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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended March 31, 2024

or

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

For the transition period from _____ to _____

Commission file number 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
(Address of principal executive offices) |  | (Zip Code)

(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 ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). 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,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer ☒ Accelerated Filer ☐ Non-accelerated Filer ☐ Smaller Reporting Company ☐

Emerging 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 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
PART I – FINANCIAL INFORMATION
Item 1. |  | Financial Statements |  | 1
|  | Condensed Consolidated Statements of Earnings |  | 1
|  | Condensed Consolidated Statements of Comprehensive Earnings |  | 2
|  | Condensed Consolidated Balance Sheets |  | 3
|  | Condensed Consolidated Statements of Cash Flows |  | 4
|  | Condensed Consolidated Statements of Stockholders’ Equity |  | 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 |  | 28
|  | Results of Operations |  | 29
|  | Liquidity and Capital Resources |  | 33
Item 3. |  | Quantitative and Qualitative Disclosures About Market Risk |  | 38
Item 4. |  | Controls and Procedures |  | 38
PART II – OTHER INFORMATION
Item 1. |  | Legal Proceedings |  | 39
Item 1A. |  | Risk Factors |  | 39
Item 2. |  | Unregistered Sales of Equity Securities and Use of Proceeds |  | 39
Item 5. |  | Other Information |  | 40
Item 6. |  | Exhibits |  | 40
|  | Signatures |  | 41

PART I – FINANCI AL INFORMATION

Item 1. Financi al 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 |

See accompanying Notes to Condensed Consolidated Financial Statements

1

WOODWARD, INC.

CONDENSED CONSOLIDATED STATE MENTS 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 |

See accompanying Notes to Condensed Consolidated Financial Statements

2

WOODWARD, INC.

CONDENSED CONSOLIDATE D 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 |

See accompanying Notes to Condensed Consolidated Financial Statements

3

WOODWARD, INC.

CONDENSED CONSOLIDATED STAT EMENTS OF 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 |

See accompanying Notes to Condensed Consolidated Financial Statements

4

WOODWARD, INC.

CONDENSED CONSOLIDATED STATE MENTS 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

5

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

6

WOODWARD, INC.

NOTES TO CONDENSED CONSOLIDA TED FINANCIAL STATEMENTS

(In thousands, except per share amounts)

(Unaudited)

Note 1. Basis of presentation

The Condensed Consolidated Financial Statements of Woodward, Inc. (“Woodward” or the “Company”) as of March 31, 2024 and for the three and six months ended March 31, 2024 and 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 March 31, 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 March 31, 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, 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. 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 credit losses; net realizable value of inventories; variable consideration including customer rebates earned and payable and early payment discounts; warranty reserves; useful lives of property and identifiable intangible assets; the evaluation of impairments of property, intangible assets, and goodwill; the provision for income tax and related valuation 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; the valuation of stock compensation instruments granted to employees, 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.

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 November 2023, the FASB issued ASU 2023-07, "Improvements to Reportable Segment Disclosures." The purpose of ASU 2023-07 is to provide enhanced disclosures about significant segment expenses. The amendments in ASU 2023-07 are effective for fiscal years beginning after December 15, 2023 (fiscal year 2025 for Woodward), and interim periods within fiscal years beginning after December 15, 2024 (fiscal year 2026 for Woodward), with early adoption permitted, and are to be applied on a retrospective basis to all periods presented. Woodward is currently assessing the impact on its segment reporting disclosures.

In December 2023, the FASB issued ASU 2023-09, "Improvements to Income Tax Disclosures." The purpose of ASU 2023-09 is to 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 the income tax disclosure. The amendments in ASU 2023-09 are effective for fiscal years beginning after December 15, 2024 (fiscal year 2026 for Woodward), with early adoption permitted, and is required to be applied prospectively with the option of retrospective application. Woodward is currently assessing the impact on its income tax disclosures.

7

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 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 March 31, 2024, “Other assets” on 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 reviewing specific customer accounts, taking into consideration accounts receivable aging, credit risk of the customers, and historical payment history, as well as current 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 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 | )
Other 1 |  |  | (33 | ) |  |  | (49 | ) |  |  | 58 |  |  |  | (113 | )
Balance, ending |  | $ | 7,126 |  |  | $ | 9,949 |  |  | $ | 7,126 |  |  | $ | 9,949 |

(1)
Includes effects of foreign exchange rate changes during the period.

