,017		13,597
Product warranties and related liabilities						19,800		18,162
Interest payable		5,392		9,626		12,199		13,611
Current portion of acquired performance obligations and unfavorable contracts (1)		1,627		1,627
Accrued retirement benefits		2,379		2,413		2,844		2,822
Current portion of loss reserve on contractual lease commitments		1,244		1,343
Current portion of deferred income from JV formation (Note 4)		6,439		6,451
Deferred revenues		3,568		4,625
Net current contract liabilities						48,821		33,748
Taxes, other than income		10,934		14,401		18,981		13,436
Other		10,341		9,704		36,280		34,124
	$	98,785	$	155,072	$	236,944	$	262,616

~~(1)~~

In connection with Woodward’s acquisition of GE Aviation Systems LLC’s (the “Seller”) thrust reverser actuation systems business located in Duarte, California (the “Duarte Acquisition”) in fiscal year 2013, Woodward assumed current and long-term performance obligations for contractual commitments that are expected to result in future economic losses. In addition, Woodward assumed current and long-term performance obligations for services to be provided to the Seller and others, partially offset by current and long-term assets related to contractual payments due from the Seller. The current portion of both obligations is included in Accrued liabilities.

Product warranties and related liabilities

~~Warranties~~

Provisions of Woodward’s sales agreements include product warranties customary to these types of agreements. Accruals are established for specifically identified warranty issues ~~that~~and related liabilities for which are probable to result in future costs. Warranty costs are accrued because revenue is recognized on a non-specific basis whenever past experience indicates a normal and predictable pattern exists.

Changes in accrued product warranties and related liabilities were as follows:


	Three Months Ended March 31,						Six Months Ended March 31,
	2024			2023			2024			2023
Beginning of period	$	21,802		$	49,526		$	18,162		$	40,042
Additions, net of recoveries		4,653			3,413			9,959			20,423
Reductions for settlement		(6,579	)		(6,501	)		(8,406	)		(14,203	)
Foreign currency exchange rate changes		(76	)		54			85			230
End of period	$	19,800		$	46,492		$	19,800		$	46,492

Restructuring charges

Three-Months Ended December 31,

2017

2016
Warranties, beginning of period
$
13,597

$
15,993
Expense, net of recoveries

(2,030)

1,923
Reductions for settling warranties

1,377

(2,032)
Foreign currency exchange rate changes

73

(356)
Warranties, end of period
$
13,017

$
15,528

~~Loss reserve on contractual lease commitments~~

In fiscal year 2022, the Company determined to implement a streamlined Aerospace and Industrial organizational and leadership structure designed to enhance the sales experience for customers, simplify operations, and increase profitability through improved execution. In connection with ~~the construction~~leadership changes arising from such reorganization, we recorded $1,083 of a new production facility in Niles, Illinois, Woodward vacated a leased facility in Skokie, Illinois and recognized a loss reserve against the estimated remaining contractual lease commitments, less anticipated sublease income. Changes in the loss reserverestructuring charges as nonsegment expenses, which were ~~as follows:~~

Three-Months Ended December 31,

2017

2016
Loss reserve on contractual lease commitments, beginning of period
$
5,270

$
9,242
Payments, net of sublease income

(553)

(402)
Loss reserve on contractual lease commitments, end of period
$
4,717

$
8,840

~~Other liabilities included $3,473 and $3,927 of accrued loss reserve on contractual lease commitments~~paid as of December 31, ~~2017~~2022.

During the second quarter of fiscal year 2023, the Company committed to a cost reduction plan ("Cost Reduction Plan") to better align the cost structure and ~~September 30, 2017, respectively, which are not expected~~recorded $5,172 of restructuring charges. The charges recognized under the Cost Reduction Plan consist of workforce management costs primarily related to ~~be settled or~~aligning the cost structure of the Company's Industrial segment with the current market conditions. All of the restructuring charges were recorded as nonsegment expenses. As of March 31, 2023, $2,836 was paid and the remaining restructuring charges were paid within the next twelve ~~months of the respective balance sheet date.~~months.

Note ~~15.~~16. Other liabilities

December 31,

September 30,

2017

2017
Net accrued retirement benefits, less amounts recognized within accrued liabilities

$
54,396

$
52,211
Noncurrent portion of deferred income from JV formation (1)

235,855

236,896
Total unrecognized tax benefits

20,003

20,949
Noncurrent income taxes payable (2)

26,000

-
Acquired unfavorable contracts (3)

1,562

2,076
Deferred economic incentives (4)

14,337

14,574
Loss reserve on contractual lease commitments (5)

3,473

3,927
Other

10,642

14,165

$
366,268

$
344,798


	March 31, 2024		September 30, 2023
Net accrued retirement benefits, less amounts recognized within accrued liabilities	$	78,464	$	72,570
Total unrecognized tax benefits		9,351		8,020
Noncurrent income taxes payable		5,894		10,714
Deferred economic incentives (1)		5,151		5,797
Noncurrent operating lease liabilities		19,202		20,685
Net noncurrent contract liabilities		426,810		414,657
Cross-currency swap derivative liability		4,968		—
Other		11,090		11,047
	$	560,930	$	543,490

(1)

Woodward receives certain economic incentives from various state and local authorities related to capital expansion projects. Such amounts are initially recorded as deferred credits and are being recognized as a reduction to pre-tax expense over the economic lives of the related capital expansion projects.

~~(1)~~

~~See Note 4,~~ ~~Joint venture~~ ~~for more information on the deferred income from JV formation.~~

~~(2)~~

~~See Note 17,~~ ~~Income taxes~~ ~~for more information on the noncurrent income taxes payable.~~

~~(3)~~

In connection with the Duarte Acquisition in fiscal year 2013, Woodward assumed current and long-term performance obligations for contractual commitments that are expected to result in future economic losses. The long-term portion of the acquired unfavorable contracts is included in Other liabilities.

~~(4)~~

~~(5)~~

~~See Note 14,~~ ~~Accrued liabilities~~ ~~for more information on the loss reserve on contractual lease commitments.~~

Note ~~16.~~17. Other (income) expense, net


					Three Months Ended March 31,						Six Months Ended March 31,
	Three-Months Ended				2024			2023			2024			2023
	December 31,
	2017		2016
Equity interest in the earnings of the JV (Note 4)	$	(596)	$	(684)
Net gain on sales of assets		(58)		(3,699)
Equity interest in the earnings of the JV					$	(8,701	)	$	(8,468	)	$	(18,856	)	$	(13,041	)
Net (gain) loss on sales of assets and businesses						(863	)		857			(872	)		890
Gain on non-recurring matter related to a previous acquisition						—			—			(4,803	)		—
Rent income		(54)		(73)		(88	)		(93	)		(170	)		(181	)
Net gain on investments in deferred compensation program		(654)		(24)		(1,785	)		(1,679	)		(4,394	)		(2,870	)
Other components of net periodic pension and other postretirement benefit, excluding service cost and interest expense						(2,947	)		(2,675	)		(5,866	)		(5,160	)
Other		(210)		(108)		—			18			(62	)		(68	)
	$	(1,572)	$	(4,588)	$	(14,384	)	$	(12,040	)	$	(35,023	)	$	(20,430	)

Note ~~17.~~18. Income taxes

On December 22, 2017, the United States (“U.S.”) enacted significant changes to the U.S. tax law following the passage and signing of H.R.1, “An Act to Provide for Reconciliation Pursuant to Titles II and V of the Concurrent Resolution on the Budget for Fiscal Year 2018” (the “Tax Act”) (previously known as “The Tax Cuts and Jobs Act”). The Tax Act included significant changes to existing tax law, including a permanent reduction to the U.S. federal corporate income tax rate from 35% to 21%, a one-time repatriation tax on deferred foreign income (“Transition Tax”), deductions, credits and business-related exclusions.

~~U.S. GAAP requires that the interim period tax provision be determined as follows:~~

At the end of each quarter, Woodward estimates the tax that will be provided for the current fiscal year stated as a percentage of estimated “ordinary income.” The term ordinary income refers to earnings from continuing operations before income taxes, excluding significant unusual or infrequently occurring items.

The estimated annual effective rate is applied to the year-to-date ordinary income at the end of each quarter to compute the estimated year-to-date tax applicable to ordinary income. The tax expense or benefit related to ordinary income in each quarter is the difference between the most recent year-to-date and the prior quarter year-to-date computations.

The tax effects of significant unusual or infrequently occurring items are recognized as discrete items in the interim period in which the events occur. The impact of changes in tax laws or rates on deferred tax amounts, the effects of changes in judgment about beginning of the year valuation allowances, and changes in tax reserves resulting from the finalization of tax audits or reviews are examples of significant unusual or infrequently occurring items that are recognized as discrete items in the interim period in which the event occurs. Enactment of the Tax Act during December 2017 resulted in a provisional discrete net charge to Woodward’s income tax expense in the amount of $14,778.

The determination of the estimated annual effective tax rate is based upon a number of significant estimates and ~~judgments, including the estimated annual pretax income of Woodward in each tax jurisdiction in which it operates, and the development of tax planning strategies during the year.~~judgments. In addition, as a global commercial enterprise, Woodward’s tax expense can be impacted by changes in tax rates or laws, the finalization of tax audits and reviews, changes in the estimate of the amount of undistributed foreign earnings that Woodward considers indefinitely reinvested, issuance of future guidance, interpretation, and rule-making, and other factors that cannot be predicted with certainty. As such, there can be significant volatility in interim tax provisions.

The permanent reduction to the U.S. federal corporate income tax rate from 35% to 21% is effective January 1, 2018 (the “Effective Date”). When a U.S. federal tax rate change occurs during a fiscal year, taxpayers are required to compute a weighted daily average rate for the fiscal year of enactment. As a result of the Tax Act, Woodward has calculated a U.S. federal statutory corporate income tax rate of 24.5% for the fiscal year ending September 30, 2018 and applied this rate in computing the first quarter of fiscal year 2018 income tax provision. The U.S. federal statutory corporate income tax rate of 24.5% is the weighted daily average rate between the pre-enactment U.S. federal statutory tax rate of 35% applicable to Woodward’s 2018 fiscal year prior to the Effective Date and the post-enactment U.S. federal statutory tax rate of 21% applicable to the 2018 fiscal year thereafter. Woodward expects the U.S. federal statutory rate to be 21% for fiscal years beginning after September 30, 2018.

On December 22, 2017, the SEC issued Staff Accounting Bulletin 118 (“SAB 118”). SAB 118 expresses views of the SEC regarding ASC Topic 740, Income Taxes (“ASC 740”) in the reporting period that includes the enactment date of the

Tax Act. The SEC staff issuing SAB 118 (the “Staff”) recognized that a registrant’s review of certain income tax effects of the Tax Act may be incomplete at the time financial statements are issued for the reporting period that includes the enactment date, including interim periods therein. The Staff’s view of the enactment of the Tax Act has been developed considering the principles of ASC Topic 805, ~~Business Combinations~~, which addresses the accounting for certain items in a business combination for which the accounting is incomplete upon issuance of the financial statements that include the reporting period in which the business combination occurs. Specifically, the Staff provides that the accounting guidance in ASC Topic 805 may be analogized to the accounting for impacts of the Tax Act. If a company does not have the necessary information available, prepared or analyzed for certain income tax effects of the Tax Act, SAB 118 allows a company to report provisional numbers and adjust those amounts during the measurement period not to extend beyond one year. For the three-months ended December 31, 2017, Woodward has recorded all known and estimable impacts of the Tax Act that are effective for fiscal year 2018. Future adjustments to the provisional numbers will be recorded as discrete adjustments to income tax expense in the period in which those adjustments become estimable and/or are finalized.

Accordingly, Woodward’s income tax provision as of December 31, 2017 reflects (i) the current year impacts of the Tax Act on the estimated annual effective tax rate and (ii) the following discrete items resulting directly from the enactment of the Tax Act based on the information available, prepared, or analyzed (including computations) in reasonable detail.



	~~Three-Months Ended~~
	~~December 31, 2017~~
~~Transition Tax (provisional)~~	$	~~26,000~~
~~Net impact on U.S. deferred tax assets and liabilities (provisional)~~		~~(16,260)~~
~~Net changes in deferred tax liability associated with anticipated repatriation taxes (provisional)~~		~~5,038~~
~~Net discrete impacts of the enactment of the Tax Act~~	$	~~14,778~~

Woodward determined that the Transition Tax is provisional because various components of the computation are unknown as of December 31, 2017, including the following significant items: the exchange rates for fiscal year 2018, the actual aggregate foreign cash position and the earnings and profits of the foreign entities as of September 30, 2018, the interpretation and identification of cash positions as of September 30, 2018, and incomplete computations of accumulated earnings and profits balances as of November 2, 2017 and December 31, 2017. Consistent with provisions allowed under the Tax Act, the $26,000 estimated Transition Tax liability will be paid over an eight year period beginning in fiscal year 2019. The entire amount of the estimated Transition Tax liability has been included in “Other liabilities” in the Condensed Consolidated Balance Sheets.

Woodward also determined that the impact of the U.S. federal corporate income tax rate change on the U.S. deferred tax assets and liabilities is provisional because the number cannot be calculated until the underlying timing differences are known rather than estimated.

Given the Tax Act’s significant changes and potential opportunities to repatriate cash tax free, Woodward is in the process of evaluating its current indefinite assertions. As a result of the Tax Act, Woodward now expects to repatriate certain earnings which will be subject to withholding taxes. These additional withholding taxes are being recorded as an additional deferred tax liability associated with the basis difference in such jurisdictions. The uncertainty related to the taxation of such withholding taxes on distributions under the Tax Act and finalization of the cash repatriation plan makes the deferred tax liability a provisional amount.

Woodward continues to review the anticipated impacts of the global intangible low taxed income (“GILTI”) and base erosion anti-abuse tax (“BEAT”) on Woodward, which are not effective until fiscal year 2019. Woodward has not recorded any impact associated with either GILTI or BEAT in the tax rate for the first quarter of fiscal year 2018.

Within the calculation of Woodward’s annual effective tax rate Woodward has used assumptions and estimates that may change as a result of future guidance, interpretation, and rule-making from the Internal Revenue Service, the SEC, and the FASB and/or various other taxing jurisdictions. For example, Woodward anticipates that the state jurisdictions will continue to determine and announce their conformity to the Tax Act which could have an impact on the annual effective tax rate.

The following table sets forth the tax expense and the effective tax rate for Woodward’s earnings before income taxes:



	Three-Months Ended
	December 31,				Three Months Ended March 31,						Six Months Ended March 31,
	2017		2016		2024			2023			2024			2023
Earnings before income taxes	$	37,487	$	47,059	$	120,624		$	40,241		$	230,344		$	71,990
Income tax expense		19,227		511		23,068			4,730			42,744			6,873
Effective tax rate		51.3%		1.1%		19.1	%		11.8	%		18.6	%		9.5	%

The increase in the year-over-year effective tax rate for the three-months ended December 31, 2017 is primarily attributable to the $14,778 discrete net impact resulting from the enactment of the Tax Act partially offset by benefits of the current year effect of the U.S. federal corporate tax rate reduction resulting from the enactment of the Tax Act on the estimated annual effective tax rate. In addition, the effective tax rate for the ~~three-months ended December 31, 2016 includes~~second quarter as compared to the ~~impact~~same period of the ~~repatriation~~prior fiscal year is primarily attributable to higher projected full-year earnings taxed at statutory rates ranging between approximately 19% and 35%. These higher projected earnings and higher actual quarterly earnings resulted in lower current quarter tax benefits as a percent of earnings when compared to the ~~U.S.~~prior quarter. Additionally, the increase is attributable to projected future withholding taxes on unremitted foreign earnings.

