10-K – 2025-11-25 – wwd-20250930.htm

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
This Management’s Discussion and Analysis should be read together with the Consolidated Financial Statements and Notes included in this report. Dollar and number of share amounts contained in this discussion and elsewhere in this Annual Report on Form 10-K are in thousands, except per share amounts. For a discussion of the 2024 Results of Operations, including a discussion of the financial results for the fiscal year ended September 30, 2024 compared to the fiscal year ended September 30, 2023, refer to Part I, Item 7 of our Annual Report on Form 10-K filed with the SEC on November 26, 2024.
OVERVIEW
We enhance the global quality of life and sustainability by optimizing energy use through improved efficiency and lower emissions. We are an independent designer, manufacturer, and services provider of control solutions for the aerospace and industrial markets. We design, produce, and service reliable, efficient, low-emission, and high-performance energy control products for diverse applications in challenging environments. We have production and assembly facilities primarily in the United States, Europe, and Asia, and promote our products and services through our worldwide locations.
Our strategic focus is providing energy control and optimization solutions for the aerospace and industrial markets. The precise and efficient control of energy, including motion, fluid, combustion, and electrical energy, is a growing requirement in the markets we serve, and we have developed and are executing on strategies to leverage the macro trends of reducing greenhouse gases, commercializing space, and accelerating the digital age. To facilitate a cleaner world, we are partnering with our customers to enable their equipment to be more efficient, capable of utilizing clean burning fuels, advancing fuel cells, and the integration of renewable power in both commercial and defense operations. Our core technologies can be leveraged across our markets and customer applications, enabling us to develop and integrate cost-effective and state-of-the-art fuel, combustion, fluid, actuation, and electronic systems. We focus primarily on serving OEMs and equipment packagers, partnering with them to bring superior component and system solutions to their demanding applications. We also provide service repair, maintenance, replacement, and other service support for our installed products.
Our components and integrated systems optimize performance of commercial aircraft, defense aircraft, military ground vehicles and other equipment, gas and steam turbines, industrial diesel, gas, bio-diesel and dual-fuel reciprocating engines, and electrical power systems. Our innovative motion, fluid, combustion, and electrical energy control systems help our customers offer more cost-effective, cleaner, and more reliable equipment.
Global Business Conditions
As global trade dynamics continue to evolve, the impact of increased trade tensions and related tariffs with U.S. trading partners remains a key factor in shaping global economic activity, supply chains, and market stability. Future tariff adjustments may emerge as countries negotiate trade agreements, respond to geopolitical shifts, and address the challenges of inflation and global competition. We expect increased cost pressure resulting from the already announced tariffs, and there are uncertainties surrounding future tariff policy changes and enforcement. However, the Company’s production and supply bases are largely in the same regions where our products are sold, which we believe will mitigate our exposure. Woodward is closely tracking costs from our supply base and customer forecasts regarding the potential impact of currently announced tariff levels, changes to such levels, and actual and potential retaliatory trade actions. We have experienced and are expecting minimal levels of cost pressure as a result of the implemented tariffs. We are proactively working to mitigate this cost pressure, potential sales risks, and potential supply chain disruptions.
BUSINESS ENVIRONMENT AND TRENDS
We serve the aerospace and industrial markets.
Aerospace Markets
Our aerospace products and systems are primarily used to provide propulsion, actuation, and motion control in both commercial and defense fixed-wing aircraft, rotorcraft, smart defense, and other defense systems.
Commercial OEM – In the commercial aerospace markets, global air traffic remained strong. However, due to a strike at Boeing during our first quarter of fiscal 2025, production levels at Boeing did not grow as much as anticipated during the fiscal year. We also experienced inventory management and normalization by our customers, particularly in the second half of the fiscal year. Overall, the commercial OEM market was slightly down year over year.
During fiscal year 2025, overall 737 MAX orders improved, but deliveries for new orders lag by several years. In November 2024, Boeing's U.S. West Coast factory workers accepted a new contract offer, ending a seven-week strike that

25

 

halted production of the 737 MAX as well as the 777. As a result of the work stoppage and our disciplined and measured production ramp to meet demand following the work stoppage, our direct sales to Boeing for the first half of fiscal year 2025 were negatively impacted. We saw deliveries of the 737 MAX program increase in the second half of fiscal year 2025 as compared to the first half of the fiscal year, and we expect them to continue to increase in future periods as we do not expect the long-term demand for the aircraft to decline. Boeing's build rate did stabilize during fiscal year 2025 and, in October 2025, the FAA and Boeing jointly agreed they could increase the 737 build rates. The market expects Boeing to further increase its build rates in fiscal year 2026. Additionally, we anticipate an increase in OEM and initial provisioning sales for the 737 MAX and CFM LEAP engines in the coming months, which would have a positive effect on our business results.
In fiscal year 2026, we expect steady global air traffic growth. In response, aircraft operators are taking delivery of the newest generation aircraft models to meet growing demand, replace aging aircraft, and achieve greater fuel efficiency, and lower emissions. The delivery of the newest generation of aircraft is expected to favor our product offerings because we have more content on those aircraft. We expect production levels to continue to grow due to strong OEM order backlogs for the new aircraft models and continued demand supply imbalance. Demand in the widebody aviation market improved in fiscal year 2025 compared to recent years due to recovering international travel, which has led to increasing production rates on the A350, A330neo, and Boeing 787. Further, we also expect narrowbody deliveries to improve due to backlog associated with single aisle programs and planned production ramps in fiscal year 2026 as compared to fiscal year 2025.
We have content on the Airbus A220, A320neo, A330neo, Bell 429, Boeing 737 MAX, 777, 787, and Comac C919. We have been awarded content on the Boeing 777-9 and Airbus A350 as well as content on a variety of business jet platforms, among others.
We continue to explore opportunities on new engine and aircraft programs that are under consideration. We recently announced that Airbus has selected Woodward as the supplier for the electro-hydraulic A350 Spoiler Actuation System. The agreement includes the supply of actuation systems for 12 of the 14 aircraft spoilers on the A350, as well as maintenance and repair services for the Woodward-supplied A350 Spoiler Actuation Systems in support of A350 operators and Airbus’ Flight Hour Services business. In addition, Woodward announced the acquisition of Safran’s electromechanical actuation business. With that comes the A350 Trimmable Horizontal Stabilizer Actuator ("THSA") product. These new product offerings with Airbus strengthen Woodward’s position for future product wins.
Defense – In recent years, the defense industry has been strong as budgetary allocations have generally increased since 2016. Ongoing global conflicts and preparation for near-peer threats are leading to higher global defense budgets. The U.S. National Defense Authorization Act ("NDAA") for fiscal year 2025 resulted in higher levels of funding for procurement, research and development, and maintenance, which supported our growth for fiscal year 2025. We expect defense research and development, procurement, and maintenance to increase in future years, which would be beneficial for us for future opportunities in defense markets. Our involvement with a wide variety of defense programs in fixed-wing aircraft, rotorcraft, and weapons systems has provided relative stability for our defense market sales, as some newer programs increase (e.g., F-35 Lightning II and T-7A Trainer), and some legacy programs decrease (e.g., F/A-18 E/F Super Hornet and V-22 Osprey). Other programs are relatively steady (e.g., KC-46A Tanker, UH-60 Black Hawk, and A-64 Apache helicopter programs) and some legacy programs, such as the F-15, should maintain or potentially increase production. Smart defense programs for which we have sales include the Joint Direct Attack Munition (“JDAM”), Small Diameter Bomb (“SDB”), and AIM-9X smart defense systems. During fiscal year 2025, we experienced significant growth in smart defense programs. We expect overall demand to increase in the near term for these weapons programs.
Services – Our commercial services business increased significantly in fiscal year 2025, as global air traffic continued to grow and initial provisioning sales have increased. In addition, our products have been selected for new aerospace platforms, and our content has increased across existing platforms, which drives increased services sales. With the entry into service of single aisle aircraft (Boeing 737 MAX and Airbus A320neo), we have seen a significant increase in initial provisioning sales to the operators of these new aircraft. The increasing utilization of LEAP and GTF engines, on which we have significant content, should further contribute to the anticipated future growth in the commercial services business. As aircraft production levels increase to accommodate rising passenger demand and to mitigate higher operating costs driven largely by higher fuel costs on older and less fuel-efficient aircraft, we expect airlines will retire older generation aircraft as they reach certain age thresholds (typically between 20 and 25 years). However, in the past few years, aircraft retirements have lagged historical levels because passenger demand has outpaced deliveries of the newest generation aircraft, forcing airlines to keep older generation legacy aircraft in service longer than anticipated. This has led to increased demand for repairs and spare parts for older engine programs remaining in service, consistent with air traffic growth. This dynamic applies to commercial services related to repairs and spare parts for mature legacy programs with large in-service fleets,