8

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 $21,265 in the six months ended March 31, 2024 from contract liabilities balances recorded as of October 1, 2023, compared to $5,299 in the three months and $14,184 in the six months ended March 31, 2023 from contract liabilities balances recorded as of October 1, 2022.

Remaining performance obligations

Remaining performance obligations related to the aggregate amount of 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 $2,325,533 as of September 30, 2023, the majority of 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 in the rem ainder of fiscal year 2024, $15,986 is expected to be rec ognized in fiscal year 2025, and the remaining balance is expected to be recognized thereafter. Woodward expects to recognize revenue from performance obligations related to material rights over the life of the underlying programs, which may be as long as forty years.

Disaggregation of Revenue

Woodward designs, produces, and services reliable, efficient, low-emission, and high-performance energy control products for diverse applications in markets throughout the world. Woodward reports financial results for each of its Aerospace and Industrial reportable segments. Woodward further disaggregates its revenue from contracts with customers by primary market as Woodward 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

9

months and six months ended March 31, 2023 to conform to the new presentation. This reclassification of revenue had no impact on our consolidated financial results.

The 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 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 |

The following stock option grants were outstanding but were excluded from the computation of diluted earnings per share because their inclusion would have been 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 |

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 |

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.

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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.

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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 6. Joint venture

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 develop, manufacture, and 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, GE pays contingent consideration to Woodward consisting of fifteen annual payments of $4,894 per year, which began in the second quarter of fiscal year 2017, subject to certain claw-back conditions. Woodward received its annual payments of $4,894 during the three-months ended March 31, 2024 and 2023, which were recorded as deferred income and included in “Net cash provided by operating activities” on the Condensed Consolidated Statements of Cash Flows.

Other income related to Woodward’s equity interest in the earnings of the 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 from the JV, recognized in “Other, net” in “Net cash provided by operating activities” on the Condensed Consolidated Statements of Cash Flows, were as 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 |

Net sales to the JV were as follows:

|  | Three Months Ended March 31, |  |  | Six Months Ended March 31, |
|  | 2024 |  |  | 2023 |  |  | 2024 |  |  | 2023 |
Net sales 1 |  | $ | 22,080 |  |  | $ | 7,320 |  |  | $ | 42,352 |  |  | $ | 13,797 |

(1)
Net sales included a reduction of $14,992 for the three months and $29,531 for the six months ended March 31, 2024 related to royalties owed to the JV by Woodward on sales by Woodward directly to third party aftermarket customers, compared to a reduction to sales of $12,888 for the three months and $20,458 for the six months ended March 31, 2023.

The Condensed Consolidated Balance Sheets include “Accounts receivable” related to amounts the JV owed Woodward, “Accounts payable” related to amounts Woodward owed the 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 |

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Note 7. Financial instruments and fair value measurements

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 as defined by the U.S. GAAP fair value hierarchy.

|  | At March 31, 2024 |  |  | At September 30, 2023 |
|  | Level 1 |  |  | Level 2 |  |  | Level 3 |  |  | Total |  |  | Level 1 |  |  | Level 2 |  |  | Level 3 |  |  | Total |
Financial assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Investments in banks and financial institutions |  | $ | 204,724 |  |  | $ | — |  |  | $ | — |  |  | $ | 204,724 |  |  | $ | 28,560 |  |  | $ | — |  |  | $ | — |  |  | $ | 28,560 |
Equity securities |  |  | 29,902 |  |  |  | — |  |  |  | — |  |  |  | 29,902 |  |  |  | 24,913 |  |  |  | — |  |  |  | — |  |  |  | 24,913 |
Cross-currency interest rate swaps |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 5,389 |  |  |  | — |  |  |  | 5,389 |
Total financial assets |  | $ | 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 banks and financial institutions: Woodward and 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” on the Condensed Consolidated Statements of Earnings. The trading securities are included in “Other 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.

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 March 31, 2024 |  |  | At September 30, 2023 |
|  | Fair Value Hierarchy Level |  | Estimated Fair Value |  |  | Carrying Cost |  |  | Estimated Fair Value |  |  | Carrying Cost |
Assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Notes receivable from municipalities |  | 2 |  | $ | 7,859 |  |  | $ | 7,410 |  |  | $ | 7,794 |  |  | $ | 7,688 |
Investments in short-term time deposits |  | 2 |  |  | 88 |  |  |  | 88 |  |  |  | 6,095 |  |  |  | 6,107 |
Liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Long-term debt |  | 2 |  |  | 612,200 |  |  |  | 650,754 |  |  |  | 661,507 |  |  |  | 722,671 |

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 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

13

payments received at an interest rate available to 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 2.6% at March 31, 2024 and 3.6% at September 30, 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 5.9% at March 31, 2024 and 6.8% at September 30, 2023.