The increase in the effective tax rate for the first half of ~~certain net foreign profits~~fiscal year 2024 as compared to the same period of the prior fiscal year is primarily attributable to higher projected full-year earnings taxed at statutory rates ranging between approximately 19% and ~~losses. The U.S. foreign~~35%. These higher projected earnings and higher actual year-to-date earnings resulted in lower current year-to-date tax ~~credits available~~benefits as a ~~result~~percent of earnings when compared to the ~~repatriation~~prior year. Additionally, the increase is attributable to projected future withholding taxes on unremitted foreign earnings and the release of ~~the foreign net earnings~~uncertain tax positions that did not recur in the ~~first quarter of last year were greater than the U.S. taxes payable on these net foreign earnings.~~ current fiscal year.

Gross unrecognized tax benefits were ~~$18,997~~$12,715 as of ~~December~~March 31, ~~2017,~~2024, and ~~$20,132~~$11,112 as of September 30, ~~2017. Included in~~2023. At March 31, 2024, the ~~balance~~amount of the liability for unrecognized ~~tax benefits were $8,949 as of December 31, 2017 and $9,677 as of September 30, 2017 of~~ tax benefits that, if recognized, would ~~affect the~~impact Woodward’s effective tax ~~rate. At this time,~~rate was $8,110. Woodward ~~estimates that~~believes it is reasonably possible that the liability for unrecognized tax benefits will decrease by as much as ~~$8,901~~$2,178 in the next twelve months due to the completion of ~~reviews~~review by tax authorities, lapses of statutes, and the settlement of tax positions. ~~Woodward accrues~~Woodward’s tax expense includes accruals for potential interest and penalties related to unrecognized tax benefits and all other interest and penalties related to tax ~~payments in tax expense. Woodward had accrued gross interest and penalties of $1,243 as of December 31, 2017 and $1,123 as of September 30, 2017.~~payments.

Woodward’s tax returns are subject to audits by U.S. federal, state, and foreign tax authorities, and these audits are at various stages of completion at any given time. Reviews of tax matters by authorities and lapses of the applicable statutes of ~~limitations~~limitation may result in changes to tax expense. ~~Fiscal~~Generally, Woodward’s fiscal years remaining open to examination for U.S. Federal income taxes include fiscal years 2020 and thereafter. Woodward’s fiscal years remaining open to examination for significant U.S. state income tax jurisdictions include fiscal years 2019 and thereafter. Woodward’s fiscal years remaining open to examination in significant foreign jurisdictions include ~~2008~~2018 and thereafter. Woodward’s fiscal years remaining open to examination in the United States include fiscal years 2014 and thereafter. Woodward is currently under examination by the Internal Revenue Service for fiscal year 2014. Woodward has concluded U.S. federal income tax examinations through fiscal year 2012. Woodward is generally subject to U.S. state income tax examinations for fiscal years 2012 and the periods thereafter.

Note ~~18.~~19. Retirement benefits

Woodward provides various retirement benefits to eligible members of the Company, including contributions to various defined contribution plans, pension benefits associated with defined benefit plans, postretirement medical benefits, and postretirement life insurance benefits. Eligibility requirements and benefit levels vary depending on employee location.

Defined contribution plans

Most of the Company’s U.S. employees are eligible to participate in the U.S. defined contribution ~~plan.~~plan (the "Retirement Savings Plan"). The ~~U.S. defined contribution plan~~Retirement Savings Plan allows employees to defer part of their annual income for income tax purposes into their personal 401(k) accounts. The Company makes matching contributions to eligible employee accounts, which are also deferred for employee personal income tax purposes. Certain ~~foreign~~non-U.S. employees are also eligible to participate in similar ~~foreign~~non-U.S. plans.

Woodward's U.S. employees receive an annual contribution of Woodward stock, equal to 5% of their eligible prior year wages, to their personal Woodward Retirement Savings Plan accounts. Woodward fulfilled its annual Woodward stock contribution obligation using shares held in treasury stock by issuing a total of 159 shares of common stock for a value of $21,887 in the second quarter of fiscal year 2024, compared to a total of 187 shares of common stock for a value of $19,307 in the second quarter of fiscal year 2023.

The amount of expense associated with defined contribution plans was as follows:

Three-Months Ended

December 31,

2017

2016
Company costs

$
7,879

$
7,249


	Three Months Ended March 31,				Six Months Ended March 31,
	2024		2023		2024		2023
Company costs	$	12,902	$	11,838	$	24,077	$	21,940

Defined benefit plans

Woodward has defined benefit plans that provide pension benefits for certain retired employees in the United States, the United Kingdom, Japan, and ~~Japan.~~Germany. Woodward also provides other postretirement benefits to its employees including postretirement medical benefits and life insurance benefits. Postretirement medical benefits are provided to certain current and retired employees, ~~and~~ their covered dependents, and beneficiaries in the United ~~States and the United Kingdom.~~States. Life insurance benefits are provided to certain retirees in the United States under frozen plans, which are no longer available to current employees. A September 30 measurement date is utilized to value plan assets and obligations for all of Woodward’s defined benefit pension and other postretirement benefit plans.

U.S. GAAP requires that, for obligations outstanding as of September 30, ~~2017,~~2023, the funded status reported in interim periods shall be the same asset or liability recognized in the previous year end statement of financial position adjusted for (a) subsequent accruals of net periodic benefit cost that exclude the amortization of amounts previously recognized in other comprehensive income (for example, subsequent accruals of service cost, interest cost, and return on plan assets) and (b) contributions to a funded plan or benefit payments.

During the third quarter of fiscal year 2016, Woodward opened a lump-sum buy-out window, which closed in the fourth quarter of fiscal year 2016 and was fully settled during the first quarter of fiscal year 2017, for certain former U.S. employees and/or their dependents eligible to receive postretirement defined benefit pension payments for past employment services to the Company. Eligible pension plan participants were provided the opportunity to elect to receive a one-time lump-sum payment or an immediate annuity in lieu of future pension benefit payments. Pension benefit payments paid from available pension plan assets under the lump-sum buy-out options were $670 during the first quarter of fiscal year 2017. Woodward made no further pension benefit payments under the lump-sum buy-out options.

The components of the net periodic retirement pension costs recognized are as follows:


	Three Months Ended March 31,
	United States						Other Countries						Total
	2024			2023			2024			2023			2024			2023
Service cost	$	194		$	224		$	312		$	332		$	506		$	556
Interest cost		1,900			1,825			803			778			2,703			2,603
Expected return on plan assets		(2,271	)		(2,075	)		(602	)		(573	)		(2,873	)		(2,648	)
Amortization of:
Net actuarial loss (gain)		56			73			(171	)		(153	)		(115	)		(80	)
Prior service cost		175			175			5			6			180			181
Net periodic retirement pension cost	$	54		$	222		$	347		$	390		$	401		$	612
Contributions paid	$	—		$	—		$	746		$	736		$	746		$	736

	Six Months Ended March 31,
	United States						Other Countries						Total
	2024			2023			2024			2023			2024			2023
Service cost	$	388		$	447		$	621		$	652		$	1,009		$	1,099
Interest cost		3,799			3,649			1,596			1,528			5,395			5,177
Expected return on plan assets		(4,542	)		(4,149	)		(1,194	)		(1,124	)		(5,736	)		(5,273	)
Amortization of:
Net actuarial loss (gain)		113			146			(339	)		(301	)		(226	)		(155	)
Prior service cost		349			349			11			11			360			360
Net periodic retirement pension cost	$	107		$	442		$	695		$	766		$	802		$	1,208
Contributions paid	$	—		$	—		$	1,339		$	1,298		$	1,339		$	1,298

The components of net periodic retirement pension costs other than the service cost and interest cost components are included in the line item “Other (income) expense, net”, and the interest component is included in the line item “Interest expense” in the Condensed Consolidated Statements of Earnings.

Three-Months Ended December 31,

United States

Other Countries

Total

2017

2016

2017

2016

2017

2016
Service cost

$
411

$
419

$
158

$
192

$
569

$
611
Interest cost

1,501

1,439

329

296

1,830

1,735
Expected return on plan assets

(2,904)

(2,632)

(686)

(641)

(3,590)

(3,273)
Amortization of:

Net actuarial loss

150

464

72

127

222

591
Prior service cost

177

96

-

-

177

96
Net periodic retirement pension benefit

$
(665)

$
(214)

$
(127)

$
(26)

$
(792)

$
(240)
Contributions paid

$
-

$
-

$
312

$
365

$
312

$
365

The components of the net periodic other postretirement benefit costs recognized are as follows:


	Three Months Ended March 31,						Six Months Ended March 31,
	2024			2023			2024			2023
Interest cost	$	225		$	226		$	451		$	452
Amortization of:
Net actuarial gain		(139	)		(124	)		(278	)		(248	)
Net periodic other postretirement cost	$	86		$	102		$	173		$	204
Contributions paid	$	413		$	444		$	825		$	885

The components of net periodic other postretirement benefit costs other than the service cost and interest cost components are included in the line item “Other (income) expense, net”, and the interest cost component is included in the line item “Interest expense” in the Condensed Consolidated Statements of Earnings.

Three-Months Ended

December 31,

2017

2016
Service cost

$
2

$
4
Interest cost

292

311
Amortization of:

Net actuarial loss

24

50
Prior service benefit

(40)

(40)
Curtailment gain

(330)

-
Net periodic other postretirement (benefit) cost

$
(52)

$
325
Contributions paid

$
226

$
615

The amount of cash contributions made to these plans in any year is dependent upon a number of factors, including minimum funding requirements in the jurisdictions in which Woodward operates and arrangements made with trustees of certain foreign plans. As a result, the actual funding in fiscal year ~~2018~~2024 may differ from the current estimate. Woodward estimates its remaining cash contributions in fiscal year ~~2018~~2024 will be as follows:


Retirement pension benefits:
United States		$	—
~~Retirement pension benefits:~~United Kingdom			558
~~United States~~Japan		$	-—
~~United Kingdom~~Germany			~~297~~
~~Japan~~	493		-
Other postretirement benefits			~~3,645~~ 1,851

~~Multiemployer defined benefit plans~~

~~Woodward operates multiemployer defined benefit plans for certain employees in both the Netherlands and Japan. The amounts of contributions associated with the multiemployer plans were as follows:~~

Three-Months Ended

December 31,

2017

2016
Company contributions

$
79

$
68

Note ~~19.~~20. Stockholders’ equity

Common stock and treasury stock

Activity in common stock and treasury stock share are as follows:


	Common Stock		Treasury Stock			Treasury stock held for deferred compensation
Balances as of January 1, 2023		72,960		(13,460	)		(122	)
Sales of treasury stock		—		251			—
Common shares issued for benefit plans		—		187			—
Purchases of stock by deferred compensation		—		—			—
Distribution of stock from deferred compensation		—		—			55
Balances as of March 31, 2023		72,960		(13,022	)		(67	)

Balances as of January 1, 2024		72,960		(12,823	)		(54	)
Sales of treasury stock		—		479			—
Common shares issued for benefit plans		—		159			—
Purchases of stock by deferred compensation		—		—			—
Distribution of stock from deferred compensation		—		—			1
Balances as of March 31, 2024		72,960		(12,185	)		(53	)


	Common Stock		Treasury Stock			Treasury stock held for deferred compensation
Balances as of September 30, 2022		72,960		(13,207	)		(139	)
Sales of treasury stock		—		270			—
Purchase of treasury stock		—		(274	)		—
Common shares issued for benefit plans		—		189			—
Purchases of stock by deferred compensation		—		—			(1	)
Distribution of stock from deferred compensation		—		—			73
Balances as of March 31, 2023		72,960		(13,022	)		(67	)

Balances as of September 30, 2023		72,960		(13,070	)		(55	)
Sales of treasury stock		—		726			—
Common shares issued for benefit plans		—		159			—
Purchases of stock by deferred compensation		—		—			(1	)
Distribution of stock from deferred compensation		—		—			3
Balances as of March 31, 2024		72,960		(12,185	)		(53	)

Stock repurchase program

In January 2022, the ~~first quarter of fiscal year 2017, Woodward’s~~Woodward board of directors ~~terminated the Company’s prior stock repurchase program and replaced it with~~(the "Board") authorized a ~~new~~ program for the repurchase of up to ~~$500,000~~$800,000 of Woodward’s outstanding shares of common stock on the open market or in privately negotiated transactions over a ~~three-year~~two-year period ~~that will end~~ending in ~~November 2019~~January 2024 (the ~~“2017~~“2022 Authorization”). InDuring the first ~~quarter~~six months of fiscal year ~~2017,~~2023, Woodward ~~purchased 350~~repurchased 274 shares of its common stock for ~~$24,004 pursuant~~$26,369.

In January 2024, the Board terminated the 2022 Authorization, which was nearing expiration, and concurrently authorized a new program for the repurchase of up to $600,000 of Woodward’s outstanding shares of common stock on the open market or in privately negotiated transactions over a ~~10b5-1 plan under the 2017 Authorization. Woodward repurchased no stock~~three-year period ending in January 2027 (the “2024 Authorization”). During the first ~~quarter~~six months of fiscal year ~~2018.~~2024, Woodward repurchased no shares of its common stock.

Stock-based compensation

Provisions governing outstanding stock option awards, restricted stock units ("RSUs"), and performance restricted stock units ("PSUs") are included in the 2017 Omnibus Incentive Plan, as amended from time to time (the “2017 Plan”), and, with respect to outstanding stock options awarded in or prior to 2016, the 2006 Omnibus Incentive Plan (the “2006 Plan”) ~~and the 2002 Stock Option Plan (the “2002 Plan”)~~. ~~The 2002 Plan provided that no further grants would be made after December 31, 2006. No further grants will be made under the 2006 Plan, which expired in fiscal year 2016.~~

~~Woodward has reserved a total of 2,000 shares of Woodward’s common stock for issuance under the~~The 2017 Plan ~~which~~ was first approved by Woodward’s stockholders in January 2017 and is athe successor plan to the 2006 Plan.

~~Stock options~~

~~To date, equity awards under~~The Board has delegated authority to administer the 2017 Plan ~~have consisted~~to the Compensation Committee of the Board, including, but not limited to, the power to determine the recipients of awards and the terms of those awards. On January 25, 2023, Woodward’s stockholders approved an additional 500 shares of Woodward’s common stock to be made available for future grants. Under the 2017 Plan, there were approximately 2,209 shares of Woodward’s common stock available for future grants as of ~~stock~~March 31, 2024 and 2,689 shares as of September 30, 2023.

Stock options ~~to Woodward’s employees and directors. Woodward believes that these stock options align the interests of its employees and directors with the interests of its stockholders.~~

Stock option awards are granted with an exercise price equal to the market price of Woodward’s stock at the date the grants are awarded, a ten-year term, and generally have a four-year vesting schedule at a rate of ~~25%~~25% per year.

The fair value of options granted is estimated as of the grant date using the Black-Scholes-Merton option-valuation ~~model using the assumptions in the following table.~~model. Woodward calculates the expected term, which represents the average period of time that stock options granted are expected to be outstanding, based upon historical experience of plan participants. Expected volatility is based on historical volatility using daily stock price observations. The estimated dividend yield is based upon Woodward’s historical dividend practice and the market value of its common stock. The risk-free rate is based on the U.S. treasury yield curve, for periods within the contractual life of the stock option, at the time of grant.