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such as the Airbus A320 and the Boeing 777. In fiscal year 2026, we anticipate the commercial services growth rate to moderate as compared to fiscal year 2025 due to high levels of certain products in fiscal year 2025 and because we received advanced purchases from certain customers in the second half of fiscal year 2025 that we believe were made to take advantage of a window of trade stability.
Our defense services sales declined slightly during fiscal year 2025 due to unfavorable mix. Defense budgets continue to support training missions and operations and maintenance upgrades. Global conflicts and growing international demand for various other military programs continue to drive demand for utilization of defense aircraft, including fighter jets, transports and both utility and attack rotorcraft, which are all supported by our products and systems. Although we expect variability, which is generally attributable to the cycling of various maintenance and upgrade programs, as well as actual usage, our outlook for defense services is strong. This is due primarily to growing fleets, the service lives of existing military programs being extended, and increased demand for repairs and spare parts for older military aircraft programs remaining in service.
Industrial Markets
Our industrial products are used worldwide in various types of turbine and reciprocating engine-powered equipment, including electric power generation and distribution systems, ships, locomotives, compressors, pumps, and other mobile and industrial machines.
Power Generation – The demand for power generation, driven in part by rising data center requirements, remained robust in fiscal year 2025. A diverse mix of power generating assets serve this market, including heavy frame, aero derivative, small industrial gas turbines, and reciprocating engines. The increase in fiscal year 2025 was led by increased demand for power generation, data centers, and process industries, particularly in North America, the Middle East, and Asia. We expect this trend to continue as global electrification, renewable integration, and expanding data center loads drive increased electricity consumption. We anticipate continued increased demand in power generation in fiscal year 2026.
Transportation – Our key markets for transportation include compressed natural gas and liquefied natural gas trucks in Asia, mining, and commercial and defense marine markets. In fiscal year 2025, we experienced a material decline in demand for our on‑highway natural gas truck business in China compared to fiscal year 2024. This material decline was due to the deteriorating Chinese economy, a narrower natural gas to diesel price spread, and elevated customer inventory levels; future demand remains uncertain due to the volatility of this business. In global marine markets, demand in fiscal year 2025 increased due to sustained ship build rates and the favorable mix of ships produced. Both commercial and defense marine customers continue to launch additional projects to support new programs or modernize fleets, including incorporating alternative fuels capability, which should drive expanded OEM and service opportunities because multi-fuel engines contain more of our content.
Oil and Gas – During fiscal year 2025, we experienced growth driven by increased demand for solutions supporting liquified natural gas production. However, we did see decreased demand due to market dynamics related to global oil and gas processing. We expect market conditions to stabilize in fiscal year 2026, with early signs of increased demand for traditional oil and gas applications across both reciprocating engines and gas turbine solutions.

27

 

RESULTS OF OPERATIONS
Financial Highlights

 

 

Year Ended September 30,

 

 

2025

 

 

2024

 

Net sales:

 

 

 

 

 

 

Aerospace segment

 

$

2,312,806

 

 

$

2,028,618

 

Industrial segment

 

 

1,254,258

 

 

 

1,295,631

 

Consolidated net sales

 

$

3,567,064

 

 

$

3,324,249

 

 

 

 

 

 

 

 

Operating profit:

 

 

 

 

 

 

Aerospace segment

 

$

506,613

 

 

$

385,360

 

Segment earnings as a percent of segment net sales

 

 

21.9

%

 

 

19.0

%

Industrial segment

 

$

182,524

 

 

$

229,857

 

Segment earnings as a percent of segment net sales

 

 

14.6

%

 

 

17.7

%

Consolidated net earnings

 

$

442,111

 

 

$

372,971

 

Adjusted net earnings

 

$

423,553

 

 

$

379,136

 

 

 

 

 

 

 

 

Effective tax rate

 

 

15.2

%

 

 

17.8

%

Adjusted effective tax rate

 

 

17.7

%

 

 

18.0

%

Consolidated diluted earnings per share

 

$

7.19

 

 

$

6.01

 

Consolidated adjusted diluted earnings per share

 

$

6.89

 

 

$

6.11

 

 

 

 

 

 

 

 

Earnings before interest and taxes ("EBIT")

 

$

562,911

 

 

$

495,472

 

Adjusted EBIT

 

$

556,233

 

 

$

503,615

 

Earnings before interest, taxes, depreciation, and amortization ("EBITDA")

 

$

676,189

 

 

$

611,642

 

Adjusted EBITDA

 

$

669,511

 

 

$

619,785

 

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 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Liquidity Highlights
Net cash provided by operating activities for fiscal year 2025 was $471,294, compared to $439,089 for fiscal year 2024. The increase in net cash provided by operating activities in fiscal year 2025 compared to fiscal year 2024 was primarily attributable to increased earnings and the timing of certain tax payments, partially offset by working capital increases.
For fiscal year 2025, free cash flow was $340,366, compared to $342,809 for fiscal year 2024. We define free cash flow as net cash provided by operating activities less payments for property, plant, and equipment. The decrease in free cash flow for fiscal year 2025 as compared to the prior fiscal year was primarily due to higher capital expenditures, partially offset by higher earnings. Free cash flow is a non-U.S. GAAP financial measure. A description of this measure as well as a reconciliation of this non-U.S. GAAP financial measure to the most directly comparable U.S. GAAP financial measure can be found under the caption “Non-U.S. GAAP Financial Measures” in this Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations.
At September 30, 2025, we held $327,431 in cash and cash equivalents and had total outstanding debt of $702,202 with additional borrowing availability of $869,828, net of outstanding letters of credit, under our revolving credit agreement. At September 30, 2025, we also had additional borrowing capacity of $24,176 under various lines of credit and foreign overdraft facilities.

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Consolidated Statements of Earnings and Other Selected Financial Data
The following table sets forth consolidated statements of earnings data as a percentage of net sales for each period indicated:

 

 

Year Ended September 30,

 

 

 

2025

 

 

% of Net Sales

 

 

2024

 

 

% of Net Sales

 

Net sales

 

$

3,567,064

 

 

 

100

%

 

$

3,324,249

 

 

 

100

%

Costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Cost of goods sold

 

 

2,610,772

 

 

 

73.2

 

 

 

2,447,770

 

 

 

73.6

 

Selling, general, and administrative expenses

 

 

329,823

 

 

 

9.2

 

 

 

307,499

 

 

 

9.3

 

Research and development costs

 

 

147,568

 

 

 

4.1

 

 

 

140,676

 

 

 

4.2

 

Interest expense

 

 

45,689

 

 

 

1.3

 

 

 

47,959

 

 

 

1.4

 

Interest income

 

 

(4,189

)

 

 

(0.1

)

 

 

(6,458

)

 

 

(0.2

)

Other income, net

 

 

(84,010

)

 

 

(2.4

)

 

 

(67,168

)

 

 

(2.0

)

Total costs and expenses

 

 

3,045,653

 

 

 

85.4

 

 

 

2,870,278

 

 

 

86.3

 

Earnings before income taxes

 

 

521,411

 

 

 

14.6

 

 

 

453,971

 

 

 

13.7

 

Income tax expense

 

 

79,300

 

 

 

2.2

 

 

 

81,000

 

 

 

2.4

 

Net earnings

 

$

442,111

 

 

 

12.4

 

 

$

372,971

 

 

 

11.2

 

Other select financial data:

 

 

September 30, 2025

 

 

September 30, 2024

 

Working capital

 

$

977,025

 

 

$

820,101

 

Total debt

 

 

702,202

 

 

 

872,470

 

Total stockholders' equity

 

 

2,566,390

 

 

 

2,176,416

 

2025 RESULTS OF OPERATIONS
2025 Net Sales Compared to 2024
Consolidated net sales for fiscal year 2025 increased by $242,815, or 7.3%, compared to fiscal year 2024.
Details of the changes in consolidated net sales are as follows:

Consolidated net sales for the year ended September 30, 2024

 

$

3,324,249

 

Aerospace volume

 

 

82,858

 

Industrial volume

 

 

(119,300

)

Effects of changes in price

 

 

266,731

 

Effects of changes in foreign currency rates

 

 

12,526

 

Consolidated net sales for the year ended September 30, 2025

 

$

3,567,064

 

In the Aerospace segment, the increase in net sales for fiscal year 2025 as compared to fiscal year 2024 was primarily attributable to price realization and higher sales volumes.
In the Industrial segment, the decrease in net sales for fiscal year 2025 as compared to fiscal year 2024 was primarily attributable to lower sales volume and unfavorable mix, both related to reduced China on-highway demand, partially offset by price realization.
We have experienced significant sales and earnings decreases in our China on-highway natural gas truck business in fiscal year 2025 as compared to fiscal year 2024. Future demand remains uncertain due to the volatility of this business. We also continue to monitor the evolving trade policy between the U.S. and China.
2025 Costs and Expenses Compared to 2024
Cost of goods sold increased by $163,002 to $2,610,772 for fiscal year 2025, from $2,447,770 for fiscal year 2024. Cost of goods sold as a percentage of net sales declined slightly to 73.2% for fiscal year 2025, compared to 73.6% for fiscal year 2024. The increase in cost of goods sold on an absolute basis in fiscal year 2025 compared to fiscal year 2024 is primarily due to net inflationary impacts on material and labor costs.