The fair value of long-term debt was estimated based on the prices of debt of comparable type and maturity available to Woodward at the end of the period, 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 5.2% at March 31, 2024 and 5.9% at September 30, 2023.

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

Note 8. Derivative instruments and hedging activities

Derivative instruments not designated or qualifying as hedging instruments

In May 2020, Woodward 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 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 risk attributable to the spot remeasurement of the US dollar denominated intercompany loan, as 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 to the cross-currency basis spread, or excluded component, of the derivative instrument is recognized in accumulated other comprehensive income (“OCI”). The remaining change in the fair value of the derivative instrument is recognized in foreign currency transaction gain or loss included in “Selling, general and administrative costs” in Woodward’s Condensed Consolidated 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 the intercompany floating-rate cross-currency interest rate swap.

14

Derivative instruments in cash flow hedging relationships

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. Reclassifications out of accumulated OCI of the change in 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 fair value changes of the derivative instruments and such hedges are deemed to 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 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 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 due September 23, 2026 (the “Series M Notes”). Woodward designated the Series M Notes as a hedge of a foreign currency exposure of Woodward’s net investment in its Euro denominated functional currency subsidiaries. Related to the Series M Notes, included in foreign currency translation adjustments within total comprehensive (losses) earnings is a net foreign exchange gain of $978 for the three months and a foreign exchange loss of $888 for the six months ended March 31, 2024, compared to foreign exchange losses of $807 for the three months and $4,432 for the six months ended March 31, 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 |

15

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

Note 9. Supplemental statement of cash flows information

|  | 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 10. Inventories

|  | 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 can be sold separately as finished goods or included in the manufacture of other products.

Note 11. Property, plant, and equipment

|  | March 31, 2024 |  |  | September 30, 2023 |
Land and land improvements |  | $ | 89,899 |  |  | $ | 89,352 |
Buildings and building improvements |  |  | 591,225 |  |  |  | 589,735 |
Leasehold improvements |  |  | 21,445 |  |  |  | 21,079 |
Machinery and production equipment |  |  | 808,980 |  |  |  | 807,244 |
Computer equipment and software |  |  | 117,694 |  |  |  | 120,290 |
Office furniture and equipment |  |  | 41,303 |  |  |  | 41,943 |
Other |  |  | 38,253 |  |  |  | 20,073 |
Construction in progress |  |  | 64,847 |  |  |  | 55,487 |
|  |  | 1,773,646 |  |  |  | 1,745,203 |
Less accumulated depreciation |  |  | (852,291 | ) |  |  | (832,109 | )
Property, plant, and equipment, net |  | $ | 921,355 |  |  | $ | 913,094 |

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 |

16

Note 12. Goodwill

|  | 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 and at any time there is an indication that goodwill is more-likely-than-not impaired (commonly referred to as a triggering event). Woodward’s goodwill impairment test in the fourth quarter of fiscal year 2023 resulted in no impairment.