Three-Months Ended

December 31, 2017
Weighted-average exercise price per share
$
78.97

Weighted-average grant date market value of Woodward stock
$
78.97

Expected term (years)

6.4
-
8.7

Estimated volatility

30.3%
-
32.7%

Estimated dividend yield

0.6%

Risk-free interest rate

2.1%
-
2.3%

The following is a summary of the activity for stock option ~~awards during the three-months ended December 31, 2017:~~awards:

Three-Months Ended

December 31, 2017

Number of options

Weighted-Average Exercise Price per Share
Options, beginning balance

5,236

$
39.58
Options granted

744

78.97
Options exercised

(34)

41.13
Options forfeited

(9)

55.61
Options, ending balance

5,937

44.48


	Three Months Ended March 31, 2024					Six Months Ended March 31, 2024
	Number of options			Weighted-Average Exercise Price per Share		Number of options			Weighted-Average Exercise Price per Share
Beginning balance		4,611		$	80.99		4,842		$	80.48
Granted		81			137.76		87			137.36
Exercised		(475	)		67.93		(710	)		69.19
Forfeited		(4	)		91.51		(6	)		91.84
Ending balance		4,213		$	83.54		4,213		$	83.54

Changes in non-vested stock options ~~during the three-months ended December 31, 2017~~ were as follows:


	Three Months Ended March 31, 2024					Six Months Ended March 31, 2024
	Number of options			Weighted-Average Grant Date Fair Value per Share		Number of options			Weighted-Average Grant Date Fair Value Per Share
Beginning balance		858		$	35.37		1,393		$	33.96
Granted		81			58.15		87			58.34
Vested		(9	)		31.78		(549	)		32.01
Forfeited		(4	)		35.54		(5	)		35.24
Ending balance		926		$	37.40		926		$	37.40

Three-Months Ended

December 31, 2017

Number of options

Weighted-Average Grant Date Fair Value per Share
Options outstanding, beginning balance

2,072

$
18.61
Options granted

744

25.68
Options vested

(787)

17.54
Options forfeited

(9)

19.82
Options outstanding, ending balance

2,020

21.63

Information about stock options that have vested, or are expected to vest, and are exercisable at ~~December~~March 31, ~~2017~~2024 was as follows:


	Number of options		Weighted-Average Exercise Price		Weighted-Average Remaining Life in Years		Aggregate Intrinsic Value
Options outstanding		4,213	$	83.54		5.5	$	297,376
Options vested and exercisable		3,287		79.53		4.8		245,191
Options vested and expected to vest		4,177		83.37		5.5		295,556

Restricted stock units

The Company generally grants RSUs to eligible employees under its form RSU agreement for employees (the “Standard Form RSU Agreement”). RSUs granted under the Standard Form RSU Agreement prior to November 14, 2023, generally have a four-year vesting schedule at a rate of 25% per year, and RSUs granted after November 14, 2023 have a three-year vesting schedule at a rate of 33.3% per year, in each case generally subject to continued employment.

The Company has also granted RSUs to certain employees under its form attraction and retention RSU agreement (the “Form Attraction and Retention RSU Agreement”), which has from time to time been used for new hires and specific retention purposes. RSUs granted under the Form Attraction and Retention Agreement are generally scheduled to fully vest on the third or fourth anniversary of the respective grant dates, and in each case, subject to continued employment.

Number

Weighted- Average Exercise Price

Weighted- Average Remaining Life in Years

Aggregate Intrinsic Value
Options outstanding

5,937

$
44.48

6.2

$
192,105
Options vested and exercisable

3,917

35.64

4.9

160,206
Options vested and expected to vest

5,823

44.07

6.1

190,725

A summary of the activity for RSUs:


	Three Months Ended March 31, 2024					Six Months Ended March 31, 2024
	Number of units			Weighted-Average Grant Date Fair Value		Number of units			Weighted-Average Grant Date Fair Value
Beginning balance		170		$	96.95		177		$	93.46
Granted		155			137.76		167			137.33
Released		(5	)		89.03		(24	)		86.59
Forfeited		(1	)		111.78		(1	)		108.48
Ending balance		319		$	116.90		319		$	116.90

Performance restricted stock units

In November 2023, the Company granted PSUs to certain employees under its form PSU agreement that generally will vest subject to a market condition and a service condition through the performance period. The market condition associated with the awards is based on the Company's relative total shareholder return ("TSR") compared to the TSR

generated by the other companies that comprise the S&P 400 Midcap Index over a three-year performance period. Performance at target will result in vesting and issuance of the number of PSUs granted, equal to 100% payout. Performance below or above target can result in an issuance of between 0% - 150% of the target number of PSUs granted. Expense is recognized based on the weighted average grant date fair value on a straight line basis over the service period, irrespective as to whether the market condition is achieved.

The fair value of the PSUs for the November 2023 grant was determined based upon a Monte Carlo valuation method. The assumptions used in the Monte Carlo method to value the PSUs granted, which includes the grant date fair value outcome from the Monte Carlo method, were as follows:


	March 31, 2024
Expected volatility		30.2	%
Risk free interest rate		4.5	%
Expected life	3 years
Grant date fair value	$	146.47

The PSUs granted receive dividend equivalent units; therefore, no discount was applied for Woodward’s dividends.

A summary of the activity for PSUs:


	Three Months Ended March 31, 2024				Six Months Ended March 31, 2024
	Number of units		Weighted-Average Grant Date Fair Value		Number of units		Weighted-Average Grant Date Fair Value
Beginning balance		66	$	146.47		—	$	—
Granted		—		—		66		146.47
Forfeited		—		—		—		—
Ending balance		66	$	146.47		66	$	146.47

Stock-based compensation expense

Woodward recognizes stock-based compensation expense on a straight-line basis over the requisite service period. Pursuant to form stock option agreements, form RSU agreements, and form PSU agreements used by the Company, with terms approved by the administrator of the applicable plan, the requisite service period can be less than the ~~four-year~~ vesting period defined in the applicable award agreement based on grantee’s retirement eligibility. As such, the recognition of stock-based compensation expense associated with some stock option grants, RSU grants, and PSU grants can be accelerated to a period of less than ~~four years,~~the vesting period, including immediate recognition of stock-based compensation expense on the date of grant.

~~Upon approving~~In connection with an executive separation and release agreement entered into by the ~~2017 Plan, Woodward’s board of directors delegated authority to administer~~Company during the 2017 Plan to the compensation committee of the board, including, but not limited to, the power to determine the recipients of awards and the terms of those awards. The compensation committee approved issuance of options in the firstsecond quarter of fiscal year ~~2017 under the 2017 Plan, with~~2024, Woodward recognized an ~~award date~~additional $1,682 of ~~October 3, 2016 conditional upon and subject to approval of the 2017 Plan by the stockholders. The~~ stock ~~options conditionally awarded under the 2017 Plan were not granted or outstanding for accounting purposes prior to stockholder approval of the 2017 Plan, and as such no stock-based~~ compensation expense, ~~related to such awards was recognized on these stock options during the three-months ended December 31, 2016, but rather the expense was recognized in the three-months ended~~before tax.

At March 31, 2017. Options granted in the three-months ended December 31, 2017 were not conditionally granted and, therefore, stock-based compensation expense related to these awards was recognized during the three-months ended December 31, 2017. Total stock-based compensation expense was $12,423 for the three-months ended December 31, 2017 and $1,261 for the three-months ended December 31, 2016.

~~At December 31, 2017,~~2024, there was approximately ~~$14,234~~$39,926 of total unrecognized compensation expense related to non-vested stock-based compensation ~~arrangements.~~arrangements, including stock options, RSUs, and PSUs. The pre-vesting forfeiture rates for purposes of determining stock-based compensation expense recognized were estimated to be 0%0.0% for members of ~~Woodward’s board of directors~~the Board and 9%7.3% for all others. The remaining unrecognized compensation cost is expected to be recognized over a weighted-average period of approximately ~~2.4~~1.6 years.

Note ~~20.~~21. Commitments and contingencies

Woodward is currently involved in claims, pending or threatened litigation or other legal proceedings, investigations and/or regulatory proceedings arising in the normal course of business, including, among others, those relating to product liability claims, employment matters, worker’s compensation claims, contractual disputes, product warranty claims, and alleged violations of various laws and regulations. Woodward accrues for known individual matters using estimates of the most likely amount of loss where it believes that it is probable the matter will result in a loss when ultimately resolved and such loss is reasonably estimable.

Legal costs are expensed as incurred and are classified in “Selling, general and administrative expenses” on the Condensed Consolidated Statements of Earnings.

Woodward is partially self-insured in the United States for healthcare and worker’s compensation up to predetermined amounts, above which third party insurance applies. Management regularly reviews the probable outcome of ~~these~~related claims and proceedings, the expenses expected to be incurred, the availability and limits of the insurance coverage, and the established accruals for liabilities.

While the outcome of pending claims, legal and regulatory proceedings, and investigations cannot be predicted with certainty, management believes that any liabilities that may result from these claims, proceedings, and investigations will not have a material effect on ~~Woodward's~~Woodward’s liquidity, financial condition, or results of operations.

InUnder the ~~event of a~~Company’s severance and change in control ~~of Woodward, as defined in change-in-control~~ agreements with its current corporate officers, Woodward ~~may~~would be required to pay termination benefits to any such ~~officers.~~officer if such officer’s employment is terminated without Cause or for Good Reason (as each term is defined therein). The amount of such benefits would vary depending on whether such termination occurs during a specified period within a change of control.

Note ~~21.~~22. Segment information

Woodward serves the aerospace and industrial markets through its two reportable segments -– Aerospace and Industrial. When appropriate, Woodward’s reportable segments are aggregations of Woodward’s operating segments. Woodward uses operating segment information internally to manage its business, including the assessment of operating segment performance and decisions for the allocation of resources between operating segments.

The accounting policies of the reportable segments are the same as those of the Company. Woodward evaluates segment profit or loss based on internal performance measures for each segment in a given period. In connection with that assessment, Woodward generally excludes matters such as certain charges for restructuring, ~~costs,~~ interest income and expense, certain gains and losses from asset dispositions, or other non-recurring and/or non-operationally related expenses.

A summary of consolidated net sales and earnings by segment follows:


	Three Months Ended March 31,						Six Months Ended March 31,
	2024			2023			2024			2023
Segment external net sales:
Aerospace	$	497,512		$	437,017		$	958,268		$	832,702
Industrial		337,831			281,197			663,805			504,131
Total consolidated net sales	$	835,343		$	718,214		$	1,622,073		$	1,336,833
Segment earnings:
Aerospace	$	98,451		$	73,314		$	177,453		$	128,748
Industrial		65,244			37,571			132,125			48,973
Nonsegment expenses		(32,834	)		(58,307	)		(59,034	)		(82,618	)
Interest expense, net		(10,237	)		(12,337	)		(20,200	)		(23,113	)
Consolidated earnings before income taxes	$	120,624		$	40,241		$	230,344		$	71,990

Three-Months Ended

December 31,

2017

2016
Segment external net sales:

Aerospace

$
305,905

$
266,680
Industrial

164,243

176,214
Total consolidated net sales

$
470,148

$
442,894
Segment earnings:

Aerospace

$
43,553

$
46,877
Industrial

19,344

17,998
Nonsegment expenses

(19,023)

(11,381)
Interest expense, net

(6,387)

(6,435)
Consolidated earnings before income taxes

$
37,487

$
47,059

Segment assets consist of accounts receivable, inventories, property, plant, and equipment, net, goodwill, and other intangibles, net. A summary of consolidated total assets by segment follows:



	December 31, 2017		September 30, 2017		March 31, 2024		September 30, 2023
Segment assets:
Aerospace	$	1,673,675	$	1,722,789	$	1,890,089	$	1,829,410
Industrial		695,167		695,264		1,563,424		1,490,341
Unallocated corporate property, plant and equipment, net		113,790		104,755
Unallocated corporate property, plant, and equipment, net						120,202		104,962
Other unallocated assets		242,542		234,301		792,544		585,490
Consolidated total assets	$	2,725,174	$	2,757,109	$	4,366,259	$	4,010,203

26Note 23. Subsequent events

On April 23, 2024, the Board approved a cash dividend of $0.25 per share for the quarter, payable on June 5, 2024, for stockholders of record as of May 22, 2024.

Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations~~(Amounts in thousands, except per share amounts)~~

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:

~~future sales, earnings, cash flow, uses of cash, and other measures of financial performance;~~

•

future sales, earnings, cash flow, uses of cash, and other measures of financial performance, including our assumptions underlying our expectations;

~~trends in our business and the markets in which we operate, including expectations in those markets in future periods;~~

•

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

~~our expected expenses in future periods and trends in such expenses over time;~~

•

our ability to manage risks from operating internationally;

~~descriptions of our plans and expectations for future operations;~~

•

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

~~plans and expectations relating to the performance of our joint venture with General Electric Company;~~

•

our expected expenses in future periods and trends in such expenses over time;

~~investments in new campuses, business sites and related business developments;~~

•

our expectations regarding margins and the impact of specific products, product mix, and our strategic actions on margins;

~~the effect of economic trends or growth;~~

•

descriptions of our plans and expectations for future operations, including our strategic initiatives and impact of such initiatives;

~~the expected levels of activity in particular industries or markets and the effects of changes in those levels;~~

•

plans and expectations relating to the performance of our joint venture with General Electric Company;

~~the scope, nature, or impact of acquisition activity and integration of such acquisition into our business;~~

•

the expected levels of activity in particular industries or markets and the effects of changes in those levels;

~~the research, development, production, and support of new products and services;~~

•

the scope, nature, or impact of acquisition activity and integration of such acquisition into our business;

~~new business opportunities;~~

•

the research, development, production, and support of new products and services;

~~restructuring and alignment costs and savings;~~

•

ability to implement and realize the intended effects of any restructuring efforts;

~~our plans, objectives, expectations and intentions with respect to business opportunities that may be available to us;~~

•

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;~~

•

our liquidity, including our ability to meet capital spending requirements and operations;

~~future repurchases of common stock;~~

•

future dividends and repurchases of common stock;

~~future levels of indebtedness and capital spending;~~

•

future levels of indebtedness and capital spending;

~~the stability of financial institutions, including those lending to us;~~

•

the stability of financial institutions, including those lending to us;

~~pension and other postretirement plan assumptions and future contributions; and~~

•

pension and other postretirement plan assumptions and future contributions;

~~our tax rate and other effects of the changes to U.S. federal tax law.~~

•

our tax rate and other effects of the changes in U.S. federal tax law;

•

availability of raw materials and components used in our products;

•

expectations relating to environmental and emissions regulations;

•

effects of data privacy, data protection, and information security regulations;

•

our ability to increase automation and develop competitive technologies;

•

our consolidated customer base and ability to enhance customer experience;

•

our ability to manage risks related to U.S. Government contracting, including defense activity and spending patterns;

•

our ability to attract, retain, and develop qualified personnel and maintain favorable labor relations;

•

impact of our ability to protect our intellectual property on our business, financial condition, results of operations, and cash flows; and

•

impact of any potential physical or cybersecurity attacks on our operations, business, including our financial condition, operating results, and reputation.