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Gross margin (as measured by net sales less cost of goods sold, divided by net sales) was 26.8% for fiscal year 2025, compared to 26.4% for fiscal year 2024. Gross margin increased slightly for fiscal year 2025 as compared to fiscal year 2024, primarily due to price realization, partially offset by unfavorable mix.
Selling, general and administrative expenses increased by $22,324, or 7.3%, to $329,823 for fiscal year 2025, compared to $307,499 for fiscal year 2024. Selling, general and administrative expenses as a percentage of net sales were 9.2% for fiscal year 2025 and 9.3% for fiscal year 2024. The increase in selling, general and administrative expenses on an absolute basis for fiscal year 2025 as compared to the prior fiscal year is primarily due to increased expenses relating to business development activities and higher project-related costs.
Research and development costs increased by $6,892, or 4.9%, to $147,568 for fiscal year 2025, as compared to $140,676 for fiscal year 2024. The increase in research and development costs on an absolute basis for fiscal year 2025 as compared to the prior fiscal year is primarily due to variability in the timing of projects and expenses. Research and development costs as a percentage of net sales declined slightly to 4.1% for fiscal year 2025, as compared to 4.2% for fiscal year 2024. Our research and development activities extend across both our operating segments and 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 declined slightly to $45,689, or 1.3% of net sales for fiscal year 2025, compared to $47,959 or 1.4% of net sales for fiscal year 2024. This was primarily due to a lower long-term debt balance after we paid the full principal balance on a series of private placement notes in the current fiscal year.
Other income, net was $84,010 for fiscal year 2025, compared to $67,168 for fiscal year 2024. The increase in other income in fiscal year 2025 compared to fiscal year 2024 was primarily attributable to a one-time gain related to product rationalization activities that was recognized in the current fiscal year that did not occur in the prior fiscal year.
Income taxes were provided at an effective rate on earnings before income taxes of 15.2% for fiscal year 2025, compared to 17.8% for fiscal year 2024. The decrease in the effective tax rate for fiscal year 2025 compared to fiscal year 2024 is primarily attributable to a reduction in the German corporate tax rate and lower projected future withholding taxes on unremitted foreign earnings in the current fiscal year. These favorable items were partially offset by a reduced research and development credit, lower benefits related to foreign intangible income, and higher state income tax expense driven by increased U.S. earnings in the current fiscal year.
Segment Results
The following table presents sales by segment:

 

 

Year Ended September 30,

 

 

2025

 

2024

Net sales:

 

 

 

 

 

 

 

 

 

 

Aerospace

 

$

2,312,806

 

 

64.8%

 

$

2,028,618

 

 

61.0%

Industrial

 

 

1,254,258

 

 

35.2%

 

 

1,295,631

 

 

39.0%

Consolidated net sales

 

$

3,567,064

 

 

100%

 

$

3,324,249

 

 

100%

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

 

 

Year Ended September 30,

 

 

 

2025

 

 

2024

 

Aerospace

 

$

506,613

 

 

$

385,360

 

Industrial

 

 

182,524

 

 

 

229,857

 

Nonsegment expenses

 

 

(126,226

)

 

 

(119,745

)

Interest expense, net

 

 

(41,500

)

 

 

(41,501

)

Consolidated earnings before income taxes

 

 

521,411

 

 

 

453,971

 

Income tax expense

 

 

79,300

 

 

 

81,000

 

Consolidated net earnings

 

$

442,111

 

 

$

372,971

 

 

30

 

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

 

 

Year Ended September 30,

 

 

2025

 

2024

Aerospace

 

21.9%

 

19.0%

Industrial

 

14.6%

 

17.7%

2025 Segment Results Compared to 2024
Aerospace
Aerospace segment net sales increased by $284,188, or 14.0% to $2,312,806 for fiscal year 2025, compared to $2,028,618 for fiscal year 2024. Segment net sales increased for fiscal year 2025 as compared to fiscal year 2024 primarily due to price realization and higher sales volumes.
Commercial OEM sales decreased in fiscal year 2025 as compared to fiscal year 2024, primarily due to the Boeing work stoppage earlier in the year and our disciplined and measured production ramp that followed, along with inventory normalization by airframers that occurred in the second half of the year. We expect Commercial OEM sales to grow in fiscal year 2026. Commercial services sales increased in fiscal year 2025 as compared to fiscal year 2024 primarily due to favorable pricing and higher volume supported by sustained high aircraft utilization of legacy aircraft and improved throughput by the MRO rates. We believe a portion of the fiscal year 2025 growth in commercial services sales was influenced by certain customers making advanced purchases in the second half of the fiscal year to take advantage of a window of trade stability.
Defense OEM sales increased in fiscal year 2025 as compared to fiscal year 2024, primarily driven by increased demand for our smart defense products, as well as price increases on certain smart defense products that took effect during the fourth quarter of the fiscal year. Defense services sales decreased in fiscal year 2025 as compared to fiscal year 2024 due to unfavorable mix.
Aerospace segment earnings increased by $121,253, or 31.5%, to $506,613 for fiscal year 2025, compared to $385,360 for fiscal year 2024.
The net increase in Aerospace segment earnings for fiscal year 2025 was due to the following:

Earnings for the period ended September 30, 2024

 

$

385,360

 

Sales volume and mix

 

 

17,464

 

Price, inflation, and productivity

 

 

138,887

 

Manufacturing expenses

 

 

(40,953

)

Other, net

 

 

5,855

 

Earnings for the period ended September 30, 2025

 

$

506,613

 

Aerospace segment earnings as a percentage of segment net sales were 21.9% for fiscal year 2025 and 19.0% for fiscal year 2024.
The increase in Aerospace segment earnings for fiscal year 2025 as compared to fiscal year 2024 was primarily due to price realization and higher sales volumes, partially offset by strategic investments in manufacturing capabilities, unfavorable mix, and inflation.
Industrial
Industrial segment net sales decreased by $41,373, or 3.2%, to $1,254,258 for fiscal year 2025, compared to $1,295,631 for fiscal year 2024. This decrease was largely a result of lower sales volume and unfavorable mix, both related to reduced China on-highway demand, partially offset by price realization.
Industrial segment earnings decreased by $47,333, or 20.6%, to $182,524 for fiscal year 2025, compared to $229,857 for fiscal year 2024.

31

 

The net decrease in Industrial segment earnings for fiscal year 2025 was due to the following:

Earnings for the period ended September 30, 2024

 

$

229,857

 

Sales volume and mix

 

 

(82,055

)

Price, inflation, and productivity

 

 

55,414

 

Effects of changes in foreign currency rates

 

 

8,339

 

Other, net

 

 

(29,031

)

Earnings for the period ended September 30, 2025

 

$

182,524

 

Industrial segment earnings as a percentage of segment net sales were 14.6% for fiscal year 2025, compared to 17.7% for fiscal year 2024.
The decrease in Industrial segment earnings for fiscal year 2025 as compared to fiscal year 2024 was primarily a result of lower sales volume and unfavorable mix, partially offset by price realization.
We have experienced significant sales and earnings decreases in our China on-highway natural gas truck business in fiscal year 2025 as compared to fiscal year 2024. Future demand remains uncertain due to the volatility of this business. We also continue to monitor the evolving trade policy between the U.S. and China.
Nonsegment
Nonsegment expenses increased by $6,481 to $126,226 for fiscal year 2025, compared to $119,745 for fiscal year 2024.
The significant items that impacted nonsegment expenses in the current fiscal year as compared to the prior fiscal year were:

 

 

Year Ended September 30,

 

 

 

2025

 

 

2024

 

Nonsegment expenses

 

$

(126,226

)

 

$

(119,745

)

Product rationalization

 

 

(20,524

)

 

 

—

 

Business development activities

 

 

7,310

 

 

 

5,902

 

Specific charge for excess and obsolete inventory

 

 

6,536

 

 

 

—

 

Non-recurring gain related to a previous acquisition

 

 

—

 

 

 

(4,803

)

Non-recurring charge related to a previous acquisition

 

 

—

 

 