Note 13. Intangible assets, net

|  | March 31, 2024 |  |  | September 30, 2023 |
|  | 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 |  | $ | 281,683 |  |  | $ | (241,513 | ) |  | $ | 40,170 |  |  | $ | 281,683 |  |  | $ | (236,143 | ) |  | $ | 45,540 |
Industrial |  |  | 386,267 |  |  |  | (101,363 | ) |  |  | 284,904 |  |  |  | 378,804 |  |  |  | (90,084 | ) |  |  | 288,720 |
Total |  | $ | 667,950 |  |  | $ | (342,876 | ) |  | $ | 325,074 |  |  | $ | 660,487 |  |  | $ | (326,227 | ) |  | $ | 334,260 |
Intellectual property: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Aerospace |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Industrial |  |  | 3,139 |  |  |  | (3,139 | ) |  |  | — |  |  |  | 3,139 |  |  |  | (3,139 | ) |  |  | — |
Total |  | $ | 3,139 |  |  | $ | (3,139 | ) |  | $ | — |  |  | $ | 3,139 |  |  | $ | (3,139 | ) |  | $ | — |
Process technology: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Aerospace |  | $ | 44,570 |  |  | $ | (40,026 | ) |  | $ | 4,544 |  |  | $ | 44,570 |  |  | $ | (39,551 | ) |  | $ | 5,019 |
Industrial |  |  | 84,877 |  |  |  | (33,676 | ) |  |  | 51,201 |  |  |  | 83,456 |  |  |  | (31,709 | ) |  |  | 51,747 |
Total |  | $ | 129,447 |  |  | $ | (73,702 | ) |  | $ | 55,745 |  |  | $ | 128,026 |  |  | $ | (71,260 | ) |  | $ | 56,766 |
Other intangibles: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Aerospace |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Industrial |  |  | 561 |  |  |  | (561 | ) |  |  | — |  |  |  | 554 |  |  |  | (524 | ) |  |  | 30 |
Total |  | $ | 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 |  | $ | 326,253 |  |  | $ | (281,539 | ) |  | $ | 44,714 |  |  | $ | 326,253 |  |  | $ | (275,694 | ) |  | $ | 50,559 |
Industrial |  |  | 537,439 |  |  |  | (138,739 | ) |  |  | 398,700 |  |  |  | 527,260 |  |  |  | (125,456 | ) |  |  | 401,804 |
Consolidated Total |  | $ | 863,692 |  |  | $ | (420,278 | ) |  | $ | 443,414 |  |  | $ | 853,513 |  |  | $ | (401,150 | ) |  | $ | 452,363 |

Woodward tests the indefinite lived trade name intangible asset for impairment during the fourth quarter of each fiscal year and 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 |

17

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 |

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

Revolving credit facility

Woodward maintains a $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, which provides for the option to increase available borrowings up to $1,500,000, subject to lenders’ 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 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 0.875% to 1.75%. The Revolving Credit Agreement matures on October 21, 2027.

Under the Second Amended and Restated Revolving Credit Agreement, there were $141,300 in principal amount of borrowings outstanding as of March 31, 2024 at an effective interest rate of 6.46% as compared to no borrowings outstanding as of September 30, 2023. As of March 31, 2024, all of the borrowings outstanding were classified as short-term borrowings based on 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 on Woodward’s foreign lines of credit and foreign overdraft facilities as of March 31, 2024 and September 30, 2023.

The Notes

On November 15, 2023, Woodward paid the entire principal balance of $75,000 on the Series H and K Notes using proceeds from borrowings under its existing revolving credit facility.

Note 15. Accrued liabilities

|  | March 31, 2024 |  |  | September 30, 2023 |
Salaries and other member benefits |  | $ | 98,019 |  |  | $ | 146,713 |
Product warranties and related liabilities |  |  | 19,800 |  |  |  | 18,162 |
Interest payable |  |  | 12,199 |  |  |  | 13,611 |
Accrued retirement benefits |  |  | 2,844 |  |  |  | 2,822 |
Net current contract liabilities |  |  | 48,821 |  |  |  | 33,748 |
Taxes, other than income |  |  | 18,981 |  |  |  | 13,436 |
Other |  |  | 36,280 |  |  |  | 34,124 |
|  | $ | 236,944 |  |  | $ | 262,616 |

18

Product warranties and related liabilities

Provisions of Woodward’s sales agreements include product warranties customary to these types of agreements. Accruals are established for specifically identified warranty issues 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

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 leadership changes arising from such reorganization, we recorded $1,083 of restructuring charges as nonsegment expenses, which were paid as of December 31, 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 recorded $5,172 of restructuring charges. The charges recognized under the Cost Reduction Plan consist of workforce management costs primarily related to 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.

Note 16. Other liabilities

|  | 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.

Note 17. Other (income) expense, net

|  | Three Months Ended March 31, |  |  | Six Months Ended March 31, |
|  | 2024 |  |  | 2023 |  |  | 2024 |  |  | 2023 |
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 |  |  | (88 | ) |  |  | (93 | ) |  |  | (170 | ) |  |  | (181 | )
Net gain on investments in deferred compensation program |  |  | (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 |  |  | — |  |  |  | 18 |  |  |  | (62 | ) |  |  | (68 | )
|  | $ | (14,384 | ) |  | $ | (12,040 | ) |  | $ | (35,023 | ) |  | $ | (20,430 | )