~~Readers are cautioned that these~~These forward-looking statements are only predictions and are subject to risks, uncertainties and assumptions that are difficult to ~~predict, including:~~

~~a decline in business with, or financial distress of, our significant customers;~~

~~global economic uncertainty and instability in the financial markets;~~

~~our ability to manage product liability claims, product recalls or other liabilities associated with the products and services that we provide;~~

our ability to obtain financing, on acceptable terms or at all, to implement our business plans, complete acquisitions, or otherwise take advantage of business opportunities or respond to business pressures;

~~the long sales cycle, customer evaluation process, and implementation period of some of our products and services;~~

~~our ability to implement and realize the intended effects of any restructuring and alignment efforts;~~

~~our ability to successfully manage competitive factors, including prices, promotional incentives, competitor product development, industry consolidation, and commodity and other input cost increases;~~

~~our ability to manage our expenses and product mix while responding to sales increases or decreases;~~

the ability of our subcontractors to perform contractual obligations and our suppliers to provide us with materials of sufficient quality or quantity required to meet our production needs at favorable prices or at all;

~~our ability to monitor our technological expertise and the success of, and/or costs associated with, our product development activities;~~

consolidation in the aerospace market and our participation in a strategic joint venture with General Electric Company may make it more difficult to secure long-term sales in certain aerospace markets;

our debt obligations, our debt service requirements, and our ability to operate our business, pursue business strategies and incur additional debt in light of covenants contained in our outstanding debt agreements;

~~our ability to manage additional tax expense and exposures;~~

~~risks related to our U.S. Government contracting activities, including liabilities resulting from legal and regulatory proceedings, inquiries, or investigations related to such activities;~~

the potential of a significant reduction in defense sales due to decreases in the amount of U.S. Federal defense spending or other specific budget cuts impacting defense programs in which we participate;

~~changes in government spending patterns, priorities, subsidy programs and/or regulatory requirements;~~

~~future impairment charges resulting from changes in the estimates of fair value of reporting units or of long-lived assets;~~

~~future results of our subsidiaries;~~

~~environmental liabilities related to manufacturing activities and/or real estate acquisitions;~~

~~our continued access to a stable workforce and favorable labor relations with our employees;~~

~~physical and other risks related to our operations and suppliers, including natural disasters, which could disrupt production;~~

~~our ability to successfully manage regulatory and legal matters (including the adequacy of amounts accrued for contingencies, the U.S. Foreign Corrupt Practices Act, U.S. and other tax laws~~, ~~international trade regulations, and product liability, patent, and intellectual property matters);~~

~~changes in accounting standards, which could adversely impact our profitability or financial position;~~

~~risks related to our common stock, including changes in prices and trading volumes;~~

risks from operating internationally, including the impact on reported earnings from fluctuations in foreign currency exchange rates, tariffs, and compliance with and changes in the legal and regulatory environments of the United States and the countries in which we operate;

~~risks associated with global political and economic uncertainty in the European Union and elsewhere;~~

fair value of defined benefit plan assets and assumptions used in determining our retirement pension and other postretirement benefit obligations and related expenses including, among others, discount rates and investment return on pension assets;

~~industry risks, including changes in commodity prices for oil, natural gas, and other minerals, unforeseen events that may reduce commercial aviation, and changing emissions standards;~~

~~possible information systems interruptions or intrusions, which may adversely affect our operations; and~~

~~certain provisions of our charter documents and Delaware law that could discourage or prevent others from acquiring our company.~~

~~These factors are representative of the risks, uncertainties, and assumptions~~predict. Factors that could cause actual ~~outcomes~~results and ~~results~~the timing of certain events to differ materially from ~~what is expressed or forecast~~the forward-looking statements include, but are not limited to, risk factors described in our forward-looking statements. Other factors are discussed elsewhere in this Quarterly Report on Form 10-Q (this “Form 10-Q”), under the caption “Risk Factors” in Part I, Item 1A in our most recent Annual Report on Form 10-K filedWoodward's filings with the Securities and Exchange Commission, ~~(“SEC”) (our “Form 10-K”), as updated from time to time in our subsequent SEC filings,~~including its Annual Report on Form 10-K for the year ended September 30, 2023, which was filed on November 17, 2023, and other ~~documents we have filed or will file~~risks described in Woodward’s filings with the ~~SEC.~~ Securities and Exchange Commission.

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 to Woodward, 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.

This discussion should be read together with Management’s Discussion and Analysis of Financial Condition and Results of Operations in Part II, Item 7 of our most recent Form 10-K and the Condensed Consolidated Financial Statements and Notes included therein and in this report.

OVERVIEW

Global Business Conditions

~~OVERVIEW~~

~~Operational Highlights~~

~~Net sales for~~During the first ~~quarter~~half of fiscal year ~~2018 were $470,148, an increase of 6.2% from $442,894 for the prior year’s first quarter. Aerospace segment~~2024, we achieved significant sales ~~for the first quarter of fiscal year 2018 were up 14.7% to $305,905,~~growth and margin expansion as compared to ~~$266,680 for~~ the ~~first quarter~~same period of the prior ~~fiscal~~ year. ~~Industrial segment sales~~The compounding impacts of our focused efforts on operational excellence enabled us to increase output and capitalize on continued strong end market demand for our products and services across the ~~first quarter~~aerospace and industrial markets. Further, we continue to better align price to the value of ~~fiscal year 2018 were down 6.8%~~our products which helps to ~~$164,243, compared~~mitigate the ongoing impacts of inflation. We remain committed to ~~$176,214 for~~growth, operational excellence, and innovation to deliver long-term success and enhanced shareholder value. We also continue to monitor the ~~first quarter~~macroeconomic environment such as inflation, uncertain future demand relating to on-highway natural gas trucks in China, and economic uncertainty as they continue to impact certain aspects of ~~the prior fiscal year.~~ our business.

~~Net~~Operational Highlights

Quarter and Year to Date Highlights


	Three Months Ended March 31,						Six Months Ended March 31,
	2024			2023			2024			2023
Net sales:
Aerospace segment	$	497,512		$	437,017		$	958,268		$	832,702
Industrial segment		337,831			281,197			663,805			504,131
Consolidated net sales	$	835,343		$	718,214		$	1,622,073		$	1,336,833

Earnings:
Aerospace segment	$	98,451		$	73,314		$	177,453		$	128,748
Segment earnings as a percent of segment net sales		19.8	%		16.8	%		18.5	%		15.5	%
Industrial segment	$	65,244		$	37,571		$	132,125		$	48,973
Segment earnings as a percent of segment net sales		19.3	%		13.4	%		19.9	%		9.7	%
Consolidated net earnings	$	97,556		$	35,511		$	187,600		$	65,117
Adjusted net earnings	$	100,825		$	61,719		$	190,636		$	91,325

Effective tax rate		19.1	%		11.8	%		18.6	%		9.5	%
Adjusted effective tax rate		19.3	%		17.8	%		18.6	%		14.5	%
Consolidated diluted earnings per share	$	1.56		$	0.58		$	3.02		$	1.07
Consolidated adjusted diluted earnings per share	$	1.62		$	1.01		$	3.07		$	1.50

Earnings before interest and taxes ("EBIT")	$	130,861		$	52,578		$	250,544		$	95,103
Adjusted EBIT	$	135,191		$	87,454		$	254,309		$	129,979
Earnings before interest, taxes, depreciation, and amortization ("EBITDA")	$	160,086		$	82,531		$	308,594		$	154,360
Adjusted EBITDA	$	164,416		$	117,407		$	312,359		$	189,236

Adjusted net earnings, ~~for the first quarter of fiscal year 2018 were $18,260, or $0.29~~adjusted earnings per ~~diluted~~ share, ~~compared to $46,548, or $0.73 per diluted share, for the first quarter of fiscal year 2017. The~~adjusted effective tax rate, ~~in the first quarter~~EBIT, adjusted EBIT, EBITDA, and adjusted EBITDA are non-U.S. GAAP financial measures. A description of ~~fiscal year 2018 was 51.3% compared to 1.1% for the first quarter of the prior fiscal year, primarily due to discrete charges related to recent changes in the U.S. federal tax law.~~

~~Earnings before interest and taxes (“EBIT”) for the first quarter of fiscal year 2018 were $43,874,~~these measures as well as a decrease of 18.0% from $53,494 in the first quarter of fiscal year 2017. Earnings before interest, taxes, depreciation and amortization (“EBITDA”) for the first quarter of fiscal year 2018 were $64,944, down 10.3% from $72,407 for the first quarter of fiscal year 2017. (A reconciliation of these non-U.S. GAAP financial measures to the ~~closest~~most directly comparable U.S. GAAP financial ~~measure~~measures can be found under the caption “Non-U.S. GAAP Financial Measures” in this Item 2 – Management’s Discussion and Analysis of Financial ~~Conditions~~Condition and Results of Operations.)

Aerospace segment earnings as a percent of segment net sales decreased to 14.2% in the first quarter of fiscal year 2018 from 17.6% in the first quarter of the prior fiscal year. Industrial segment earnings as a percent of segment net sales increased to 11.8% in the first quarter of fiscal year 2018 from 10.2% in the first quarter of the prior fiscal year.

Liquidity Highlights

Net cash ~~used in~~provided by operating activities for the first ~~quarter~~half of fiscal year ~~2018~~2024 was ~~$2,533,~~$144,118, compared to $40,150 for the first half of fiscal year 2023. The increase in net cash provided by operating activities ~~of $52,351 for~~in the first ~~quarter~~half of fiscal year ~~2017. The increase in net cash used in operating activities in the first quarter of fiscal year 2018~~2024 compared to the first half of the prior ~~year’s first quarter~~fiscal year is primarily attributable to ~~a decrease in net earnings in the current fiscal quarter and higher working capital used primarily due to the timing of payments for accounts payable and accrued liabilities.~~increased earnings.

For the first ~~quarter~~half of fiscal year ~~2018,~~2024, free cash flow ~~which we~~was $87,817, compared to negative $3,896 for the first half of fiscal year 2023. We define free cash flow as net cash ~~flows~~flow from operating activities less payments for property, plant, and ~~equipment,~~equipment. Adjusted free cash flow, which we define as free cash flow excluding cash payments pertaining to a non-recurring matter unrelated to the ongoing operations, payments for business development activities, payments for restructuring charges, and cash received for a non-recurring matter related to a previous acquisition, was ~~an outflow of $30,983, compared to an inflow of $31,293~~$90,032 for the first ~~quarter~~half of fiscal year ~~2017. (A reconciliation~~2024, compared to a negative $1,060 for the first half of ~~this~~fiscal year 2023. The increase in free cash flow and adjusted free cash flow for the first half of fiscal year 2024 as compared to the same period of the prior fiscal year

was primarily due to increased earnings, partially offset by higher capital expenditures. Free cash flow and adjusted free cash flow are non-U.S. GAAP financial ~~measure~~measures. A description of these measures as well as a reconciliation of these non-U.S. GAAP financial measures to the ~~closest~~most directly comparable U.S. GAAP financial ~~measure~~measures can be found under the caption “Non-U.S. GAAP Financial Measures” in this Item 2 – Management’s Discussion and Analysis of Financial ~~Conditions~~Condition and Results of Operations.)

At ~~December~~March 31, ~~2017,~~2024, we held ~~$85,779~~$316,932 in cash and cash equivalents and had total outstanding debt of ~~$649,639 with~~$791,038. We have additional borrowing availability of ~~$922,377,~~$850,764, net of outstanding letters of credit, under our revolving credit agreement. At ~~December~~March 31, ~~2017,~~2024, we also had additional borrowing capacity of ~~$7,516~~$25,585 under various foreign lines of credit and foreign overdraft facilities.

RESULTS OF OP~~ERATIONS~~OPERATIONS

The following table sets forth ~~selected~~condensed consolidated statements of earnings data as a percentage of net sales for each period indicated:


	Three Months Ended												Six Months Ended
	March 31, 2024			% of Net Sales			March 31, 2023			% of Net Sales			March 31, 2024			% of Net Sales			March 31, 2023			% of Net Sales
Net sales	$	835,343			100	%	$	718,214			100	%	$	1,622,073			100	%	$	1,336,833			100	%
Costs and expenses:
Cost of goods sold		600,954			71.9	%		559,149			77.9	%		1,183,335			73.0	%		1,051,812			78.7	%
Selling, general, and administrative expenses		81,447			9.8	%		75,578			10.5	%		155,958			9.6	%		138,765			10.4	%
Research and development costs		36,465			4.4	%		37,777			5.3	%		67,259			4.1	%		66,411			5.0	%
Restructuring charges		—			0.0	%		5,172			0.7	%		—			0.0	%		5,172			0.4	%
Interest expense		11,530			1.4	%		12,845			1.8	%		22,966			1.4	%		23,987			1.8	%
Interest income		(1,293	)		(0.2	)%		(508	)		(0.1	)%		(2,766	)		(0.2	)%		(874	)		(0.1	)%
Other (income) expense, net		(14,384	)		(1.7	)%		(12,040	)		(1.7	)%		(35,023	)		(2.2	)%		(20,430	)		(1.5	)%
Total costs and expenses		714,719			85.6	%		677,973			94.4	%		1,391,729			85.8	%		1,264,843			94.6	%
Earnings before income taxes		120,624			14.4	%		40,241			5.6	%		230,344			14.2	%		71,990			5.4	%
Income tax expense		23,068			2.8	%		4,730			0.7	%		42,744			2.6	%		6,873			0.5	%
Net earnings	$	97,556			11.7	%	$	35,511			4.9	%	$	187,600			11.6	%	$	65,117			4.9	%

Three-Months Ended

December 31, 2017

% of Net Sales

December 31, 2016

% of Net Sales
Net sales

$
470,148

100
%

$
442,894

100
%
Costs and expenses:

Cost of goods sold

346,784

73.8

329,148

74.3

Selling, general, and administrative expenses

46,276

9.8

38,300

8.6

Research and development costs

34,786

7.4

26,540

6.0

Interest expense

6,750

1.4

6,840

1.5

Interest income

(363)

(0.1)

(405)

(0.1)

Other (income) expense, net

(1,572)

(0.3)

(4,588)

(1.0)

Total costs and expenses

432,661

92.0

395,835

89.4

Earnings before income taxes

37,487

8.0

47,059

10.6

Income tax expense

19,227

4.1

511

0.1

Net earnings

$
18,260

3.9

$
46,548

10.5

Other select financial data:


	March 31, 2024		September 30, 2023
Working capital	$	1,120,119	$	852,256
Total debt		791,038		721,526
Total stockholders' equity		2,329,413		2,070,989

December 31,

September 30,

2017

2017
Working capital
$
626,122

$
593,955
Short-term borrowings

66,300

32,600
Total debt

649,639

612,886
Total stockholders' equity

1,400,546

1,371,383

Net Sales

Consolidated net sales for the ~~first~~second quarter of fiscal year ~~2018~~2024 increased by ~~$27,254,~~$117,129, or ~~6.2%~~16.3%, compared to the same period of fiscal year ~~2017.~~ 2023. Consolidated net sales for the first half of fiscal year 2024 increased by $285,240, or 21.3%, compared to the same period of fiscal year 2023.