 

4,378

 

Certain non-restructuring separation costs

 

 

—

 

 

 

2,666

 

Nonsegment expenses excluding infrequent significant charges and gains

 

$

(132,904

)

 

$

(111,602

)

Excluding these charges in the above table, nonsegment expenses increased $21,302 in fiscal year 2025 as compared to the prior fiscal year, primarily due to increased headcount and higher project-related costs.
LIQUIDITY AND CAPITAL RESOURCES
Historically, we have met working capital, capital expenditure, product development, and other liquidity needs through net cash provided by operating activities and borrowings under our credit facilities. We have supplemented liquidity by issuing debt as needed to fund acquisitions, refinance obligations, or repay other indebtedness. We 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 next 12 months and the foreseeable future. However, we could be adversely affected if the financial institutions providing our capital refuse to honor their contractual commitments, cease lending, or declare bankruptcy. We believe the lending institutions participating in our credit arrangements are financially stable.
Our total cash and cash equivalents were $327,431 at September 30, 2025 and $282,270 at September 30, 2024, and our working capital was $977,025 at September 30, 2025 and $820,101 at September 30, 2024. Of the cash and cash equivalents held at September 30, 2025, $324,617 was held by our foreign locations. We are not presently aware of any significant restrictions on the repatriation of these funds, although a portion is considered indefinitely reinvested in certain foreign subsidiaries. If these funds were needed to fund our operations or satisfy obligations in the United States, then they could be repatriated, and their repatriation into the United States may cause us to incur additional U.S. income taxes or foreign withholding taxes. Any additional U.S. taxes could be offset, in part or in whole, by foreign tax credits. The amount of such taxes and application of tax credits would be dependent on the income tax laws and other circumstances at the

32

 

time these amounts are repatriated. Based on these variables, it is impractical to determine the income tax liability that might be incurred if these funds were to be repatriated.
Our revolving credit facility, as amended, provides a borrowing capacity of up to $1,000,000 with the option to increase total available borrowings to up to $1,500,000, subject to lenders’ participation. We can borrow against our revolving credit facility as long as we are in compliance with all of our debt covenants. We believe we were in compliance with all our debt covenants as of September 30, 2025. See Note 15, Credit facilities, short-term borrowings, and long-term debt in the Notes to the Consolidated Financial Statements in “Item 8 – Financial Statements and Supplemental Data,” for more information about our covenants. Borrowings under the revolving credit facility can be made in U.S. dollars or in foreign currencies other than the U.S. dollar, provided that the U.S. dollar equivalent of any foreign currency borrowings and U.S. dollar borrowings does not, in total, exceed the borrowing capacity of the revolving credit facility. Historically, we have used borrowings under our revolving credit facilities to meet certain short-term working capital needs, as well as for strategic uses, including repurchases of our common stock, payments of dividends, acquisitions, and facility expansions.
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 15, Credit facilities, short-term borrowings, and long-term debt in the Notes to the Consolidated Financial Statements in Part II, Item 8 of this Form 10-K.
At September 30, 2025, we had total outstanding debt of $702,202 consisting of various series of unsecured notes due between 2025 and 2033, and amounts borrowed under our revolving credit facility, and our finance leases. On November 17, 2025, Woodward paid the entire principal balance of $75,000 on the Series I and L Notes using proceeds from borrowings under its existing revolving credit facility.
At September 30, 2025, we had additional borrowing availability of $869,828 under our revolving credit facility, net of outstanding letters of credit, and additional borrowing availability of $24,176 under various foreign credit facilities.
At September 30, 2025, we had $122,300 outstanding amount borrowed under our revolving credit facility. Revolving credit facility and short-term borrowing activity during the fiscal year ended September 30, 2025 were as follows:

Maximum daily balance during the period

 

$

359,100

 

Average daily balance during the period

 

$

264,546

 

Weighted average interest rate on average daily balance

 

 

5.41

%

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.
Capital Resources
The following table summarizes certain cash requirements for known contractual and other obligations as of September 30, 2025, and the estimated timing thereof.

 

 

Current

 

 

Long-term

 

 

Total

 

Long-term debt, including finance leases

 

$

122,934

 

 

$

457,613

 

 

$

580,547

 

Pension and other post retirement

 

 

15,862

 

 

 

154,191

 

 

 

170,053

 

Purchase obligations

 

 

640,763

 

 

 

157,813

 

 

 

798,576

 

On September 16, 2025, we announced plans to build a precision manufacturing facility in Greer, South Carolina, in Spartanburg County. The new site is a strategic investment for us and will require significant capital investment in the upcoming fiscal years. The site is expected to become operational in 2027 and will progressively scale production and hiring in subsequent years to meet market demand.

33

 

Cash Flows

 

 

Year Ended September 30,

 

 

 

2025

 

 

2024

 

Net cash provided by operating activities

 

$

471,294

 

 

$

439,089

 

Net cash used in investing activities

 

 

(119,553

)

 

 

(89,217

)

Net cash used in financing activities

 

 

(313,926

)

 

 

(218,047

)

Effect of exchange rate changes on cash and cash equivalents

 

 

7,346

 

 

 

12,998

 

Net change in cash and cash equivalents

 

 

45,161

 

 

 

144,823

 

Cash and cash equivalents at beginning of year

 

 

282,270

 

 

 

137,447

 

Cash and cash equivalents at end of year

 

$

327,431

 

 

$

282,270

 

2025 Cash Flows Compared to 2024
Net cash provided by operating activities for fiscal year 2025 was $471,294, compared to $439,089 for fiscal year 2024. The increase in net cash provided by operating activities in fiscal year 2025 compared to fiscal year 2024 was primarily attributable to increased earnings and the timing of certain tax payments, partially offset by working capital increases.
Net cash used in investing activities for fiscal year 2025 was $119,553, compared to $89,217 in fiscal year 2024. The increase in cash used in investing activities in fiscal year 2025 compared to fiscal year 2024 was primarily due to increased payments for property, plant, and equipment, as well as payments related to the business acquisition of the Safran Electronics & Defense electromechanical actuation business, all partially offset by proceeds received from certain business divestitures as part of our product rationalization efforts.
Net cash used in financing activities for fiscal year 2025 was $313,926, compared to $218,047 in fiscal year 2024. The increase in net cash flows used in financing activities in fiscal year 2025 compared to fiscal year 2024 was primarily attributable to the change from net debt borrowings to net debt payments, partially offset by decreases in repurchases of common stock. During fiscal year 2025, we had net debt payments in the amount of $180,672, compared to net debt borrowings of $141,183 in fiscal year 2024. During fiscal year 2025, we made $172,857 of cash repurchases of common stock, compared to $390,819 of cash repurchases of common stock during fiscal year 2024.
Non-U.S. GAAP Financial Measures
Adjusted net earnings, adjusted earnings per share, adjusted income tax expense, adjusted effective tax rate, EBIT, adjusted EBIT, EBITDA, adjusted EBITDA, and free cash flow are financial measures not prepared and presented in accordance with U.S. 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) product rationalization, (ii) costs related to business development activities, (iii) a specific charge for excess and obsolete inventory, (iv) a non-recurring gain related to a previous acquisition, (v) a non-recurring charge related to a previous acquisition, (vi) certain non-restructuring separation costs, and (vii) the impact of a German corporate tax rate reduction. The product rationalization adjustment pertains to the elimination and divestiture of certain product lines. The specific charge for excess and obsolete inventory relates to the intended disposal of certain inventory in our Industrial segment due in part to an unexpected shift in sales patterns. This non-recurring charge is not related to product rationalization and reflects an isolated event. The Company believes that these excluded items are short-term in nature, not directly related to the ongoing operations of the business, and therefore, their exclusion illustrates more clearly how the underlying business of Woodward is performing.
Management uses adjusted net earnings, adjusted earnings per share, adjusted effective tax rate, and adjusted income tax expense to evaluate the Company’s performance excluding these infrequent or unusual period expenses that are not necessarily indicative of the Company’s operating performance for the period. Management defines adjusted earnings per share as adjusted net earnings, as defined above, divided by the weighted-average number of diluted shares of common stock outstanding for the period. Adjusted income tax expense is defined by the Company as income tax expense excluding, as applicable, (i) product rationalization, (ii) costs related to business development activities, (iii) a specific charge for excess and obsolete inventory, (iv) a non-recurring gain related to a previous acquisition, (v) a non-recurring charge related to a previous acquisition, (vi) certain non-restructuring separation costs, and (vii) the impact of a German corporate tax rate reduction. The product rationalization adjustment pertains to the elimination and divestiture of certain product