19

Note 18. Income taxes

The determination of the estimated annual effective tax rate is based upon a number of significant estimates and 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 following table sets forth the tax expense and the effective tax rate for Woodward’s earnings before income taxes:

|  | Three Months Ended March 31, |  |  | Six Months Ended March 31, |
|  | 2024 |  |  | 2023 |  |  | 2024 |  |  | 2023 |
Earnings before income taxes |  | $ | 120,624 |  |  | $ | 40,241 |  |  | $ | 230,344 |  |  | $ | 71,990 |
Income tax expense |  |  | 23,068 |  |  |  | 4,730 |  |  |  | 42,744 |  |  |  | 6,873 |
Effective tax rate |  |  | 19.1 | % |  |  | 11.8 | % |  |  | 18.6 | % |  |  | 9.5 | %

The increase in the effective tax rate for the second quarter 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 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 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 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 35%. These higher projected earnings and higher actual year-to-date earnings resulted in lower current year-to-date tax benefits as a percent of earnings when compared to the prior year. Additionally, the increase is attributable to projected future withholding taxes on unremitted foreign earnings and the release of uncertain tax positions that did not recur in the current fiscal year.

Gross unrecognized tax benefits were $12,715 as of March 31, 2024, and $11,112 as of September 30, 2023. At March 31, 2024, the amount of the liability for unrecognized tax benefits that, if recognized, would impact Woodward’s effective tax rate was $8,110. Woodward believes it is reasonably possible that the liability for unrecognized tax benefits will decrease by as much as $2,178 in the next twelve months due to the completion of review by tax authorities, lapses of statutes, and the settlement of tax positions. 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.

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 limitation may result in changes to tax expense. 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 2018 and thereafter.

Note 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 (the "Retirement Savings Plan"). The 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 non-U.S. employees are also eligible to participate in similar non-U.S. plans.

20

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 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 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, their covered dependents, and beneficiaries in the United 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, 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.

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.

21

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.

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 2024 may differ from the current estimate. Woodward estimates its remaining cash contributions in fiscal year 2024 will be as follows:

Retirement pension benefits: |  |  |
United States |  | $ | — |
United Kingdom |  |  | 558 |
Japan |  |  | — |
Germany |  |  | 493 |
Other postretirement benefits |  |  | 1,851 |

Note 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 | )

22

|  | 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 Woodward board of directors (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”). During the first six months of fiscal year 2023, Woodward repurchased 274 shares of its common stock for $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 three-year period ending in January 2027 (the “2024 Authorization”). During the first six months of fiscal year 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”).

The 2017 Plan was first approved by Woodward’s stockholders in January 2017 and is the successor plan to the 2006 Plan. The Board has delegated authority to administer 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. 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 March 31, 2024 and 2,689 shares as of September 30, 2023.

Stock options

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. 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.

23

The following is a summary of the activity for stock option awards:

|  | 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 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 |

Information about stock options that have vested, or are expected to vest, and are exercisable at March 31, 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 |

R estricted 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.

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

24

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 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 the vesting period, including immediate recognition of stock-based compensation expense on the date of grant.

In connection with an executive separation and release agreement entered into by the Company during the second quarter of fiscal year 2024, Woodward recognized an additional $1,682 of stock compensation expense, before tax.

At March 31, 2024, there was approximately $39,926 of total unrecognized compensation expense related to non-vested stock-based compensation 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% for members of the Board and 7.3% for all others. The remaining unrecognized compensation cost is expected to be recognized over a weighted-average period of approximately 1.6 years.

Note 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.

25

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 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 liquidity, financial condition, or results of operations.

Under the Company’s severance and change in control agreements with its current corporate officers, Woodward would be required to pay termination benefits to any such 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 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, 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 |

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:

|  | March 31, 2024 |  |  | September 30, 2023 |
Segment assets: |  |  |  |  |  |
Aerospace |  | $ | 1,890,089 |  |  | $ | 1,829,410 |
Industrial |  |  | 1,563,424 |  |  |  | 1,490,341 |
Unallocated corporate property, plant, and equipment, net |  |  | 120,202 |  |  |  | 104,962 |
Other unallocated assets |  |  | 792,544 |  |  |  | 585,490 |
Consolidated total assets |  | $ | 4,366,259 |  |  | $ | 4,010,203 |