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


	Three-Month Period			Six-Month Period
Consolidated net sales for the period ended March 31, 2023	$	718,214		$	1,336,833
Aerospace volume		29,145			63,638
Industrial volume		34,299			113,489
Effects of changes in price		56,958			106,763
Effects of changes in foreign currency rates		(3,273	)		1,350
Consolidated net sales for the period ended March 31, 2024	$	835,343		$	1,622,073



	~~Three-Month Period~~
~~Consolidated net sales for~~In the Aerospace segment, the ~~period ended December 31, 2016~~	$	~~442,894~~
~~Aerospace volume~~		~~36,317~~
~~Industrial volume~~		~~(15,615)~~
~~Effects of changes in price and sales mix~~		~~960~~
~~Effects of changes in foreign currency rates~~		~~5,592~~
~~Consolidated net sales for the period ended December 31, 2017~~	$	~~470,148~~

~~The~~ increase in net sales for the second quarter and first half of fiscal year 2024 as compared to the same periods of the prior fiscal year is primarily attributable to increased aircraft utilization, as a result of continued growth in passenger traffic, and price realization.

In the Industrial segment, the increase in net sales for the second quarter and first half of fiscal year 2024 as compared to the same periods of the prior fiscal year is primarily attributable to growth in transportation, particularly in the

on-highway natural gas truck business in China, strong sales in power generation, and price realization, partially offset by a decrease in oil and gas sales.

Costs and Expenses

Cost of goods sold increased by $41,805 to $600,954, for the second quarter of fiscal year 2018 was primarily attributable to increased defense original equipment manufacturer (“OEM”) sales boosted by continued momentum in smart weapon sales and increased commercial aftermarket and OEM sales in2024, from $559,149, for the Aerospace segment, partially offset by net sales declines in the Industrial segment. The Industrial segment experienced decreased industrial gas turbine sales and renewables sales, which were partially offset by increased salessecond quarter of ~~large gas engines and fuel systems for Compressed Natural Gas (“CNG”) trucks in Asia.~~

~~Costs and Expenses~~

fiscal year 2023. Cost of goods sold decreased to 71.9% of net sales, for the second quarter of fiscal year 2024, compared to 77.9% of net sales for the second quarter of fiscal year 2023.

Cost of goods sold increased by ~~$17,636~~$131,523 to ~~$346,784, or 73.8%~~$1,183,335, for the first half of fiscal year 2024, from $1,051,812, for the first half of fiscal year 2023. Cost of goods sold decreased to 73.0% of net sales, for the first ~~quarter~~half of fiscal year ~~2018 from $329,148, or 74.3%~~2024, compared to 78.7% of net sales for the first ~~quarter~~half of fiscal year ~~2017.~~ 2023.

The increase in cost of goods sold on an absolute basis in the second quarter and first half of fiscal year 2024 compared to the same periods of the prior fiscal year is primarily ~~attributable~~due to higher sales volume and ~~planned production facility capacity expansion costs, partially offset by savings from~~net inflationary impacts on material and labor costs. The decrease in cost ~~reduction initiatives~~of goods sold as a percent of net sales in ~~our Industrial segment.~~ the second quarter and first half of fiscal year 2024 compared to the same periods of the prior fiscal year is primarily due to price realization.

Gross margin (as measured by net sales less cost of goods sold, divided by net sales) was ~~26.2%~~28.1% for the ~~first~~second quarter of fiscal year ~~2018,~~2024 and 27.0% for the first half of fiscal year 2024, compared to ~~25.7%~~22.1% for the ~~first~~second quarter of fiscal year ~~2017. Gross~~2023 and 21.3% for the first half of fiscal year 2023. The increase in gross margin for the second quarter and first ~~quarter~~half of fiscal year

~~2018 was higher~~ 2024 as compared to the ~~first~~same periods of the prior fiscal year is primarily attributable to higher sales volume and price realization, partially offset by net inflationary impacts on material and labor costs.

Selling, general, and administrative expenses increased by $5,869, or 7.8%, to $81,447 for the second quarter of fiscal year ~~2017, primarily related~~2024, compared to ~~increased sales volume partially offset by planned production facility capacity expansion costs and unfavorable product mix.~~

~~Selling, general, and administrative expenses~~ ~~increased by $7,976, or 20.8%, to $46,276~~$75,578 for the ~~first~~second quarter of fiscal year ~~2018, as compared to $38,300 for the first quarter of fiscal year 2017.~~2023. Selling, general, and administrative expenses as a percentage of net sales ~~was~~decreased to 9.8% for the ~~first~~second quarter of fiscal year ~~2018 as~~2024, compared to ~~8.6%~~10.5% for the ~~first~~second quarter of fiscal year ~~2017.~~2023. The increase in selling, general, and administrative expenses on an absolute basis for the ~~first~~second quarter of fiscal year ~~2018 was~~2024 compared to the same period of the prior fiscal year is primarily due to ~~the timing of the recognition of stock-based~~increased annual variable incentive compensation ~~expense. We recognized the majority of our annual stock-based compensation expense in~~costs.

Selling, general, and administrative expenses increased by $17,193, or 12.4%, to $155,958 for the first ~~quarter~~half of fiscal year ~~2018, whereas in fiscal year 2017 the majority of this expense was recognized in the second quarter of the fiscal year.~~

~~Research and development costs~~ ~~increased by $8,246, or 31.1%,~~2024, compared to ~~$34,786~~$138,765 for the first ~~quarter~~half of fiscal year ~~2018, as compared to $26,540 for the first quarter of fiscal year 2017. Research~~2023. Selling, general, and ~~development costs~~administrative expenses as a percentage of net sales ~~increased~~decreased to ~~7.4%~~9.6% for the first half of fiscal year 2024, compared to 10.4% for the first half of fiscal year 2023. The increase in selling, general, and administrative expenses on an absolute basis for the first half of fiscal year 2024 as compared to the same period of the prior fiscal year is primarily due to increased annual variable incentive compensation costs, increased expenses relating to business development activities, and increased headcount.

Research and development costs decreased by $1,312, or 3.5%, to $36,465 for the second quarter of fiscal year ~~2018 as~~2024, compared to ~~6.0%~~$37,777 for the ~~first~~second quarter of fiscal year ~~2017. Research~~2023. The decrease in research and development costs infor the ~~first~~second quarter of fiscal year ~~2018 were higher~~2024 as compared to the same period of the prior fiscal year is primarily due to ~~increased spending on new awards and opportunities being pursued within both of our business segments as well as~~ variability in the timing of projects and expenses. As a percentage of net sales, research and development costs decreased to 4.4% for the second quarter of fiscal year 2024, as compared to 5.3% for the same period of the prior fiscal year.

Research and development costs increased by $848, or 1.3%, to $67,259 for the first half of fiscal year 2024, compared to $66,411 for the first half of fiscal year 2023. The increase in research and development costs for the first half of fiscal year 2024 as compared to the same period of the prior fiscal year is primarily due to variability in the timing of projects and expenses. As a percentage of net sales, research and development costs decreased to 4.1% for the first half of fiscal year 2024, as compared to 5.0% for the first half of fiscal year 2023.

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~~programs.

Interest expense~~was$6,750,~~ decreased by $1,315, or ~~1.4% of net sales,~~10.2%, to $11,530 for the ~~first~~second quarter of fiscal year ~~2018,~~2024, compared to ~~$6,840, or 1.5% of net sales,~~$12,845 for the ~~first~~second quarter of fiscal year ~~2017.~~2023. Interest expense decreased by $1,021, or 4.3%, to $22,966 for the first half of fiscal year 2024, compared to $23,987 for the first half of fiscal year 2023. Interest expense as a percentage of net sales was 1.4% for each of the second quarter and first half of fiscal year 2024, compared to 1.8% for each of the second quarter and first half of fiscal year 2023. The ~~slight~~ decrease in interest expense ~~was~~for the second quarter and first half of fiscal year 2024 as compared to the same periods of the prior fiscal year is primarily attributable to ~~lower average borrowings under~~increased payments on our revolving credit facility induring the second quarter and first half of fiscal year 2024. During the first six months of fiscal year 2024, we paid the entire balance of two series of private placement notes totaling $75,000.

Other income increased by $2,344 to $14,384 for the second quarter of fiscal year ~~2018~~2024, compared to $12,040 for the ~~first~~second quarter of fiscal year ~~2017.~~2023. The increase in other income for the second quarter of fiscal year 2024 as compared to the same period of the prior fiscal year is primarily attributable to a gain on sales of assets and businesses whereas in the prior year we had a loss on the sale of assets and businesses.

Other income increased by $14,593 to $35,023 for the first half of fiscal year 2024, compared to $20,430 for the first half of fiscal year 2023. The increase in other income for the second quarter of fiscal year 2024 as compared to the same period of the prior fiscal year is primarily attributable to increased earnings in the joint venture with General Electric and a non-recurring gain related to a previous acquisition that was recognized during the first half of fiscal year 2024.

Income taxes were provided at an effective rate on earnings before income taxes of ~~51.3%~~19.1% for the second quarter and 18.6% for the first ~~quarter~~half of fiscal year ~~2018, compared to 1.1%~~2024, and 11.8% for the second quarter and 9.5% for the first ~~quarter~~half of fiscal year ~~2017. The changes in components of our effective tax rate (as a percentage of earnings before income taxes) were attributable to the following:~~2023.



		~~Three-Month~~
		~~Period~~
~~Effective tax rate for the period ended December 31, 2016~~		~~1.1~~	%
~~Current year effect of U.S. federal corporate rate reduction~~		~~(9.3)~~
~~Discrete impact of the Tax Act:~~
~~Effect of U.S. federal corporate rate reduction on net U.S. deferred tax liability~~	~~(43.8)~~
~~Transition Tax~~	~~69.4~~
~~Increased deferred tax liability associated with anticipated repatriation taxes~~	~~13.0~~
~~Net discrete impact of enactment of the Tax Act~~		~~38.6~~
~~Taxes on international activities~~		~~22.9~~
~~Research and experimentation credit~~		~~(0.1)~~
~~State and local taxes~~		~~(0.1)~~
~~Adjustment of prior period tax items~~		~~(3.1)~~
~~Net excess income tax benefit from stock-based compensation~~		~~1.3~~
~~Effective tax rate for the period ended December 31, 2017~~		~~51.3~~	%

The increase in the year-over-year effective tax rate for the three-months ended December 31, 2017 is primarily attributable to the $14,778 discrete net impact resulting from the enactment of “An Act to Provide for Reconciliation Pursuant to Titles II and V of the Concurrent Resolution on the Budget for Fiscal Year 2018” (the “Tax Act”) partially offset by benefits of the current year effect of the U.S. federal corporate rate reduction resulting from the enactment of the Tax Act on the estimated annual effective tax rate. In addition, the effective tax rate for the ~~three-months ended December 31, 2016 includes~~second quarter as compared to the ~~impact~~same period of the ~~repatriation~~prior fiscal year is primarily attributable to higher projected full-year earnings taxed at statutory rates ranging between approximately 19% and 35%. These higher projected earnings and higher actual quarterly earnings resulted in lower current quarter tax ~~on deferred foreign profits and losses. The U.S. foreign tax credits available~~benefits as a ~~result~~percent of earnings when compared to the ~~repatriation of~~prior year quarter. Additionally, the increase is attributable to projected future withholding taxes on unremitted foreign ~~net earnings~~earnings.

The increase in the ~~first quarter of last year were greater than the U.S. taxes payable on these net foreign earnings.~~

As a result of the Tax Act, we have calculated a U.S. federal statutory corporate income tax rate of 24.5% for the fiscal year ending September 30, 2018 and we expect the U.S. federal statutory rate to be 21% for fiscal years beginning after September 30, 2018. Overall, we anticipate the decrease in the U.S. federal statutory rate resulting from the enactment of the Tax Act will have favorable impact on our future U.S. tax expense and operating cash flows.

~~Within the calculation of our annual~~ effective tax rate ~~we have used assumptions~~for the first half of fiscal year 2024 as compared to the same period of the prior fiscal year is primarily attributable to higher projected full-year earnings taxed at statutory rates ranging between approximately 19% and ~~estimates that may change~~35%. These higher projected earnings and higher actual year-to-date earnings resulted in lower current year-to-date tax benefits as a ~~result~~percent of ~~future guidance, interpretation, and rule-making from the Internal Revenue Service, the SEC, the Financial~~

~~Accounting Standards Board (“FASB”) and/or various other taxing jurisdictions. The Tax Act contains many significant changes~~earnings when compared to the ~~U.S. tax laws,~~prior year. Additionally, the ~~consequences of which have not yet been fully determined. Changes in corporate tax rates, the net deferred tax assets and/or liabilities relating~~increase is attributable to ~~our U.S. operations, the taxation of~~projected future withholding taxes on unremitted foreign earnings and the ~~deductibility~~release of ~~expenses contained~~uncertain tax positions that did not recur in the ~~Tax Act or other future tax reform legislation could have a material impact on our future U.S. tax expense.~~current fiscal year.

Segment Results

The following table presents sales by segment:


	Three Months Ended March 31,								Six Months Ended March 31,
	2024				2023				2024				2023
Net sales:
Aerospace	$	497,512	59.6	%	$	437,017	60.8	%	$	958,268	59.1	%	$	832,702	62.3	%
Industrial		337,831	40.4	%		281,197	39.2	%		663,805	40.9	%		504,131	37.7	%
Consolidated net sales	$	835,343	100	%	$	718,214	100	%	$	1,622,073	100	%	$	1,336,833	100	%

Three-Months Ended December 31,

2017

2016
Net sales:

Aerospace

$
305,905

65.1
%

$
266,680

60.2
%
Industrial

164,243

34.9

176,214

39.8

Consolidated net sales

$
470,148

100.0
%

$
442,894

100.0
%

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,
	2024			2023			2024			2023
Aerospace	$	98,451		$	73,314		$	177,453		$	128,748
Industrial		65,244			37,571			132,125			48,973
Nonsegment expenses		(32,834	)		(58,307	)		(59,034	)		(82,618	)
Interest expense, net		(10,237	)		(12,337	)		(20,200	)		(23,113	)
Consolidated earnings before income taxes		120,624			40,241			230,344			71,990
Income tax expense		(23,068	)		(4,730	)		(42,744	)		(6,873	)
Consolidated net earnings	$	97,556		$	35,511		$	187,600		$	65,117

Three-Months Ended December 31,

2017

2016
Aerospace
$
43,553

$
46,877
Industrial

19,344

17,998
Nonsegment expenses

(19,023)

(11,381)
Interest expense, net

(6,387)

(6,435)
Consolidated earnings before income taxes

37,487

47,059
Income tax expense

(19,227)

(511)
Consolidated net earnings
$
18,260

$
46,548

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


	Three Months Ended March 31,						Six Months Ended March 31,
	2024			2023			2024			2023
Aerospace		19.8	%		16.8	%		18.5	%		15.5	%
Industrial		19.3	%		13.4	%		19.9	%		9.7	%

Aerospace

Three-Months Ended December 31,

2017

2016
Aerospace

14.2%

17.6%
Industrial

11.8%

10.2%

Aerospace

segment net sales increased by $60,495, or 13.8%, to $497,512 for the second quarter of fiscal year 2024, compared to $437,017 for the second quarter of fiscal year 2023. Aerospace segment net sales ~~were $305,905~~increased by $125,566, or 15.1%, to $958,268 for the first ~~quarter~~half of fiscal year ~~2018, up 14.7%~~2024, compared to ~~$266,680~~$832,702 for the first ~~quarter~~half of fiscal year ~~2017.~~2023. The increase in Aerospace segment net sales ~~for~~in the second quarter and first ~~quarter~~half of fiscal year 2018 as compared to the first quarter of fiscal year 2017 was driven primarily by increased commercial OEM and aftermarket sales and increased defense OEM sales in the first quarter of fiscal year 2018. Defense aftermarket sales were down in the first quarter of fiscal year 20182024 as compared to the same ~~period~~periods of the prior fiscal year ~~2017.~~

~~Commercial OEM sales were up for the first quarter~~is primarily attributable to increased aircraft utilization, as a result of ~~fiscal year 2018 as compared to the first quarter of fiscal year 2017. The strong commercial OEM sales~~continued growth in the quarter benefitted from the accelerating deliveries of certain key next generation aircraft on which we have increased content, as well as some improvement in business jets as compared to a weak first quarter of fiscal year 2017.

