In the first quarter of fiscal year 2017, the Board 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 ended in November 2019 (the “2017 Authorization”). Effective upon the expiration of the 2017 Authorization in November 2019, Woodward’s board of directors approved 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 2022 (the “2019 Authorization”). In the first nine-months of fiscal year 2020, Woodward purchased 124 shares of its common stock for $13,346 under the 2019 Authorization. Woodward repurchased 1,102 shares of common stock for $110,311 under the 2017 Authorization in the first nine-months of fiscal year 2019.

Provisions governing outstanding stock option awards are included in the 2017 Omnibus Incentive Plan, as amended from time to time (the “2017 Plan”) and the 2006 Omnibus Incentive Plan (the “2006 Plan”), as applicable.

The 2017 Plan was approved by Woodward’s stockholders in January 2017 and is a successor plan to the 2006 Plan. As of September 14, 2016, the effective date of the 2017 Plan, the Board delegated authority to administer the 2017 Plan to the compensation committee of the Board (the “Committee”), including, but not limited to, the power to determine the recipients of awards and the terms of those awards. On January 29, 2020, Woodward’s stockholders approved an additional 1,000 shares of Woodward’s common stock to be made available for future grants. Under the 2017 Plan, there were approximately 1,965 shares of Woodward’s common stock available for future grants as of June 30, 2020 and 1,783 shares as of September 30, 2019.

Woodward believes that 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% 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. 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					Nine-Months Ended
		June 30,					June 30,
		2020			2019	2020				2019
Weighted-average exercise price per share	$	58.40			n/a	$	90.57			$	79.12
Weighted-average grant date market value of Woodward stock	$	58.40			n/a	$	90.57			$	79.12
Expected term (years)		6.5			n/a		6.4	-	8.7		6.5	-	8.7
Estimated volatility		33.1%	-	34.3%	n/a		25.7%	-	34.3%		25.7%	-	31.0%
Estimated dividend yield		0.5%	-	0.6%	n/a		0.5%	-	0.9%		0.7%	-	0.8%
Risk-free interest rate		0.4%			n/a		0.4%	-	1.7%		2.6%	-	3.1%

The following is a summary of the activity for stock option awards during the three and nine-months ended June 30, 2020:

	Three-Months Ended					Nine-Months Ended
	June 30, 2020					June 30, 2020
	Number of options			Weighted-Average Exercise Price per Share		Number of options			Weighted-Average Exercise Price per Share
Options, beginning balance		5,623		$	60.50		5,387		$	53.73
Options granted		280			58.40		909			90.57
Options exercised		(66	)		31.15		(429	)		34.44
Options expired		(3	)		70.89		(3	)		70.89
Options forfeited		(57	)		103.58		(87	)		96.52
Options, ending balance		5,777			60.31		5,777			60.31

Changes in non-vested stock options during the three and nine-months ended June 30, 2020 were as follows:

	Three-Months Ended					Nine-Months Ended
	June 30, 2020					June 30, 2020
	Number of options			Weighted-Average Grant Date Fair Value per Share		Number of options			Weighted-Average Grant Date Fair Value Per Share
Non-vested options outstanding, beginning balance		1,867		$	25.95		2,068		$	23.43
Options granted		280			16.92		909			24.98
Options vested		—			—		(800	)		21.52
Options forfeited		(57	)		27.89		(87	)		27.01
Non-vested options outstanding, ending balance		2,090			24.69		2,090			24.69

Information about stock options that have vested, or are expected to vest, and are exercisable at June 30, 2020 was as follows:

	Number		Weighted-Average Exercise Price		Weighted-Average Remaining Life in Years		Aggregate Intrinsic Value
Options outstanding		5,777	$	60.31		6.0	$	118,997
Options vested and exercisable		3,686		47.95		4.6		110,112
Options vested and expected to vest		5,678		59.95		5.9		118,261

Restricted stock units have been granted to certain employees of L’Orange (at acquisition) and other current Woodward members in key management positions. Each restricted stock unit entitles the holder to one share of the Company’s common stock upon vesting. The restricted stock units were granted with a two year vesting schedule and vest on the one and two year anniversaries of the grant date at a rate of 50% per year. The restricted stock units do not participate in dividends during the vesting period. The fair value of restricted stock units granted were estimated using the closing price of Woodward common stock on the grant date.

A summary of the activity for restricted stock units for the three and nine-months ended June 30, 2020:

	Three-Months Ended					Nine-Months Ended
	June 30, 2020					June 30, 2020
	Number			Weighted-Average Grant Date Fair Value per Unit		Number			Fair Value per Share
Beginning balance		9		$	91.55		9		$	91.55
Units granted		—			—		—			—
Units vested		—			—		—			—
Units forfeited		(1	)		97.56		(1	)		97.56
Ending balance		8			90.98		8			90.98

Woodward recognizes stock-based compensation expense on a straight-line basis over the requisite service period. Pursuant to form stock option 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 based on grantee’s retirement eligibility. As such, the recognition of stock-based compensation expense associated with some stock option grants can be accelerated to a period of less than four years, including immediate recognition of stock-based compensation expense on the date of grant.

During the third quarter of fiscal year 2020, Woodward entered into a Separation and Release Agreement with Jonathan (“Jack”) W. Thayer, the Company’s former Chief Financial Officer. Under the provisions of the agreement, all stock options previously granted to Mr. Thayer, other than an award granted in October 2019, were modified to provide for continued vesting post-termination based on the original schedule and an extension of the exercise period for the remaining ten-year term of the options. As a result of the modification to these awards, Woodward recognized an additional $2,376 of stock compensation expense, before tax, during the three-months ended June 30, 2020.

At June 30, 2020, there was approximately $20,088 of total unrecognized compensation expense related to non-vested stock-based compensation arrangements, including both stock options and restricted stock awards. The pre-vesting forfeiture rates for purposes of determining stock-based compensation expense recognized were estimated to be 0% for members of the Board and 9% for all others. The remaining unrecognized compensation cost is expected to be recognized over a weighted-average period of approximately 1.9 years.

On April 5, 2020, the Board declared a dividend distribution of one right (a “Right”) for each outstanding share of common stock of the Company to stockholders of record as of the close of business on April 16, 2020 (the “Record Date”). Each Right entitles the registered holder, upon the occurrence of specified events, to purchase from the Company one one-thousandth of a share of Series B Participating Preferred Stock, par value $0.003 per share (the “Preferred Stock”), of the Company at an exercise price of $480.00 (the “Exercise Price”). In addition, each Right entitles the registered holder (other than any person or group that acquires 15% or more of the Company’s common stock without the approval of the Board), following the occurrence of other specified events, to purchase common stock of the Company or stock of any acquirer of the Company at a substantial discount. The complete terms of the Rights are set forth in a Preferred Stock Rights Agreement (the “Rights Agreement”), dated as of April 5, 2020, between the Company and American Stock Transfer & Trust Company, LLC, as rights agent.

The Board adopted the Rights Agreement to protect stockholders from coercive or otherwise unfair takeover tactics. In general terms, it works by imposing a significant penalty upon any person or group that acquires 15% or more of the common stock of the Company without the approval of the Board. As a result, the overall effect of the Rights Agreement and the issuance of the Rights may be to render more difficult or discourage a merger, tender or exchange offer or other business combination involving the Company that is not approved by the Board. However, neither the Rights Agreement nor the Rights should interfere with any merger, tender or exchange offer or other business combination approved by the Board.

The Rights expire on the earliest of (i) on April 5, 2021 (unless such date is extended) or (ii) the redemption or exchange of the Rights pursuant to the Rights Agreement.