34

 

lines. The specific charge for excess and obsolete inventory relates to the intended disposal of certain inventory in our Industrial segment due in part to an unexpected shift in sales patterns. This non-recurring charge is not related to product rationalization and reflects an isolated event.
The reconciliation of net earnings and earnings per share to adjusted net earnings and adjusted earnings per share, respectively, for the fiscal years ended 2025 and 2024 and are shown in the table below:

 

 

Year Ended September 30,

 

 

 

2025

 

 

2024

 

 

 

Net Earnings

 

 

Earnings Per
Share

 

 

Net Earnings

 

 

Earnings Per
Share

 

Net earnings (U.S. GAAP)

 

$

442,111

 

 

$

7.19

 

 

$

372,971

 

 

$

6.01

 

Non-U.S. GAAP adjustments, net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

Product rationalization 1

 

 

(20,524

)

 

 

(0.33

)

 

 

—

 

 

 

—

 

Business development activities 2

 

 

7,310

 

 

 

0.12

 

 

 

5,902

 

 

 

0.10

 

Specific charge for excess and obsolete inventory 3

 

 

6,536

 

 

 

0.11

 

 

 

—

 

 

 

—

 

Non-recurring gain related to a previous acquisition 1

 

 

—

 

 

 

—

 

 

 

(4,803

)

 

 

(0.08

)

Non-recurring charge related to a previous acquisition 2

 

 

—

 

 

 

—

 

 

 

4,378

 

 

 

0.07

 

Certain non-restructuring separation costs 2

 

 

—

 

 

 

—

 

 

 

2,666

 

 

 

0.04

 

Tax effect of Non-U.S. GAAP net earnings adjustments

 

 

1,512

 

 

 

0.02

 

 

 

(1,978

)

 

 

(0.03

)

Total non-U.S. GAAP adjustments

 

 

(5,166

)

 

 

(0.08

)

 

 

6,165

 

 

 

0.10

 

German corporate tax rate reduction impact 4

 

 

(13,392

)

 

 

(0.22

)

 

 

—

 

 

 

—

 

Adjusted net earnings (Non-U.S. GAAP)

 

$

423,553

 

 

$

6.89

 

 

$

379,136

 

 

$

6.11

 

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

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

(3) Presented in the line item "Cost of goods sold" in Woodward's Consolidated Statement of Earnings.

(4) Presented in the line item "Income tax expense" in Woodward's Consolidated Statement of Earnings.

The reconciliation of income tax expense to adjusted income tax expense and the adjusted effective tax rate are shown in the table below:

 

 

Year Ended September 30,

 

 

 

2025

 

 

2024

 

Income tax expense (U.S. GAAP)

 

$

79,300

 

 

$

81,000

 

Tax effect of Non-U.S. GAAP net income adjustments

 

 

11,880

 

 

 

1,978

 

Adjusted income tax expense (Non-U.S. GAAP)

 

$

91,180

 

 

$

82,978

 

Adjusted effective tax rate (Non-U.S. GAAP)

 

 

17.7

%

 

 

18.0

%

Management uses EBIT to evaluate our performance without financing and tax related considerations, as these elements may not fluctuate with operating results. Management uses EBITDA in evaluating our 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 our 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) product rationalization, (ii) costs related to business development activities, (iii) a specific charge for excess and obsolete inventory, (iv) a non-recurring gain related to a previous acquisition, (v) a non-recurring charge related to a previous acquisition, and (vi) certain non-restructuring separation costs. The product rationalization adjustment pertains to the elimination and divestiture of certain product lines. The specific charge for excess

35

 

and obsolete inventory relates to the intended disposal of certain inventory in our Industrial segment due in part to an unexpected shift in sales patterns. This non-recurring charge is not related to product rationalization and reflects an isolated event. 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 that by removing these gains and charges from EBIT and EBITDA it 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:

 

 

Year Ended September 30,

 

 

 

2025

 

 

2024

 

Net earnings (U.S. GAAP)

 

$

442,111

 

 

$

372,971

 

Income tax expense

 

 

79,300

 

 

 

81,000

 

Interest expense

 

 

45,689

 

 

 

47,959

 

Interest income

 

 

(4,189

)

 

 

(6,458

)

EBIT (Non-U.S. GAAP)

 

 

562,911

 

 

 

495,472

 

Non-U.S. GAAP adjustments:

 

 

 

 

 

 

Product rationalization

 

 

(20,524

)

 

 

—

 

Business development activities

 

 

7,310

 

 

 

5,902

 

Specific charge for excess and obsolete inventory

 

 

6,536

 

 

 

—

 

Non-recurring gain related to a previous acquisition

 

 

—

 

 

 

(4,803

)

Non-recurring charge related to a previous acquisition

 

 

—

 

 

 

4,378

 

Certain non-restructuring separation costs

 

 

—

 

 

 

2,666

 

Total non-U.S. GAAP adjustments

 

 

(6,678

)

 

 

8,143

 

Adjusted EBIT (Non-U.S. GAAP)

 

$

556,233

 

 

$

503,615

 

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

 

 

Year Ended September 30,

 

 

 

2025

 

 

2024

 

Net earnings (U.S. GAAP)

 

$

442,111

 

 

$

372,971

 

Income tax expense

 

 

79,300

 

 

 

81,000

 

Interest expense

 

 

45,689

 

 

 

47,959

 

Interest income

 

 

(4,189

)

 

 

(6,458

)

Amortization of intangible assets

 

 

28,224

 

 

 

33,592

 

Depreciation expense

 

 

85,054

 

 

 

82,578

 

EBITDA (Non-U.S. GAAP)

 

 

676,189

 

 

 

611,642

 

Non-U.S. GAAP adjustments:

 

 

 

 

 

 

Product rationalization

 

 

(20,524

)

 

 

—

 

Business development activities

 

 

7,310

 

 

 

5,902

 

Specific charge for excess and obsolete inventory

 

 

6,536

 

 

 

—

 

Non-recurring gain related to a previous acquisition

 

 

—

 

 

 

(4,803

)

Non-recurring charge related to a previous acquisition

 

 

—

 

 

 

4,378

 

Certain non-restructuring separation costs

 

 

—

 

 

 

2,666

 

Total non-U.S. GAAP adjustments

 

 

(6,678

)

 

 

8,143

 

Adjusted EBITDA (Non-U.S. GAAP)

 

$

669,511

 

 

$

619,785

 

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 income tax expense, adjusted effective tax rate, EBIT, adjusted EBIT, EBITDA, and adjusted EBITDA exclude certain financial information compared with net earnings, the most 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 earnings per share, adjusted income tax expense, adjusted effective tax rate, EBIT, adjusted EBIT, EBITDA, and adjusted EBITDA may differ from similarly titled measures used by other companies, limiting their usefulness as comparative measures.

36

 

Cash flow-based non-U.S. GAAP financial measures
Management uses free cash flow, which is defined 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 the Company’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, investing in research and development, purchasing our common stock, and paying dividends. In addition, securities analysts, investors, and others frequently use free cash flow in their evaluation of companies.
The use of this 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 does not necessarily represent funds available for discretionary use and is not necessarily a measure of our ability to fund our cash needs. Our calculation of free cash flow may differ from similarly titled measures used by other companies, limiting their usefulness as a comparative measure.
Free cash flow reconciled to net cash provided by operating activities was as follows:

 

 

Year Ended September 30,

 

 

 

2025

 

 

2024

 

Net cash provided by operating activities (U.S. GAAP)

 

$

471,294

 

 

$

439,089

 

Payments for property, plant and equipment

 

 

(130,928

)

 

 

(96,280

)

Free cash flow (Non-U.S. GAAP)

 

$

340,366

 

 

$

342,809

 

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 Consolidated Financial Statements and accompanying notes. Note 1, Operations and summary of significant accounting policies, to the Consolidated Financial Statements describes the significant accounting policies and methods used in the preparation of the Consolidated Financial Statements. The estimates and assumptions described below are those that we consider to be most critical to an understanding of our financial statements because they involve significant judgments and uncertainties. All these estimates reflect our best judgment about current, and for some estimates, future economic and market conditions, and their effects based on information available as of the date of these financial statements. As estimates are updated or actual amounts are known, our critical accounting estimates are revised, and operating results may be affected by the revised estimates. Actual results may differ from these estimates under different assumptions or conditions.
Our management has discussed the development and selection of these critical accounting estimates with the Audit Committee of our Board of Directors, and the Audit Committee has reviewed our disclosures in this Management’s Discussion and Analysis.
Revenue recognition
Revenue is recognized on contracts with customers for arrangements in which quantities and pricing are fixed and/or determinable and are generally based on customer purchase orders, often within the framework of a long-term supply arrangement with the customer. We recognize revenue for performance obligations within a customer contract when control of the associated product or service is transferred to the customer. Some of our contracts with customers contain a single performance obligation, while other contracts contain multiple performance obligations. Each product within a contract generally represents a separate performance obligation as we do not provide significant installation and integration services, the products do not customize each other, and the products can function independently of each other.
A contract's transaction price is allocated to each performance obligation and recognized as revenue when, or as, the customer obtains control of the associated product or service. When there are multiple performance obligations within a contract, we generally use the observable standalone sales price for each distinct product or service within the contract to allocate the transaction price to the distinct products or services. In instances when a standalone sales price for each product or service is not observable within the contract, we allocate the transaction price to each performance obligation using an estimate of the standalone selling price for each product or service, which is generally based on incurred costs plus a reasonable margin, for each distinct product or service in the contract.
When determining the transaction price of each contract, we consider contractual consideration payable by the customer and variable consideration that may affect the total transaction price. Variable consideration, consisting of early