Commercial aftermarket sales increased significantly in the first quarter of fiscal year 2018 as compared to the first quarter of fiscal year 2017, benefitting from both the initial provisioning for new platformspassenger traffic, and ~~increased utilization of existing fleets.~~ price realization.

~~U.S. government funds continue to be prioritized for defense platforms on which we have content.~~ 31

Defense OEM sales increased in the second quarter and were approximately flat for the first half of fiscal year 2024 as compared to the same periods of the prior fiscal year, primarily driven by increased demand for ground vehicle components, partially offset by reduced demand for smart defense. Our defense aftermarket sales increased in the second quarter and first half of fiscal year 2024 compared to the same periods of the prior fiscal year, primarily driven by supply chain stabilization and increased output.

Aerospace segment earnings increased by $25,137, or 34.3%, to $98,451 for the second quarter of fiscal year ~~2018~~2024, compared to $73,314 for the ~~first~~second quarter of fiscal year ~~2017, driven primarily~~2023. Aerospace segment earnings increased by ~~continued strong demand~~$48,705, or 37.8%, to $177,453 for ~~smart weapons, as well as growing international demand for various other military programs.~~

~~Defense aftermarket sales decreased in~~ the first ~~quarter~~half of fiscal year ~~2018 as~~2024, compared to $128,748 for the first ~~quarter~~half of fiscal year ~~2017, reflecting variability in the timing of continued maintenance needs and upgrade programs.~~2023.

~~Aerospace segment earnings~~ ~~decreased by $3,324, or 7.1%, to $43,553 for the first quarter of fiscal year 2018, compared to $46,877 for the first quarter of fiscal year 2017.~~ The ~~net decrease~~increase in Aerospace segment earnings ~~for the first quarter of fiscal year 2018~~ was due to the following:


	Three-Month Period			Six-Month Period
Earnings for the period ended March 31, 2023	$	73,314		$	128,748
Sales volume and mix		17,159			31,289
Price, inflation, and productivity		16,775			28,846
Other, net		(8,797	)		(11,430	)
Earnings for the period ended March 31, 2024	$	98,451		$	177,453



	~~Three-Month~~
	~~Period~~
~~Earnings for the period ended December 31, 2016~~	$	~~46,877~~
~~Sales volume~~		~~18,207~~
~~Price, sales mix and productivity~~		~~(4,952)~~
~~Production capacity expansion costs~~		~~(5,138)~~
~~Increases in research and development expenses~~		~~(5,876)~~
~~Other, net~~		~~(5,565)~~
~~Earnings for the period ended December 31, 2017~~	$	~~43,553~~

Aerospace segment earnings as a percentage of segment net sales were ~~14.2%~~19.8% for the second quarter and 18.5% for the first half of fiscal year 2024, compared to 16.8% for the second quarter and 15.5% for the first half of fiscal year 2023.

Industrial

Industrial segment net sales increased by $56,634, or 20.1%, to $337,831 for the second quarter of fiscal year ~~2018,~~2024, compared to ~~17.6%~~$281,197 for the ~~first~~second quarter of fiscal year ~~2017. Aerospace~~2023. Industrial segment ~~earnings benefitted from higher~~net sales ~~volume which~~increased by $159,674, or 31.7%, to $663,805 for the first half of fiscal year 2024, compared to $504,131 for the first half of fiscal year 2023. The increase in Industrial segment net sales in the second quarter and first half of fiscal year 2024 as compared to the same periods of the prior fiscal year was primarily attributable to growth in transportation, particularly in the on-highway natural gas truck business in China, as well as strong sales in power generation and price realization, partially offset by ~~unfavorable product sales mix~~decreased oil and ~~higher production capacity expansion costs to support new program awards. Aerospace segment earnings were also negatively impacted by increased investment~~gas sales.

Future demand for on-highway natural gas trucks in ~~research and development for new program awards and opportunities being pursued.~~

~~Industrial~~

~~Industrial segment net sales~~ ~~decreased by 6.8% to $164,243 for~~China beyond the ~~first~~third quarter of fiscal year ~~2018, compared~~2024 remains uncertain.

Industrial segment earnings increased by $27,673, or 73.7%, to ~~$176,214~~$65,244 for the ~~first~~second quarter of fiscal year ~~2017 due primarily~~2024, compared to ~~declines~~$37,571 for the second quarter of fiscal year 2023. Segment earnings increased by $83,152, or 169.8%, to $132,125 for the first half of fiscal year 2024, compared to $48,973 for the first half of fiscal year 2023.

The increase in industrial gas turbine and renewables sales. The decline in industrial gas turbine sales was the result of increased efficiency leading to lower overall demand for electricity, the increased utilization of renewable power sources, and excess inventory in the channel. The sales decline in our renewables businessIndustrial segment earnings was due to the ~~short-term unfavorable impact~~following:


	Three-Month Period			Six-Month Period
Earnings for the period ended March 31, 2023	$	37,571		$	48,973
Sales volume and mix		11,629			55,374
Price, inflation, and productivity		24,609			38,527
Other, net		(8,565	)		(10,749	)
Earnings for the period ended March 31, 2024	$	65,244		$	132,125

Industrial segment earnings as a percentage of ~~platform transitions by some~~segment net sales were 19.3% for the second quarter and 19.9% for the first half of ~~our customers. Sales~~fiscal year 2024, compared to 13.4% for the second quarter and 9.7% for the first half of ~~fuel systems~~fiscal year 2023. Industrial earnings benefited significantly from increased demand for ~~CNG~~on-highway natural gas trucks in ~~Asia~~China as well as from operational improvements including increased output and other efficiency gains, and favorable product mix. Future demand for on-highway natural gas trucks in China beyond the ~~first~~third quarter of fiscal year ~~2018~~2024 remains uncertain.

Nonsegment

Nonsegment expenses decreased by $25,473 to $32,834 for the second quarter of fiscal year 2024, compared to $58,307 for the second quarter of fiscal year 2023. Nonsegment expenses decreased by $23,584 to $59,034 for the first half of fiscal year 2024 compared to $82,618 for the first half of fiscal year 2023.

The decrease in nonsegment expenses for the second quarter and first half of fiscal year 2024 as compared to the ~~first~~same periods of the prior year was primarily due to significant costs that occurred in the second quarter of fiscal year ~~2017 as the Chinese government continues to encourage natural gas usage. In addition, sales of reciprocating engines used in both power generation and oil and gas applications were up~~2023 that did not reoccur in the second quarter or first half of fiscal year 2024.

The significant charges that impacted nonsegment expenses are as follows:


	Three Months Ended March 31,						Six Months Ended March 31,
	2024			2023			2024			2023
Nonsegment expenses	$	(32,834	)	$	(58,307	)	$	(59,034	)	$	(82,618	)
Non-recurring gain related to a previous acquisition		—			—			(4,803	)		—
Business development activities		1,664			—			5,902			—
Certain non-recurring separation costs		2,666			2,208			2,666			2,208
Specific charge for excess and obsolete inventory		—			11,995			—			11,995
Product rationalization		—			10,504			—			10,504
Restructuring charges		—			5,172			—			5,172
Non-recurring charge related to customer collections		—			4,997			—			4,997
Nonsegment expenses excluding one time significant charges	$	(28,504	)	$	(23,431	)	$	(55,269	)	$	(47,742	)

Excluding these charges, nonsegment expenses increased $5,073 in the second quarter of fiscal year ~~2018~~2024 as compared to the same period of the prior fiscal year.

~~Industrial segment earnings~~ Excluding these charges, nonsegment expenses increased ~~by $1,346, or 7.5%, to $19,344 for~~$7,527 in the first ~~quarter~~half of fiscal year ~~2018,~~2024 as compared to ~~$17,998 for~~ the ~~first quarter~~same period of the prior fiscal ~~year 2017.~~year. The ~~net increase in Industrial segment earnings for the first quarter of fiscal year 2018 was due to the following:~~



	~~Three-Month~~
	~~Period~~
~~Earnings for the period ended December 31, 2016~~	$	~~17,998~~
~~Sales volume~~		~~(7,319)~~
~~Price, sales mix and productivity~~		~~166~~
~~Savings from cost reduction initiatives~~		~~3,765~~
~~Effects of changes in foreign currency rates~~		~~754~~
~~Other, net~~		~~3,980~~
~~Earnings for the period ended December 31, 2017~~	$	~~19,344~~

Industrial segment earnings as a percentage of sales were 11.8% for the first quarter of fiscal year 2018, compared to 10.2% for the first quarter of fiscal year 2017. The increase in segment earnings for the first quarter of fiscal year 2018 was largely driven by savings from prior year cost reduction initiatives.

~~Nonsegment expenses~~

~~Nonsegment expenses~~ increased to $19,023 for the first quarter of fiscal year 2018, compared to $11,381 for the first quarter of fiscal year 2017. As a percent of sales, nonsegment expenses increased to 4.0% of net sales for the first quarter of fiscal year 2018, compared to 2.6% of net sales for the first quarter of fiscal year 2017. Theremaining increase in nonsegment expenses infor the second quarter and first ~~quarter~~half of fiscal year ~~2018~~2024 as compared to the ~~first quarter~~same periods of the prior fiscal year ~~2017~~ is primarily due to ~~the recognition of the~~increased annual variable incentive compensation costs.

majority of our annual stock-based compensation expense in the first quarter of fiscal year 2018, whereas in fiscal year 2017 the majority of this expense was recognized in the second quarter of the fiscal year.

~~LIQUIDI~~TYLIQUIDITY 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. ~~Historically,~~From time to time, we have also issued debt to supplement our cash needs, or repay our other ~~indebtedness.~~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 ~~including capital expansion funding~~ for the foreseeable future.

~~Our aggregate cash and cash equivalents were $85,779 at December 31, 2017 and 87,552 at September 30, 2017, and~~In addition to our working capital was $626,122 at December 31, 2017 and $593,955 at September 30, 2017. Of the $85,779 of cash and cash equivalents held at December 31, 2017, $82,024 was held by our foreign locations. We are not presently aware of any significant restrictions on the repatriation of these funds, although a portion is considered indefinitely reinvested in these foreign subsidiaries. If these funds were needed to fund our operations or satisfy obligations in the United States, then they could be repatriated and their repatriation into the United States may cause us to incur additional U.S. income taxes or foreign withholding taxes. Any additional U.S. taxes could be offset, in part or in whole, by foreign tax credits. The amount of such taxes and application of tax credits would be dependent on the income tax laws and other circumstances at the time these amounts are repatriated. Based on these variables, it is impractical to determine the income tax liability that might be incurred if these funds were to be repatriated. The additional uncertainty associated with the Tax Act increases the impracticality of determining this income tax liability.

~~We do not believe the Transition Tax, which is expected to be paid over and eight year period beginning in January 2019, will have a significant impact on our cash flows in any individual fiscal year.~~

Consistent with common business practice in China, our Chinese subsidiary accepts bankers’ acceptance notes from Chinese customers, in settlement of certain customer accounts receivable. Bankers’ acceptance notes are financial instruments issued by Chinese financial institutions as part of financing arrangements between the financial institution and a customer of the financial institution. Bankers’ acceptance notes represent a commitment by the issuing financial institution to pay a certain amount of money at a specified future maturity date to the legal owner of the bankers’ acceptance note as of the maturity date. The maturity date of bankers’ acceptance notes varies, but it is our policy to only accept bankers’ acceptance notes with maturity dates no more than 180 days from the date of our receipt of such draft. The issuing financial institution is the obligor, not our customers. Upon our acceptance of a bankers’ acceptance note from a customer, such customer has no further obligation to pay us for the related accounts receivable balance. We had bankers’ acceptance notes of $59,798 at December 31, 2017 and $38,243 at September 30, 2017 recorded as non-customer accounts receivable on our condensed consolidated balance sheets. The increase in the amount of bankers’ acceptance notes is due to the higher sales of natural gas truck and bus systems in China. We only accept bankers’ acceptance notes issued by banks that are believed to be creditworthy and to which the credit risks associated with the bankers’ acceptance notes are believed to be low.

~~Our~~ revolving credit facility, matures in April 2020 and provides a borrowing capacity of up to $1,000,000 with the option to increase total available borrowings to up to $1,200,000, subject to lenders’ participation. We can borrow against our $1,000,000 revolving credit facility as long as we are in compliance with all of our debt covenants. Historically, we have used borrowings under our revolving credit facilities to meet certain short-term working capital needs, as well as for strategic uses, including repurchases of our common stock, payments of dividends, acquisitions, and facilities expansions. In addition, 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 ~~$1,000,000~~ revolving credit facility and our other credit facilities, see Note ~~13,~~ 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.

At ~~December~~March 31, ~~2017,~~2024, we had total outstanding debt of ~~$649,639~~$791,038 consisting of ~~amounts borrowed under our revolving credit facility and~~ various series of unsecured notes due between ~~2018~~2025 and ~~2031, with~~2033 and obligations under our finance leases.

At March 31, 2024, we had $141,300 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, 2024 were as follows:


Maximum daily balance during the period	$	284,800
Average daily balance during the period	$	185,846
Weighted average interest rate on average daily balance		6.45	%

At March 31, 2024, we had additional borrowing availability of ~~$922,377~~$850,764 under our revolving credit facility, net of outstanding letters of credit, and additional borrowing availability of ~~$7,516~~$25,585 under various foreign credit facilities. ~~As of December 31, 2017, the $100,000 in debt related to~~

To our Series D Notes, which mature and are payable in October 2018, has been classified as long-term based on our intent and ability to refinance this debt using cash proceeds from our existing revolving credit facility which, in turn, is expected to be repaid beyond the next twelve months. For further discussion of our notes, see Note 13, ~~Credit facilities, short-term borrowings and long-term debt~~ ~~in the Notes to the Condensed Consolidated Financial Statements in Part I, Item I of this Form 10-Q.~~

~~At December 31, 2017, we had $66,300 of borrowings outstanding under our revolving credit facility, all of which was classified as short-term.Revolving credit facility and short-term borrowing activity during the three-months ended December 31, 2017 were as follows:~~



~~Maximum daily balance during the period~~	$	~~194,950~~
~~Average daily balance during the period~~	$	~~163,406~~
~~Weighted average interest rate on average daily balance~~		~~2.29%~~

~~We believe~~knowledge, we were in compliance with all our debt covenants as of ~~December~~March 31, ~~2017.~~2024. See Note ~~12,~~ 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 ~~recent~~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.

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 an increase of approximately $1,917 in cash provided by operating activities during the six months ended March 31, 2024, compared to an increase in cash provided by operating activities of approximately $1,569 during the six months ended March 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.

In the first quarter of fiscal year 2017, our board of directors terminated the Company’s prior stock repurchase program and replaced it with a new 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 will end in November 2019 (the “2017 Authorization”). In the three-months ended December 31, 2016, we purchased 350 shares of our common stock for $24,004, under the 2017 Authorization pursuant to a 10b5-1 plan. We repurchased no stock in the three-months ended December 31, 2017.