Note 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.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward Looki ng 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, including our assumptions underlying our expectations;
•
trends in our business and the markets in which we operate, including expectations for those markets, our customers and their business and products;
•
our ability to manage risks from operating internationally;
•
expectations regarding demand for our products, in particular our expectations with respect to natural gas trucks in China;
•
our expected expenses in future periods and trends in such expenses over time;
•
our expectations regarding margins and the impact of specific products, product mix, and our strategic actions on margins;
•
descriptions of our plans and expectations for future operations, including our strategic initiatives and impact of such initiatives;
•
plans and expectations relating to the performance of our joint venture with General Electric Company;
•
the expected levels of activity in particular industries or markets and the effects of changes in those levels;
•
the scope, nature, or impact of acquisition activity and integration of such acquisition into our business;
•
the research, development, production, and support of new products and services;
•
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 liquidity, including our ability to meet capital spending requirements and operations;
•
future dividends and repurchases of common stock;
•
future levels of indebtedness and capital spending;
•
the stability of financial institutions, including those lending to us;
•
pension and other postretirement plan assumptions and future contributions;
•
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.

These forward-looking statements are only predictions and are subject to risks, uncertainties and assumptions that are difficult to predict. Factors that could cause actual results and the timing of certain events to differ materially from the forward-looking statements include, but are not limited to, risk factors described in Woodward's filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K for the year ended September 30, 2023, which was filed on November 17, 2023, and other risks described in Woodward’s filings with the 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.

27

OVERV IEW

Global Business Conditions

During the first half of fiscal year 2024, we achieved significant sales growth and margin expansion as compared to the same period of the prior year. 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 aerospace and industrial markets. Further, we continue to better align price to the value of our products which helps to mitigate the ongoing impacts of inflation. We remain committed to growth, operational excellence, and innovation to deliver long-term success and enhanced shareholder value. We also continue to monitor the 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 our business.

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, adjusted earnings per share, adjusted effective tax rate, EBIT, adjusted EBIT, EBITDA, and adjusted EBITDA are non-U.S. GAAP financial measures. A description of these measures as well as a reconciliation of these non-U.S. GAAP financial measures to the most directly comparable U.S. GAAP financial measures can be found under the caption “Non-U.S. GAAP Financial Measures” in this Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Liquidity Highlights

Net cash provided by operating activities for the first half of fiscal year 2024 was $144,118, compared to $40,150 for the first half of fiscal year 2023. The increase in net cash provided by operating activities in the first half of fiscal year 2024 compared to the first half of the prior fiscal year is primarily attributable to increased earnings.

For the first half of fiscal year 2024, free cash flow was $87,817, compared to negative $3,896 for the first half of fiscal year 2023. We define free cash flow as net cash flow from operating activities less payments for property, plant, and 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 $90,032 for the first half of fiscal year 2024, compared to a negative $1,060 for the first half of 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

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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 measures. A description of these measures as well as a reconciliation of these non-U.S. GAAP financial measures to the most directly comparable U.S. GAAP financial measures can be found under the caption “Non-U.S. GAAP Financial Measures” in this Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations.

At March 31, 2024, we held $316,932 in cash and cash equivalents and had total outstanding debt of $791,038. We have additional borrowing availability of $850,764, net of outstanding letters of credit, under our revolving credit agreement. At March 31, 2024, we also had additional borrowing capacity of $25,585 under various foreign lines of credit and foreign overdraft facilities.

RESULTS OF OPERATIONS

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

|  | Three Months Ended |  |  | Six Months Ended |
|  | March 31, 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 | %

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 |

Net Sales

Consolidated net sales for the second quarter of fiscal year 2024 increased by $117,129, or 16.3%, compared to the same period of fiscal year 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 |

In the Aerospace 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 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

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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 2024, from $559,149, for the second quarter of 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 $131,523 to $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 half of fiscal year 2024, compared to 78.7% of net sales for the first half of fiscal year 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 due to higher sales volume and net inflationary impacts on material and labor costs. The decrease in cost of goods sold as a percent of net sales in 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 28.1% for the second quarter of fiscal year 2024 and 27.0% for the first half of fiscal year 2024, compared to 22.1% for the second quarter of fiscal year 2023 and 21.3% for the first half of fiscal year 2023. The increase in gross margin 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 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 2024, compared to $75,578 for the second quarter of fiscal year 2023. Selling, general, and administrative expenses as a percentage of net sales decreased to 9.8% for the second quarter of fiscal year 2024, compared to 10.5% for the second quarter of fiscal year 2023. The increase in selling, general, and administrative expenses on an absolute basis for the second quarter of fiscal year 2024 compared to the same period of the prior fiscal year is primarily due to increased annual variable incentive compensation costs.