37

 

payment discounts, rebates, and other sources of price variability, are included in the estimated transaction price based on both customer-specific information as well as historical experience. We regularly review our estimates of variable consideration on the transaction price and recognize changes in estimates on a cumulative catch-up basis as if the most current estimate of the transaction price adjusted for variable consideration had been known as of the inception of the contract.
Point in time and over time revenue recognition
Control of the products generally transfers to the customer at a point in time, if the customer does not control the products as they are produced. We exercise judgment and consider the timing of right of payment, transfer of the risk and rewards, transfers of title, transfer of physical possession, and customer acceptance when determining when control of the product transfers to the customer, generally upon shipment of products. Performance obligations are satisfied and revenue is recognized over time if: (i) the customer receives the benefits as we perform work, (ii) if the customer controls the asset as it is being enhanced, or (iii) if the product being produced for the customer has no alternative use to us and we have an enforceable right to payment with a profit. When services are provided, revenue from those services is recognized over time because control is transferred continuously to customers as we perform the work.
For services that are not short-term in nature, MRO and sales of products that have no alternative use to us and an enforceable right to payment with a profit, we use an actual cost input measure to determine the extent of progress towards completion of the performance obligation. For these revenue streams, revenue is recognized over time as work is performed based on the relationship between actual costs incurred to-date for each contract and the total estimated costs for such contract at completion of the performance obligation (the cost-to-cost method). We have concluded that this measure of progress best depicts the transfer of assets to the customer, because incurred costs are integral to our completion of the performance obligation under the specific customer contract and correlate directly to the transfer of control to the customer. Contract costs include labor, material, and overhead. Contract cost estimates are based on various assumptions to project the outcome of future events. These assumptions include labor productivity, and availability; the complexity of the work to be performed; the cost and availability of materials; the performance of subcontractors; and the availability and timing of funding from the customer. Revenues, including estimated fees or profits, are recorded proportionally as costs are incurred.
Inventories
Inventories are valued at the lower of cost or net realizable value. Inventory cost is determined using methods that approximate the first-in, first-out basis. We include product costs, labor, and related fixed and variable overhead in the cost of inventories. Inventory net realizable values are determined by giving substantial consideration to the expected product selling price. We estimate expected selling prices based on our historical recovery rates, general economic, and market conditions, the expected channel of disposition, and current customer contracts and preferences. Actual results may differ from our estimates due to changes in resale or market value and the mix of these factors.
We monitor inventory for events or circumstances, such as negative margins, recent sales history suggesting lower sales value, or changes in customer preferences, which would indicate the net realizable value of inventory is less than the carrying value of inventory, and management records adjustments as necessary. When inventory is written down below cost, such reduced amount is considered the cost for subsequent accounting purposes. Our recording of inventory at the lower of cost or net realizable value has not historically required material adjustments once initially established.
The carrying value of inventory was $654,608 at September 30, 2025 and $609,092 at September 30, 2024. If economic conditions, customer product requirements, or other factors significantly reduce future customer demand for our products from forecast levels, then future adjustments to the carrying value of inventory may become necessary. We attempt to maintain inventory quantities at levels considered necessary to fill firm and expected orders in a reasonable time frame, which we believe mitigates our exposure to future inventory carrying cost adjustments.
Reviews for impairment of indefinite lived intangible assets
We have one indefinitely lived intangible asset consisting of the Woodward L’Orange trade name. At September 30, 2025, the carrying value of the Woodward L’Orange trade name intangible asset was $68,010, representing approximately 1% of our total assets. The Woodward L’Orange trade name intangible asset is analyzed for impairment on an annual basis and more often if an event occurs or circumstances change that indicate the fair value of the Woodward L’Orange intangible asset may be below its carrying amount.

38

 

During the fourth quarter, we completed the annual impairment analysis, for the fiscal year ended September 30, 2025, of the Woodward L’Orange trade name intangible asset as of July 31, 2025. The results of the annual impairment analysis performed as of July 31, 2025 indicated the estimated fair value of the Woodward L’Orange trade name intangible asset was in excess of its carrying value, and accordingly, no impairment existed.
We test for impairment by performing a qualitative assessment or by using a quantitative assessment. In fiscal year 2025, we elected to perform a qualitative assessment and determined it was not more likely than not that our reporting units carrying value was more than its fair value, therefore the quantitative assessment was not performed. Using the qualitative assessment, qualitative factors may include, but are not limited to, economic conditions, industry and market considerations, cost factors, overall financial performance of the reporting unit and other entity and reporting unit specific events.
In fiscal year 2024, we performed a quantitative assessment using a combination of a discounted cash flow analysis and market multiples based upon historical and projected financial information.
The quantitative assessment consists of comparing the fair value of the Woodward L’Orange trade name intangible asset, determined using discounted cash flows based on the relief from royalty method under the income approach, with its carrying amount. If the carrying amount of the Woodward L’Orange trade name intangible asset exceeds its fair value, an impairment loss would be recognized to reduce the carrying amount to its fair value. We have not recorded any impairment charges associated with the indefinitely lived intangible asset since it was acquired.
As part of our ongoing monitoring efforts to assess the Woodward L’Orange trade name indefinite lived asset for possible indications of impairment, we will continue to consider a wide variety of factors, including but not limited to the global economic environment and its potential impact on our business.
Income taxes
We are subject to income taxes in the United States and numerous foreign jurisdictions. Significant judgment is required in evaluating our tax positions and determining our provision for income taxes.
During the ordinary course of business, there are many transactions and calculations for which the ultimate tax determination is uncertain. We establish reserves for tax-related uncertainties based on estimates of whether, and the extent to which, additional taxes will be due. The reserves are established when we believe that certain positions are likely to be challenged and may not be fully sustained on review by tax authorities. We adjust these reserves in light of changing facts and circumstances, such as the closing of a tax audit or refinement of an estimate. Although we believe our reserves are reasonable, no assurance can be given that the final outcome of these matters will be consistent with what is reflected in our historical income tax provisions and accruals. To the extent that the final tax outcome of these matters is different from the amounts recorded, such differences will impact the current provision for income taxes.
Significant judgment is also required in determining any valuation allowance recorded against deferred tax assets. The determination of the amount of valuation allowance to be provided on recorded deferred tax assets involves estimates regarding the timing and amount of the reversal of taxable temporary differences, expected future taxable income, and the impact of tax planning strategies. A valuation allowance is established to offset any deferred tax assets if, based upon the available evidence, it is more likely than not that some or all of the deferred tax asset will not be realized. In assessing the need for a valuation allowance, we consider all available evidence including past operating results, estimates of future taxable income, and the feasibility of tax planning strategies. Changes in the relevant facts can significantly impact the judgment or need for valuation allowances. In the event we change our determination as to the amount of deferred tax assets that can be realized, we will adjust our valuation allowance with a corresponding impact to the provision for income taxes in the period in which such determination is made.
Our provision for income taxes is subject to volatility and could be affected by earnings that are different than those anticipated in countries that have lower or higher tax rates; by transfer pricing adjustments; and/or changes in tax laws, regulations, and accounting principles, including accounting for uncertain tax positions, or interpretations thereof. There can be no assurance that these items will remain stable over time. Additionally, we record through income tax expense all future excess tax benefits and tax deficiencies from stock options exercised. This creates unpredictable volatility in the effective tax rate because the additional expense or benefit recognized each quarter is based on the timing of the member’s election to exercise any vested stock options outstanding, which is outside our control, and the market price of our shares at the time of exercise, which is subject to market volatility.