For our Aerospace segment, we have been purchasing production equipment for our second campus in the greater-Rockford, Illinois area and anticipate continuing such purchases as new aircraft platforms ramp up to full production volumes. The second campus, completed in 2015, was built to support the expected growth in our Aerospace segment over the next ten years and beyond, as a result of our being awarded a substantial number of new system platforms, particularly on narrow-body aircraft.

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.~~stable and do not currently foresee adverse impacts to financial institutions supporting our capital requirements.

Cash Flows


	Six Months Ended March 31,
	2024			2023
Net cash provided by operating activities	$	144,118		$	40,150
Net cash (used in) investing activities		(49,641	)		(35,236	)
Net cash provided by financing activities		80,588			24,337
Effect of exchange rate changes on cash and cash equivalents		4,420			(7,668	)
Net change in cash and cash equivalents		179,485			21,583
Cash and cash equivalents at beginning of year		137,447			107,844
Cash and cash equivalents at end of period	$	316,932		$	129,427

Three-Months Ended

December 31,

2017

2016
Net cash (used in) provided by operating activities
$
(2,533)

$
52,351
Net cash used in investing activities

(29,109)

(16,618)
Net cash provided by (used in) financing activities

27,327

(22,192)
Effect of exchange rate changes on cash and cash equivalents

2,542

(13,746)
Net change in cash and cash equivalents

(1,773)

(205)
Cash and cash equivalents at beginning of year

87,552

81,090
Cash and cash equivalents at end of period
$
85,779

$
80,885

Net ~~cash flows used in operating activities~~ ~~for the first quarter of fiscal year 2018 was $2,533, compared to net~~ cash flows provided by operating activities for the first half of ~~$52,351~~fiscal year 2024 was $144,118, compared to $40,150 for the same period of fiscal year 2023. The increase in net cash provided by operating activities in the first ~~quarter~~half of fiscal year ~~2017. The change in cash flows from operating activities~~2024 as compared to the first half of the prior fiscal year is primarily attributable to a decrease in net earnings in the first quarter of fiscal year 2018 compared to the prior fiscal year and working capital changes which had an increase in cash use in the first quarter of 2018 due mainly to increased ~~payments of accounts payable and accrued liabilities compared to the first quarter of last year.~~earnings.

Net cash flows used in investing activities for the first ~~quarter~~half of fiscal year ~~2018~~2024 was ~~$29,109,~~$49,641 compared to ~~$16,618 in~~$35,236 for the ~~first quarter~~same period of fiscal year ~~2017.~~2023. The increase in cash flows used in investing activities in the first ~~quarter~~half of fiscal year ~~2018~~2024 as compared to the first ~~quarter~~half of the prior fiscal year is primarily due to increased payments for ~~capital expenditures. Payments for~~ property, plant, and equipment increased by $7,392 from $21,058 in the first quarter of fiscal year 2017 to $28,450 in the first quarter of this year. In addition, the first quarter of fiscal year 2018 had lower cash proceeds from the sale of assets compared to the first quarter of fiscal year 2017.equipment.

Net cash flows provided by financing activities for the first ~~quarter~~half of fiscal year ~~2018~~2024 was ~~$27,327,~~$80,588, compared to $24,337 for the same period of fiscal year 2023. The increase in net cash flows ~~used in~~provided by financing activities ~~of $22,192~~ in the first ~~quarter~~half of fiscal year ~~2017.~~2024 as compared to the first half of the prior fiscal year is primarily attributable to the decrease in repurchases of common stock and an increase in borrowings on revolving lines of credit, partially offset by an increase in payments on revolving lines of credit. During the first ~~quarter~~half of fiscal year ~~2018,~~2024, we did not repurchase any common stock, compared to $26,369 of repurchases of common stock during the first half of fiscal year 2023. During the first half of fiscal year 2024, we had net debt borrowings in the amount of ~~$33,594~~$65,828, compared to ~~net debt borrowings of $3,748~~$63,412 in the first ~~quarter~~half of fiscal year 2017. We utilized $24,004 to repurchase 350 shares of our common stock in the first quarter of fiscal year 2017 under the 2017 Authorization. We made no stock repurchases in the first quarter of fiscal year 2018.2023.

~~Contractual Obligations~~

We have various contractual obligations, including obligations related to long-term debt, operating and capital leases, purchases, retirement pension benefit plans, and other postretirement benefit plans. These contractual obligations are summarized and discussed more fully in Management’s Discussion and Analysis of Financial Condition and Results of Operations in Part II, Item 7 of our most recent Form 10-K. There have been no material changes to our various contractual obligations during the three-months ended December 31, 2017.

Non-U.S. GAAP Financial Measures

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

U.S. GAAP. However, we believe these non-U.S. GAAP financial measures provide additional information that enables readers to evaluate our business from the perspective of management.

Earnings based ~~non-U.S.~~non‐U.S. 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, (iii) certain non-restructuring separation costs, (iv) a specific charge for excess and obsolete inventory, (v) product rationalization, (vi) restructuring charges, and (vii) a non-recurring charge related to customer collections. The product rationalization adjustment pertains to a non-recurring write-off of inventory and assets related to the elimination of certain product lines. The specific charge for excess and obsolete inventory pertains to a non-recurring process change that resulted in the identification and write down of certain excess inventory unrelated to product rationalization. The non-recurring charge related to customer collections pertains to a discrete process issue that was identified and corrected. 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. 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. Management uses both adjusted net earnings and adjusted earnings per share when comparing operating performance to other periods which may not have similar, infrequent or unusual charges.

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 March 31,
	2024				2023
	Net Earnings		Earnings Per Share		Net Earnings		Earnings Per Share
Net earnings (U.S. GAAP)	$	97,556	$	1.56	$	35,511	$	0.58
Non-U.S. GAAP adjustments, net of tax:
Business development activities		1,256		0.02		—		—
Certain non-restructuring separation costs		2,013		0.04		1,661		0.03
Specific charge for excess and obsolete inventory		—		—		9,016		0.15
Product rationalization		—		—		7,896		0.13
Restructuring charges		—		—		3,874		0.06
Non-recurring charge related to customer collections		—		—		3,761		0.06
Non-U.S. GAAP adjustments		3,269		0.06		26,208		0.43
Adjusted net earnings (Non-U.S. GAAP)	$	100,825	$	1.62	$	61,719	$	1.01


	Six Months Ended March 31,
	2024						2023
	Net Earnings			Earnings Per Share			Net Earnings		Earnings Per Share
Earnings per share (U.S. GAAP)	$	187,600		$	3.02		$	65,117	$	1.07
Non-U.S. GAAP adjustments, net of tax:
Non-recurring gain related to a previous acquisition		(3,433	)		(0.06	)		—		—
Business development activities		4,456			0.07			—		—
Certain non-restructuring separation costs		2,013			0.04			1,661		0.03
Specific charge for excess and obsolete inventory		—			—			9,016		0.15
Product rationalization		—			—			7,896		0.13
Restructuring charges		—			—			3,874		0.06
Non-recurring charge related to customer collections		—			—			3,761		0.06
Total non-U.S. GAAP adjustments		3,036			0.05			26,208		0.43
Adjusted earnings per share (Non-U.S. GAAP)	$	190,636		$	3.07		$	91,325	$	1.50

Management uses EBIT to evaluate Woodward’s performance without financing and tax related considerations, as these elements ~~may~~do not fluctuate with operating results. Management uses EBITDA in evaluating Woodward’s operating performance, making business decisions, including developing budgets, managing expenditures, forecasting future periods, and evaluating capital structure impacts of various strategic scenarios. Securities analysts, investors, and others frequently use EBIT and EBITDA in their evaluation of companies, particularly those with significant property, plant, and equipment, and intangible assets subject to amortization.

The Company believes that EBIT and EBITDA are useful measures to the investor when measuring operating performance as they eliminate the impact of financing and tax expenses, which are non-operating expenses and may be driven by factors outside of the Company’s operations, such as changes in tax laws or regulations, and, in the case of EBITDA, the noncash charges associated with depreciation and amortization. Further, as interest from financing, income taxes, depreciation, and amortization can vary dramatically between companies and between periods, management believes that the removal of these items can improve comparability.

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, (iii) certain non-restructuring separation costs, (iv) a specific charge for excess and obsolete inventory, (v) product rationalization, (vi) restructuring charges, and (vii) a non-recurring charge related to customer collections. The product rationalization adjustment pertains to a non-recurring write-off of inventory and assets related to the ~~three-months ended December 31, 2017~~elimination of certain product lines. The specific charge for excess and ~~December 31, 2016~~obsolete inventory pertains to a non-recurring process change that resulted in the identification and write down of certain excess inventory unrelated to product rationalization. The non-recurring charge related to customer collections pertains to a discrete process issue that was identified and corrected. As these charges are infrequent or unusual items that can be variable from period to period and do not fluctuate with operating results, management believes removing these gains and charges from EBIT and EBITDA improves comparability of past, present, and future operating results and provides consistency when comparing EBIT and EBITDA between periods.

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


	Three Months Ended March 31,						Six Months Ended March 31,
	2024			2023			2024			2023
Net earnings (U.S. GAAP)	$	97,556		$	35,511		$	187,600		$	65,117
Income tax expense		23,068			4,730			42,744			6,873
Interest expense		11,530			12,845			22,966			23,987
Interest income		(1,293	)		(508	)		(2,766	)		(874	)
EBIT (Non-U.S. GAAP)		130,861			52,578			250,544			95,103
Non-U.S. GAAP adjustments:
Non-recurring gain related to a previous acquisition		—			—			(4,803	)		—
Business development activities		1,664			—			5,902			—
Certain non-recurring separation costs		2,666			2,208			2,666			2,208
Specific charge for excess and obsolete inventory		—			11,995			—			11,995
Product rationalization		—			10,504			—			10,504
Restructuring charges		—			5,172			—			5,172
Non-recurring charge related to customer collections		—			4,997			—			4,997
Total non-U.S. GAAP adjustments		4,330			34,876			3,765			34,876
Adjusted EBIT (Non-U.S. GAAP)	$	135,191		$	87,454		$	254,309		$	129,979

Three-Months Ended December 31,

2017

2016
Net earnings (U.S. GAAP)

$
18,260

$
46,548
Income tax expense

19,227

511
Interest expense

6,750

6,840
Interest income

(363)

(405)
EBIT (Non-U.S. GAAP)

43,874

53,494
Amortization of intangible assets

6,243

6,458
Depreciation expense

14,827

12,455
EBITDA (Non-U.S. GAAP)

$
64,944

$
72,407

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


	Three Months Ended March 31,						Six Months Ended March 31,
	2024			2023			2024			2023
Net earnings (U.S. GAAP)	$	97,556		$	35,511		$	187,600		$	65,117
Income tax expense		23,068			4,730			42,744			6,873
Interest expense		11,530			12,845			22,966			23,987
Interest income		(1,293	)		(508	)		(2,766	)		(874	)
Amortization of intangible assets		8,618			9,418			17,217			18,596
Depreciation expense		20,607			20,535			40,833			40,661
EBITDA (Non-U.S. GAAP)		160,086			82,531			308,594			154,360
Non-U.S. GAAP adjustments:
Non-recurring gain related to a previous acquisition		—			—			(4,803	)		—
Business development activities		1,664			—			5,902			—
Certain non-recurring separation costs		2,666			2,208			2,666			2,208
Specific charge for excess and obsolete inventory		—			11,995			—			11,995
Product rationalization		—			10,504			—			10,504
Restructuring charges		—			5,172			—			5,172
Non-recurring charge related to customer collections		—			4,997			—			4,997
Total non-U.S. GAAP adjustments		4,330			34,876			3,765			34,876
Adjusted EBITDA (Non-U.S. GAAP)	$	164,416		$	117,407		$	312,359		$	189,236

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. GAAP. 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. 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.

Cash ~~flow-based non-U.S.~~flow‐based non‐U.S. GAAP financial measures

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 ~~paying dividends.~~investing in additional research and development. In addition, securities analysts, investors, and others frequently use free cash flow in their evaluation of companies. Adjusted free cash flow represents a further non-U.S. GAAP adjustment to free cash flow to exclude, as applicable, the effect of cash received for a non-recurring matter related to a previous acquisition, and cash payments for (i) business development activities, (ii) a non-recurring matter unrelated to the ongoing operations of the business, and (iii) restructuring charges. Management believes that excluding these infrequent or unusual items from free cash flow better portrays our ability to generate cash, as such items are not indicative of the Company’s operating performance for the period.

The use of ~~this non-U.S.~~these non‐U.S. GAAP financial ~~measure~~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. GAAP. Free cash flow ~~does~~and adjusted free cash flow do not necessarily represent funds available for discretionary use and isare not necessarily a measure of our ability to fund our cash needs. Our calculation of free cash flow and adjusted free cash flow may differ from similarly titled measures used by other companies, limiting ~~its~~their usefulness as a comparative ~~measure.~~measures.

Free cash flow ~~for the three-months ended December 31, 2017~~ and ~~December 31, 2016~~adjusted free cash flow reconciled to net cash provided by operating activities were as follows:


	Six Months Ended March 31,
	2024			2023
Net cash provided by operating activities (U.S. GAAP)	$	144,118		$	40,150
Payments for property, plant and equipment		(56,301	)		(44,046	)
Free cash flow (Non-U.S. GAAP)		87,817			(3,896	)
Cash received for a non-recurring matter related to a previous acquisition		(4,803	)		—
Cash paid for business development activities		4,293			—
Cash paid for a non-recurring matter unrelated to the ongoing operations of the business		2,725			—
Cash paid for restructuring charges		—			2,836
Adjusted free cash flow (Non-U.S. GAAP)	$	90,032		$	(1,060	)

Three-Months Ended December 31,

2017

2016
Net cash (used in) provided by operating activities (U.S. GAAP)
$
(2,533)

$
52,351
Payments for property, plant and equipment

(28,450)

(21,058)
Free cash flow (Non-U.S. GAAP)
$
(30,983)

$
31,293

CRITICAL ACCOUNTING ~~POLICIES AND~~ ESTIMATES

The preparation of financial statements and related disclosures in conformity with U.S. GAAP requires us to make judgments, assumptions, and estimates that affect the amounts reported in the Condensed Consolidated Financial Statements and accompanying notes. Note 1, Operations and summary of significant accounting policies, in the Notes to the Consolidated Financial Statements included in Part II, Item 8 of our most ~~recent~~recently filed Form 10-K, describes the significant accounting policies and methods used in the preparation of the Consolidated Financial Statements. Our critical accounting estimates, identified in Management’s Discussion and Analysis of Financial Condition and Results of Operations in Part II, Item 7 of our most ~~recent~~recently filed Form 10-K, include the discussion of estimates used for revenue recognition, inventory valuation, ~~depreciation and amortization,~~ reviews for impairment of goodwill ~~postretirement benefit obligations,~~and other indefinitely lived intangible assets, and our provision for income taxes. Such accounting ~~policies and~~ estimates require significant judgments and assumptions to be used in the preparation of the Condensed Consolidated Financial Statements included in this Form 10-Q, and actual results could differ materially from the amounts reported.

New Accounting Standards

From time to time, the FASB or other standards-setting bodies issue new accounting pronouncements. Updates to the FASB Accounting Standards Codification are communicated through issuance of an Accounting Standards Update.