Selling, general, and administrative expenses increased by $17,193, or 12.4%, to $155,958 for the first half of fiscal year 2024, compared to $138,765 for the first half of fiscal year 2023. Selling, general, and administrative expenses as a percentage of net sales decreased to 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 2024, compared to $37,777 for the second quarter of fiscal year 2023. The decrease in research and development costs for the second quarter 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 4.4% 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.

Interest expense decreased by $1,315, or 10.2%, to $11,530 for the second quarter of fiscal year 2024, compared to $12,845 for the second quarter of fiscal year 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 decrease in interest expense 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 payments on our revolving credit facility during 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.

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Other income increased by $2,344 to $14,384 for the second quarter of fiscal year 2024, compared to $12,040 for the second quarter 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 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 19.1% for the second quarter and 18.6% for the first half of fiscal year 2024, and 11.8% for the second quarter and 9.5% for the first half of fiscal year 2023.

The increase in the effective tax rate for the second quarter 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 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 prior year 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 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 35%. These higher projected earnings and higher actual year-to-date earnings resulted in lower current year-to-date tax benefits as a percent of earnings when compared to the prior year. Additionally, the increase is attributable to projected future withholding taxes on unremitted foreign earnings and the release of uncertain tax positions that did not recur in the 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 | %

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 |

The following table presents segment earnings 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

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 increased by $125,566, or 15.1%, to $958,268 for the first half of fiscal year 2024, compared to $832,702 for the first half of fiscal year 2023. The increase in Aerospace 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 is primarily attributable to increased aircraft utilization, as a result of continued growth in passenger traffic, and price realization.

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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 2024, compared to $73,314 for the second quarter of fiscal year 2023. Aerospace segment earnings increased by $48,705, or 37.8%, to $177,453 for the first half of fiscal year 2024, compared to $128,748 for the first half of fiscal year 2023.

The increase in Aerospace segment earnings 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 |

Aerospace segment earnings as a percentage of segment net sales were 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 2024, compared to $281,197 for the second quarter of fiscal year 2023. Industrial segment net sales 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 decreased oil and gas sales.

Future demand for on-highway natural gas trucks in China beyond the third quarter of fiscal year 2024 remains uncertain.

Industrial segment earnings increased by $27,673, or 73.7%, to $65,244 for the second quarter of fiscal year 2024, compared to $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 segment earnings was due to the 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 segment net sales were 19.3% for the second quarter and 19.9% for the first half of fiscal year 2024, compared to 13.4% for the second quarter and 9.7% for the first half of fiscal year 2023. Industrial earnings benefited significantly from increased demand for on-highway natural gas trucks in 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 third quarter of fiscal year 2024 remains uncertain.

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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 same periods of the prior year was primarily due to significant costs that occurred in the second quarter of fiscal year 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 2024 as compared to the same period of the prior fiscal year. Excluding these charges, nonsegment expenses increased $7,527 in the first half of fiscal year 2024 as compared to the same period of the prior fiscal year. The remaining increase in nonsegment expenses for the second quarter and first half of fiscal year 2024 as compared to the same periods of the prior fiscal year is primarily due to increased annual variable incentive compensation costs.

LIQUIDITY AND CA PITAL RESOURCES

Historically, we have satisfied our working capital needs, as well as capital expenditures, product development, and other liquidity requirements associated with our operations, with cash flow provided by operating activities and borrowings under our credit facilities. From time to time, we have also issued debt to supplement our cash needs, repay our other indebtedness, or finance our acquisitions. We continue to expect that cash generated from our operating activities, together with borrowings under our revolving credit facility and other borrowing capacity, will be sufficient to fund our continuing operating needs for the foreseeable future.

In addition to our revolving credit facility, we have various foreign credit facilities, some of which are tied to net amounts on deposit at certain foreign financial institutions. These foreign credit facilities are reviewed annually for renewal. We use borrowings under these foreign credit facilities to finance certain local operations on a periodic basis. For further discussion of our revolving credit facility and our other credit facilities, see Note 14, Credit facilities, short-term borrowings and long-term debt in the Notes to the Condensed Consolidated Financial Statements included in Part I, Item I of this Form 10-Q.