39

 

Our effective tax rates differ from the U.S. statutory rate primarily due to the tax impact of foreign operations, adjustments of valuation allowances, research tax credits, state taxes, and tax audit settlements. In addition to potential local country tax law and policy changes that could impact the provision for income taxes, management’s judgment about and intentions concerning the repatriation of foreign earnings could also significantly impact the provision for income taxes. Management reassesses its judgment regularly, taking into consideration the potential tax impacts of these judgments, and intentions.
On July 4, 2025 “One Big Beautiful Bill Act” was signed into law. This new law made changes to various U.S. federal income tax items that have effective dates in fiscal years 2025, 2026, and 2027. Woodward is still assessing the impacts of this Act on our consolidated financial statements.
Item 7A. Quantitative and Qualitat ive 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.
Foreign Currency Exchange Rate Risk, Interest Rate Risk, and Related Hedging Activities
We are impacted by changes in foreign currency exchange rates when we sell product in currencies different from the currency in which product and manufacturing costs were incurred. The functional currencies and our purchasing and sales activities primarily include USD, EUR, RMB, JPY, and GBP. We may also be impacted by changes in the relative buying power of our customers, which may impact sales volumes either positively or negatively. As these currencies fluctuate against each other, and other currencies, we are exposed to foreign currency exchange rate risk on sales, purchasing transactions, and labor. Foreign currency exchange rate risk is reduced through the maintenance of local production facilities in the markets we serve, which we believe creates a natural hedge to our foreign currency exchange rate exposure.
The percentages of our net sales denominated in a currency other than the USD were as follows:

 

 

For the Year Ended September 30,

 

 

 

2025

 

 

2024

 

Functional currency:

 

 

 

 

 

 

EUR

 

 

16.0

%

 

 

14.1

%

RMB

 

 

3.6

%

 

 

8.7

%

JPY

 

 

2.3

%

 

 

2.3

%

GBP

 

 

2.4

%

 

 

2.0

%

All other foreign currencies

 

 

2.9

%

 

 

2.7

%

 

 

27.2

%

 

 

29.8

%

Currency exchange rates vary daily and often one currency strengthens against the USD while another currency weakens. Because of the complex interrelationship of our worldwide supply chains and distribution channels, it is difficult to quantify the impact of a particular change in exchange rates.
We use derivative and/or hedging instruments as risk management tools that involve complexity and are not used for trading or speculative purposes. From time to time, we will enter into a foreign currency exchange rate contract to hedge against changes in foreign currency exchange rates on liabilities expected to be settled at a future date. Market risk arises from the potential adverse effects on the value of derivative instruments that result from a change in foreign currency exchange rates. We minimize this market risk by establishing and monitoring parameters that limit the types of, and degree to which we enter into, derivative instruments. We enter into derivative instruments for risk management purposes only. We do not enter into or issue derivatives for trading or speculative purposes. As of September 30, 2025 and 2024, we had no open foreign currency exchange rate contracts and all previous exchange rate derivative instruments were settled or terminated.
For more information on derivative instruments, see Note 8, Derivative instruments and hedging activities , in the Notes to the Consolidated Financial Statements in “Item 8 – Financial Statements and Supplementary Data.”
Our reported financial results of operations, including the reported value of our assets and liabilities, are also impacted by changes in foreign currency exchange rates. The assets and liabilities of substantially all of our subsidiaries outside the United States are translated at period end rates of exchange for each reporting period. Earnings and cash flow statements are translated at weighted-average rates of exchange. Although these translation changes have no immediate cash impact, the translation changes may impact future borrowing capacity, debt covenants, and the overall value of our

40

 

net assets. In addition, we also have assets and liabilities, specifically accounts receivable, accounts payable, and current inter-company receivables and payables, whose carrying amounts approximate their fair value, which are denominated in currencies other than their relevant functional currencies. Foreign currency exchange rate risk is mitigated through several means, including the invoicing of customers in the same currency as the source of the products, and the prompt settlement of inter-company balances utilizing a global netting system.

41

 

Item 8. Financial Statemen ts and Supplementary Data
REPORT OF INDEPE NDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and the Board of Directors of Woodward, Inc.
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of Woodward, Inc. and subsidiaries (the "Company") as of September 30, 2025 and 2024, the related consolidated statements of earnings, comprehensive earnings, cash flows, and stockholders' equity, for each of the three years in the period ended September 30, 2025, and the related notes (collectively referred to as the "financial statements"). We also have audited the Company's internal control over financial reporting as of September 30, 2025, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of September 30, 2025 and 2024, and the results of its operations and its cash flows for each of the three years in the period ended September 30, 2025, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of September 30, 2025, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.
Basis for Opinions
The Company's management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on these financial statements and an opinion on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the financial statements included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures to respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control over Financial Reporting
A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and

42

 

directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Point in time and over time revenue recognition and material rights and costs to fulfill a contract – Refer to Notes 1 and 3 to the financial statements
Critical Audit Matter Description
The Company recognizes revenue for performance obligations within a customer contract when control of the associated product or service is transferred to the customer. The Company also identifies and measures material rights associated with consideration it receives from customers for funded research and development activities related to long-term supply contracts.
• Performance obligations are satisfied and revenue is recognized over time if: (i) the customer receives the benefits as Woodward performs work, (ii) if the customer controls the asset as it is being enhanced, or (iii) if the product being produced for the customer has no alternative use to Woodward and Woodward has an enforceable right to payment with a profit. For products being produced for the customer that have no alternative use to Woodward and Woodward has an enforceable right to payment with a profit, and where the products are substantially the same and have the same pattern of transfer to the customer, revenue is recognized as a series of distinct products. Revenue is recognized at a point in time if the conditions above are not met. Revenue recognized over time and at a point in time was $1,937,766 and $1,629,298, respectively, for the year ended September 30, 2025.

• Customers sometimes pay consideration to Woodward for product engineering and development activities that do not result in the immediate transfer of distinct products or services to the customer. There is an implicit assumption that without the customer making such advance payments to Woodward, Woodward’s future sales of products or services to the customer would be at a higher selling price; therefore, such payments create a “material right” to the customer that effectively gives the customer an option to acquire future products or services, at a discount, that are dependent upon the product engineering and development. Material rights are recorded as contract liabilities and will be recognized when control of the related products or services are transferred to the customer. Deferred revenue from material rights related to engineering and development funding as of September 30, 2025 were $7,353 within Accrued liabilities and $199,465 in Other liabilities .

We identified both the determination of whether to recognize revenue at a point in time or over time as well as the identification and measurement of material rights associated with funded research and development activities as a critical audit matter because of the significant judgments and assumptions management makes related to alternative use, the enforceable right to payment, and the identification and measurement of material rights. This required a high degree of auditor judgment and an increased extent of effort to evaluate the appropriateness of management’s classification of revenue as point in time or over time and identification and measurement of material rights.

43

 

How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the classification of revenue and identification of material rights included the following, among others:
• We tested the effectiveness of controls over alternative use, enforceable right to payment, and the application of those conclusions to customer sales orders.

• We tested the effectiveness of controls over the identification and subsequent monitoring of material rights.

• We tested that alternative use and enforceable right to payment were appropriately applied to determine that revenue was classified properly.

• We tested balances identified as material rights by inspecting contracts, source documents, and payment support to determine that balances were appropriately measured, accounted for, and disclosed as material rights.

 
/s/ DELOITTE & TOUCHE LLP
Denver, Colorado
November 25, 2025
We have served as the Company's auditor since fiscal year 2008.

44

 

WOODWARD, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except per share amounts)
 

 

 

Year Ended September 30,

 

 

 

2025

 

 

2024

 

 

2023

 

Net sales

 

$

3,567,064

 

 

$

3,324,249

 

 

$

2,914,566

 

Costs and expenses:

 

 

 

 

 

 

 

 

 

Cost of goods sold

 

 

2,610,772

 

 

 

2,447,770

 

 

 

2,236,983

 

Selling, general and administrative expenses

 

 

329,823

 

 

 

307,499

 

 

 

269,692

 

Research and development costs

 

 

147,568

 

 

 

140,676

 

 

 

132,095

 

Restructuring activities

 

 

—

 

 

 

—

 

 

 

5,172

 

Interest expense

 

 

45,689

 

 

 

47,959

 

 

 

47,898

 

Interest income

 

 

( 4,189

)

 

 

( 6,458

)

 

 

( 2,751

)

Other income, net

 

 

( 84,010

)

 

 

( 67,168

)

 

 

( 50,291

)

Total costs and expenses

 

 

3,045,653

 

 

 

2,870,278

 

 

 

2,638,798

 

Earnings before income taxes

 

 

521,411

 

 

 

453,971

 

 

 

275,768

 

Income tax expense

 

 

79,300

 

 

 

81,000

 

 

 

43,400

 

Net earnings

 

$

442,111

 

 

$

372,971

 

 

$

232,368

 

 

 

 

 

 

 

 

 

 

Earnings per share:

 

 

 

 

 

 

 

 

 

Basic earnings per share

 

$

7.42

 

 

$

6.21

 

 

$

3.88

 