To understand the impact of recently issued guidance, whether adopted or to be adopted, please review the information provided in Note 2, New accounting standards, in the Notes to the Condensed Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q. Unless otherwise discussed, we believe that the impact of recently issued guidance, whether adopted or to be adopted in the future, is not expected to have a material impact on our Condensed Consolidated Financial Statements upon adoption.

~~Off-Balance Sheet Arrangements~~

As of December 31, 2017, we did not have any off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of Regulation S-K promulgated by the SEC, that have or are reasonably likely to have a current or future effect on our financial condition, changes in our financial condition, revenues, or expenses, results of operations, liquidity, capital expenditures, or capital resources, that are material to investors.

Item 3.~~Quantitative~~Quantitative and ~~Qualitative~~Qualitative Disclosures About Market Risk

In the normal course of business, we have exposures to interest rate risk from our long-term and short-term debt and our postretirement benefit plans, and foreign currency exchange rate risk related to our foreign operations and foreign currency transactions. We are also exposed to various market risks that arise from transactions entered into in the normal course of business related to items such as the cost of raw materials and changes in inflation. Certain contractual relationships with customers and vendors mitigate risks from changes in raw material costs and foreign currency exchange rate changes that arise from normal purchasing and normal sales activities.

These market risks are discussed more fully in “Quantitative and Qualitative Disclosures About Market Risk” in Part II, Item 7A of our most recent Form 10-K. These market risks have not materially changed since the date our most recent Form 10-K was filed with the SEC.

Item 4.~~Controls~~Controls and Procedures

We have established disclosure controls and procedures, which are designed to ensure that information required to be disclosed in reports filed or submitted under the Securities Exchange Act of 1934, as amended (the “Act”) is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. These disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in the reports that we file or submit under the Act is accumulated and communicated to management, including our Principal Executive Officer ~~(Thomas A. Gendron,~~(Charles (“Chip”) P. Blankenship, Jr., Chairman of the Board, Chief Executive Officer and President) and Principal Financial and Accounting Officer ~~(Robert~~(William F. ~~Weber, Jr., Vice Chairman,~~Lacey, Chief Financial ~~Officer and Treasurer)~~Officer), as appropriate, to allow timely decisions regarding required disclosures.

~~Thomas A. Gendron~~38

Chip P. Blankenship, Jr. and ~~Robert~~William F. ~~Weber, Jr.,~~Lacey evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15 under the Securities Exchange Act of 1934, as amended, or the Exchange Act), as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on their evaluations, they concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of ~~December~~March 31, ~~2017.~~2024.

~~Furthermore, there~~There have not been noany changes in our internal ~~control~~controls over financial reporting during the ~~fiscal~~ quarter ~~covered by this Form 10-Q~~ended March 31, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II – OT~~HER~~OTHER INFORMATION

Item 1.Legal Proceedings

Woodward is currently involved in claims, pending or threatened litigation or other legal proceedings, investigations, and/or regulatory proceedings arising in the normal course of business, including, among others, those relating to product liability claims, employment matters, worker’s compensation claims, contractual disputes, product warranty claims, and alleged violations of various laws and regulations. Woodward accrues for known individual matters using estimates of the most likely amount of loss where it believes that it is probable the matter will result in a loss when ultimately resolved and such loss is reasonably estimable.

While the outcome of pending claims, legal and regulatory proceedings, and investigations cannot be predicted with certainty, management believes that any liabilities that may result from these claims, proceedings, and investigations will not have a material effect on Woodward's liquidity, financial condition, or results of operations.

Item 1A.Risk Factors

Investment in our securities involves risk. An investor or potential investor should consider the risks summarized under the caption “Risk Factors” in Part I, Item 1A of our most recent Form 10-K when making investment decisions regarding our securities. The risk factors that were disclosed in our most recent Form 10-K have not materially changed since the date our most recent Form 10-K was filed with the SEC.

Item 2.Unregistered Sales of Equity Securities and Use of Proceeds

Sales of Unregistered Securities

None.


Issuer Purchases of Equity Securities (In thousands, except for shares and per share amounts)	Total Number of Shares Purchased		Weighted Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1)		Maximum Number (or Approximate Dollar Value) of Shares that may yet be Purchased under the Plans or Programs at Period End (1)
January 1, 2024 through January 31, 2024 (2)		195	$	141.46		—	$	227,578
February 1, 2024 through February 29, 2024 (2)		115		141.52		—		227,578
March 1, 2024 through March 31, 2024 (2)		20		155.38		—		227,578

(1)

In January 2022, the Board 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 ending in January 2024 (the “2022 Authorization”). In January 2024, the Board terminated the 2022 Authorization, which was nearing expiration, and concurrently authorized a new program for the repurchase of up to $600,000 of Woodward’s outstanding shares of common stock on the open market or in privately negotiated transactions over a three-year period ending in January 2027 (the “2024 Authorization”).

(2)

Under a trust established for the purposes of administering the Woodward Executive Benefit Plan, 195 shares of common stock were acquired in January 2024, 21 shares of common stock were acquired in February 2024, and 20 shares of common stock were acquired in March 2024 on the open market related to the deferral of compensation by certain eligible members of Woodward’s management who irrevocably elected to invest some or all of their deferred compensation in Woodward common stock. In addition, 94 shares of common stock were acquired in February 2024 on the open market related to the reinvestment of dividends for shares of treasury stock held for deferred compensation. Shares owned by the trust, which is a separate legal entity, are included in "Treasury stock held for deferred compensation" in the Condensed Consolidated Balance Sheets.

Item 5.Other Information

Issuer Purchases of Equity Securities
(In thousands, except for shares and per share amounts)

Total Number of Shares Purchased

Weighted Average Price Paid Per Share

Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1)

Maximum Number (or Approximate Dollar Value) of Shares that may yet be Purchased under the Plans or Programs at Period End (1)
October 1, 2017 through October 31, 2017 (2)

258

$
77.33

-

$
428,803
November 1, 2017 through November 30, 2017 (2)

1,805

77.35

-

428,803
December 1, 2017 through December 31, 2017 (2)

11,520

76.54

-

428,803

~~(1)~~

In November 2016, our board of directors approved a stock repurchase 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 will end in November 2019.

~~(2)~~

Under a trust established for the purposes of administering the Woodward Executive Benefit Plan, 258 shares of common stock were acquired in October 2017, 1,505 shares of common stock were acquired in November 2017 and 11,520 shares of common stock were acquired in December 2017, each on the open market related to the deferral of compensation by certain eligible members of Woodward’s management who irrevocably elected to invest some or all of their deferred compensation in Woodward common stock. In addition, 300 shares of common stock were acquired in November 2017 on the open market related to the reinvestment of dividends for shares of treasury stock held for deferred compensation. Shares owned by the trust, which is a separate legal entity, are included in "Treasury stock held for deferred compensation" in the Condensed Consolidated Balance Sheets.

During the three months ended March 31, 2024, no directors or officers, as defined in Rule 16a-1(f), adopted or terminated a “Rule 10b5-1 trading arrangement” or a “non-Rule 10b5-1 trading arrangement,” each as defined in Regulation S-K Item 408.

Item 6.Exhi~~bits~~Exhibits

Exhibits filed as part of this Report are listed in the Exhibit Index.

WOODWARD, INC.

EXHIBIT INDEX


	Exhibit Number	Description
*	~~Exhibit Number~~10.1	~~Description~~Separation Agreement dated March 14, 2024 by and between Woodward, Inc. and A. Christopher Fawzy
*	31.1	Rule 13a-14(a)/15d-14(a) certification of ~~Thomas A. Gendron~~Charles P. Blankenship, Jr.
*	31.2	Rule 13a-14(a)/15d-14(a) certification of ~~Robert~~William F. ~~Weber, Jr.~~Lacey
*	32.1	Section 1350 certifications
*	~~101.INS~~101	~~XBRL Instance Document.~~
*	~~101.SCH~~		~~XBRL Taxonomy Extension Schema Document~~
*	~~101.CAL~~		~~XBRL Taxonomy Extension Calculation Linkbase Document~~
*	~~101.DEF~~		~~XBRL Taxonomy Extension Definition Linkbase Document~~
*	~~101.LAB~~		~~XBRL Taxonomy Extension Label Linkbase Document~~
*	~~101.PRE~~		~~XBRL Taxonomy Extension Presentation Linkbase Document~~

	~~Attached as Exhibit 101 to this report are~~The following financial statements from the ~~following materials from Woodward, Inc.’s~~Company’s Quarterly Report on Form 10-Q for the quarter ended ~~December~~March 31, ~~2017~~2024, formatted in ~~XBRL (eXtensible Business Reporting Language):~~Inline XBRL: (i) ~~the~~Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Earnings, ~~(ii) the~~(iii) Condensed Consolidated Statements of Comprehensive Earnings, ~~(iii) the Condensed Consolidated Balance Sheets,~~ (iv) ~~the~~ Condensed Consolidated Statements of Cash Flows, (v) ~~the~~ Condensed Consolidated Statements of Stockholders’ Equity, and (vi) ~~the~~ Notes to ~~the~~ Condensed Consolidated Financial Statements.
*
104
*		~~Filed as an exhibit to this Report~~Cover page Interactive Data File (embedded within the Inline XBRL document and are contained in Exhibit 101)

* Filed as an exhibit to this Report

SIGNATURES

~~SIGNATURES~~

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



			WOODWARD, INC.
Date: ~~January 23, 2018~~May 3, 2024			/s/ ~~Thomas A. Gendron~~Charles P. Blankenship, Jr.
			~~Thomas A. Gendron~~Charles P. Blankenship, Jr.
			Chairman of the Board, Chief Executive Officer, and President (on behalf of the registrant and as the registrant’s Principal Executive Officer)

Date: ~~January 23, 2018~~May 3, 2024			/s/ ~~Robert~~William F. ~~Weber, Jr.~~Lacey
			~~Robert~~William F. ~~Weber, Jr.~~Lacey
			~~Vice Chairman,~~ Chief Financial Officer (on behalf of the registrant and ~~Treasurer~~ (as the registrant’s Principal Financial and Accounting Officer)



	Three-Months Ended December 31,
	2017		2016
Cash flows from operating activities:
Net earnings	$	18,260	$	46,548
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization		21,070		18,913��
Gain due to curtailment of postretirement plan		(330)		-
Net gain on sales of assets		(58)		(3,699)
Stock-based compensation		12,423		1,261
Deferred income taxes		(11,681)		4,777
Gain on derivatives reclassified from accumulated comprehensive earnings into earnings		(18)		(18)
Changes in operating assets and liabilities:
Accounts receivable		72,714		87,615
Inventories		(28,796)		(37,632)
Accounts payable and accrued liabilities		(104,150)		(54,563)
Income taxes		25,597		(5,731)
Retirement benefit obligations		(673)		(897)
Other		(6,891)		(4,223)
Net cash (used in) provided by operating activities		(2,533)		52,351
Cash flows from investing activities:
Payments for purchase of property, plant, and equipment		(28,450)		(21,058)
Proceeds from sale of assets		132		3,682
Proceeds from sales of short-term investments		-		758
Payments for purchases of short-term investments		(791)		-
Net cash used in investing activities		(29,109)		(16,618)
Cash flows from financing activities:
Cash dividends paid		(7,656)		(6,779)
Proceeds from sales of treasury stock		1,389		4,843
Payments for repurchases of common stock		-		(24,004)
Borrowings on revolving lines of credit and short-term borrowings		458,950		316,650
Payments on revolving lines of credit and short-term borrowings		(425,250)		(312,800)
Payments of long-term debt and capital lease obligations		(106)		(102)
Net cash provided by (used in) financing activities		27,327		(22,192)
Effect of exchange rate changes on cash and cash equivalents		2,542		(13,746)
Net change in cash and cash equivalents		(1,773)		(205)
Cash and cash equivalents at beginning of year		87,552		81,090
Cash and cash equivalents at end of period	$	85,779	$	80,885



	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, 2016	-	72,960	(11,374)	(157)	$	106	$	141,570	$	(25,971)	$	179	$	(39,913)	$	(65,705)	$	5,089	$	1,649,506	$	(512,882)	$	(5,089)	$	1,212,595
Net earnings	-	-	-	-		-		-		-		-		-		-		-		46,548		-		-		46,548
Other comprehensive income (loss), net of tax	-	-	-	-		-		-		(15,111)		(11)		1,259		(13,863)		-		-		-		-		(13,863)
Cash dividends paid ($0.110 per share)	-	-	-	-		-		-		-		-		-		-		-		(6,779)		-		-		(6,779)
Purchases of treasury stock	-	-	(350)	-		-		-		-		-		-		-		-		-		(24,004)		-		(24,004)
Sales of treasury stock	-	-	139	-		-		(907)		-		-		-		-		-		-		5,750		-		4,843
Common shares issued from treasury stock to settle employee liabilities	-	-	26	(26)		-		740		-		-		-		-		1,767		-		1,027		(1,767)		1,767
Stock-based compensation	-	-	-	-		-		1,261		-		-		-		-		-		-		-		-		1,261
Purchases and transfers of stock by/to deferred compensation plan	-	-	-	-		-		-		-		-		-		-		37		-		-		(37)		-
Distribution of stock from deferred compensation plan	-	-	-	-		-		-		-		-		-		-		(4)		-		-		4		-
Balances as of December 31, 2016	-	72,960	(11,559)	(183)	$	106	$	142,664	$	(41,082)	$	168	$	(38,654)	$	(79,568)	$	6,889	$	1,689,275	$	(530,109)	$	(6,889)	$	1,222,368

Balances as of October 1, 2017	-	72,960	(11,739)	(186)	$	106	$	163,836	$	(27,280)	$	135	$	(26,041)	$	(53,186)	$	7,135	$	1,820,268	$	(559,641)	$	(7,135)	$	1,371,383
Net earnings	-	-	-	-		-		-		-		-		-		-		-		18,260		-		-		18,260
Other comprehensive income (loss), net of tax	-	-	-	-		-		-		4,547		(11)		211		4,747		-		-		-		-		4,747
Cash dividends paid ($0.125 per share)	-	-	-	-		-		-		-		-		-		-		-		(7,656)		-		-		(7,656)
Sales of treasury stock	-	-	33	-		-		214		-		-		-		-		-		-		1,175		-		1,389
Stock-based compensation	-	-	-	-		-		12,423		-		-		-		-		-		-		-		-		12,423
Purchases and transfers of stock by/to deferred compensation plan	-	-	-	(14)		-		-		-		-		-		-		1,041		-		-		(1,041)		-
Distribution of stock from deferred compensation plan	-	-	-	-		-		-		-		-		-		-		(3)		-		-		3		-
Balances as of December 31, 2017	-	72,960	(11,706)	(200)	$	106	$	176,473	$	(22,733)	$	124	$	(25,830)	$	(48,439)	$	8,173	$	1,830,872	$	(558,466)	$	(8,173)	$	1,400,546



	September 30, 2017		Effects of Foreign Currency Translation		December 31, 2017
Aerospace	$	455,423	$	-	$	455,423
Industrial		101,122		214		101,336
Consolidated	$	556,545	$	214	$	556,759



Year Ending September 30:
2018 (remaining)	$	18,782
2019		23,156
2020		20,373
2021		18,404
2022		16,249
Thereafter		68,669
	$	165,633



	Number		Weighted- Average Exercise Price		Weighted- Average Remaining Life in Years		Aggregate Intrinsic Value
Options outstanding		5,937	$	44.48		6.2	$	192,105
Options vested and exercisable		3,917		35.64		4.9		160,206
Options vested and expected to vest		5,823		44.07		6.1		190,725