At March 31, 2024, we had total outstanding debt of $791,038 consisting of various series of unsecured notes due between 2025 and 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 | %

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At March 31, 2024, we had additional borrowing availability of $850,764 under our revolving credit facility, net of outstanding letters of credit, and additional borrowing availability of $25,585 under various foreign credit facilities.

To our knowledge, we were in compliance with all our debt covenants as of March 31, 2024. See Note 15, Credit facilities, short-term borrowings and long-term debt in the Notes to the Consolidated Financial Statements included in Part II, Item 8 of our most recently filed Form 10-K, for more information about our covenants.

In addition to utilizing our cash resources to fund the working capital needs of our business, we evaluate additional strategic uses of our funds, including the repurchase of our common stock, payment of dividends, significant capital expenditures, 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.

We believe that cash flows from operations, along with our contractually committed borrowings and other borrowing capability, will continue to be sufficient to fund anticipated capital spending requirements and our operations for the foreseeable future. However, we could be adversely affected if the financial institutions providing our capital requirements refuse to honor their contractual commitments, cease lending, or declare bankruptcy. We believe the lending institutions participating in our credit arrangements are financially stable and do not currently foresee adverse impacts to financial institutions supporting our capital requirements.

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 |

Net cash flows provided by operating activities for the first half of 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 half of fiscal year 2024 as compared to the first half of the prior fiscal year is primarily attributable to increased earnings.

Net cash flows used in investing activities for the first half of fiscal year 2024 was $49,641 compared to $35,236 for the same period of fiscal year 2023. The increase in cash flows used in investing activities in the first half of fiscal year 2024 as compared to the first half of the prior fiscal year is primarily due to increased payments for property, plant, and equipment.

Net cash flows provided by financing activities for the first half of fiscal year 2024 was $80,588, compared to $24,337 for the same period of fiscal year 2023. The increase in net cash flows provided by financing activities in the first half of fiscal year 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 half of fiscal year 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 $65,828, compared to $63,412 in the first half of fiscal year 2023.

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

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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. 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 |

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Management uses EBIT to evaluate Woodward’s performance without financing and tax related considerations, as these elements 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 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. 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 |

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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. 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 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 these non‐U.S. GAAP financial measures is not intended to be considered in isolation of, or as substitutes for, the financial information prepared and presented in accordance with U.S. GAAP. Free cash flow and adjusted free cash flow do not necessarily represent funds available for discretionary use and are 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 their usefulness as comparative measures.

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Free cash flow and 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 | )

CRITICAL ACCOUNTING 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 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 recently filed Form 10-K, include the discussion of estimates used for revenue recognition, inventory valuation, reviews for impairment of goodwill and other indefinitely lived intangible assets, and our provision for income taxes. Such accounting 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.

Item 3. Quantitative and 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 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 (Charles (“Chip”) P. Blankenship, Jr., Chairman of the Board, Chief Executive Officer and President) and Principal Financial and Accounting Officer (William F. Lacey, Chief Financial Officer), as appropriate, to allow timely decisions regarding required disclosures.

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Chip P. Blankenship, Jr. and William F. 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 March 31, 2024.

There have not been any changes in our internal controls over financial reporting during the quarter ended March 31, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II – 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.

Ite m 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.

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Item 5. Other Information

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. E xhibits

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

WOODWARD, INC.

EXHIBIT INDEX

| Exhibit Number | Description
* | 10.1 | 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 Charles P. Blankenship, Jr.
* | 31.2 | Rule 13a-14(a)/15d-14(a) certification of William F. Lacey
* | 32.1 | Section 1350 certifications
* | 101 | The following financial statements from the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2024, formatted in Inline XBRL: (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Earnings, (iii) Condensed Consolidated Statements of Comprehensive Earnings, (iv) Condensed Consolidated Statements of Cash Flows, (v) Condensed Consolidated Statements of Stockholders’ Equity, and (vi) Notes to Condensed Consolidated Financial Statements.
* | 104 | Cover page Interactive Data File (embedded within the Inline XBRL document and are contained in Exhibit 101)

* Filed as an exhibit to this Report

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SIGNA TURES

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: May 3, 2024 |  | /s/ Charles P. Blankenship, Jr.
|  | 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: May 3, 2024 |  | /s/ William F. Lacey
|  | William F. Lacey
|  | Chief Financial Officer (on behalf of the registrant and as the registrant’s Principal Financial and Accounting Officer)

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