Diluted earnings per share

 

$

7.19

 

 

$

6.01

 

 

$

3.78

 

 

 

 

 

 

 

 

 

 

Weighted Average Common Shares Outstanding:

 

 

 

 

 

 

 

 

 

Basic

 

 

59,563

 

 

 

60,076

 

 

 

59,908

 

Diluted

 

 

61,464

 

 

 

62,084

 

 

 

61,482

 

 
See accompanying Notes to Consolidated Financial Statements

45

 

WOODWARD, INC.
CONSOLIDATED STATEMENTS O F COMPREHENSIVE EARNINGS
(In thousands)
 

 

 

Year Ended September 30,

 

 

 

2025

 

 

2024

 

 

2023

 

Net earnings

 

$

442,111

 

 

$

372,971

 

 

$

232,368

 

 

 

 

 

 

 

 

 

 

Foreign currency related other comprehensive earnings:

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

19,041

 

 

 

30,311

 

 

 

21,180

 

Net (loss) on foreign currency transactions designated as hedges of net investments

 

 

( 2,263

)

 

 

( 2,381

)

 

 

( 3,090

)

Taxes on changes on foreign currency translation adjustments

 

 

3,401

 

 

 

334

 

 

 

1,011

 

Foreign currency translation and transactions adjustments, net of tax

 

 

20,179

 

 

 

28,264

 

 

 

19,101

 

 

 

 

 

 

 

 

 

 

Derivative related other comprehensive earnings:

 

 

 

 

 

 

 

 

 

Unrealized (loss) on fair value adjustment of derivative instruments

 

 

( 23,105

)

 

 

( 18,551

)

 

 

( 36,587

)

Reclassification of net realized losses on derivatives to earnings

 

 

22,435

 

 

 

23,093

 

 

 

33,224

 

Taxes on changes on derivative transactions

 

 

—

 

 

 

—

 

 

 

( 141

)

Derivative adjustments, net of tax

 

 

( 670

)

 

 

4,542

 

 

 

( 3,504

)

 

 

 

 

 

 

 

 

 

Pension and postretirement medical liability other comprehensive earnings:

 

 

 

 

 

 

 

 

 

Net gain arising during the period

 

 

3,227

 

 

 

7,826

 

 

 

9,401

 

Prior service cost arising during the period

 

 

—

 

 

 

( 1,121

)

 

 

—

 

Amortization of:

 

 

 

 

 

 

 

 

 

Prior service cost

 

 

785

 

 

 

721

 

 

 

720

 

Net (gain)

 

 

( 683

)

 

 

( 1,049

)

 

 

( 823

)

Foreign currency exchange rate changes on pension and postretirement medical liabilities

 

 

509

 

 

 

110

 

 

 

247

 

Taxes on changes on pension and postretirement medical liability adjustments

 

 

( 1,064

)

 

 

( 1,320

)

 

 

( 3,250

)

 

 

2,774

 

 

 

5,167

 

 

 

6,295

 

Total comprehensive earnings

 

$

464,394

 

 

$

410,944

 

 

$

254,260

 

 
 
See accompanying Notes to Consolidated Financial Statements

46

 

WOODWARD, INC.
CONSOLIDATED B ALANCE SHEETS
(In thousands, except per share amounts)
 

 

 

September 30,

 

 

September 30,

 

 

 

2025

 

 

2024

 

ASSETS

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

327,431

 

 

$

282,270

 

Accounts receivable, less allowance for uncollectible amounts of $ 9,725  and $ 7,738 , respectively

 

 

831,116

 

 

 

770,066

 

Inventories

 

 

654,608

 

 

 

609,092

 

Income taxes receivable

 

 

1,553

 

 

 

22,016

 

Other current assets

 

 

69,706

 

 

 

60,167

 

Total current assets

 

 

1,884,414

 

 

 

1,743,611

 

Property, plant and equipment, net

 

 

986,623

 

 

 

940,715

 

Goodwill

 

 

832,288

 

 

 

806,643

 

Intangible assets, net

 

 

428,080

 

 

 

440,419

 

Deferred income tax assets

 

 

118,711

 

 

 

84,392

 

Other assets

 

 

380,027

 

 

 

353,135

 

Total assets

 

$

4,630,143

 

 

$

4,368,915

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Short-term debt

 

$

122,300

 

 

$

217,000

 

Current portion of long-term debt

 

 

122,934

 

 

 

85,719

 

Accounts payable

 

 

289,417

 

 

 

287,457

 

Income taxes payable

 

 

59,655

 

 

 

40,692

 

Accrued liabilities

 

 

313,083

 

 

 

292,642

 

Total current liabilities

 

 

907,389

 

 

 

923,510

 

Long-term debt, less current portion

 

 

456,968

 

 

 

569,751

 

Deferred income tax liabilities

 

 

107,669

 

 

 

121,858

 

Other liabilities

 

 

591,727

 

 

 

577,380

 

Total liabilities

 

 

2,063,753

 

 

 

2,192,499

 

Commitments and contingencies (Note 22)

 

 

 

 

 

 

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

 

 

482,259

 

 

 

396,554

 

Accumulated other comprehensive losses

 

 

( 10,415

)

 

 

( 32,698

)

Deferred compensation

 

 

1,741

 

 

 

2,662

 

Retained earnings

 

 

3,600,395

 

 

 

3,223,259

 

 

 

4,074,086

 

 

 

3,589,883

 

Treasury stock at cost, 13,060  shares and 13,787  shares, respectively

 

 

( 1,505,955

)

 

 

( 1,410,805

)

Treasury stock held for deferred compensation, at cost, 28  shares and 45  shares, respectively

 

 

( 1,741

)

 

 

( 2,662

)

Total stockholders' equity

 

 

2,566,390

 

 

 

2,176,416

 

Total liabilities and stockholders' equity

 

$

4,630,143

 

 

$

4,368,915

 

 
See accompanying Notes to Consolidated Financial Statements

47

 

WOODWARD, INC.
CONSOLIDATED S TATEMENTS OF CASH FLOWS
(In thousands)
 
 

 

 

Year Ended September 30,

 

 

 

2025

 

 

2024

 

 

2023

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

 

Net earnings

 

$

442,111

 

 

$

372,971

 

 

$

232,368

 

Adjustments to reconcile net earnings to net cash provided by operating activities:

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

113,278

 

 

 

116,170

 

 

 

119,743

 

Net (gain) loss on sales of assets and businesses

 

 

( 18,731

)

 

 

( 457

)

 

 

1,491

 

Stock-based compensation

 

 

31,674

 

 

 

33,052

 

 

 

23,383

 

Deferred income taxes

 

 

( 52,358

)

 

 

( 44,606

)

 

 

( 40,155

)

Changes in operating assets and liabilities, net of the effect of acquisition:

 

 

 

 

 

 

 

 

 

Trade accounts receivable

 

 

( 11,475

)

 

 

35,799

 

 

 

( 113,119

)

Unbilled receivables (contract assets)

 

 

( 38,478

)

 

 

( 51,168

)

 

 

( 23,879

)

Costs to fulfill a contract

 

 

( 14,812

)

 

 

( 3,718

)

 

 

( 11,544

)

Inventories

 

 

( 49,624

)

 

 

( 84,944

)

 

 

3,234

 

Accounts payable and accrued liabilities

 

 

56,818

 

 

 

63,655

 

 

 

67,447

 

Contract liabilities

 

 

( 3,042

)

 

 

31,538

 

 

 

20,115

 

Income taxes

 

 

31,992

 

 

 

( 18,069

)

 

 

( 3,652

)

Retirement benefit obligations

 

 

( 3,406

)

 

 

( 1,837

)

 

 

( 909

)

Other

 

 

( 12,653

)

 

 

( 9,297

)

 

 

34,020

 

Net cash provided by operating activities

 

 

471,294

 

 

 

439,089

 

 

 

308,543

 

 

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

 

Payments for purchase of property, plant, and equipment

 

 

( 130,928

)

 

 

( 96,280

)

 

 

( 76,500

)

Proceeds from sale of assets

 

 

42

 

 

 

2,292

 

 

 

488

 

Proceeds from business divestiture

 

 

50,068

 

 

 

1,800

 

 

 

—

 

Payments for business acquisition, net of cash acquired

 

 

( 41,678

)

 

 

—

 

 

 

878

 

Proceeds from sales of short-term investments

 

 

2,943

 

 

 

9,738

 

 

 

7,692

 

Payments for purchases of short-term investments

 

 

—

 

 

 

( 6,767

)

 

 

( 6,109

)

Net cash used in investing activities

 

 

( 119,553

)

 

 

( 89,217

)

 

 

( 73,551

)

 

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

 

Cash dividends paid

 

 

( 64,975

)

 

 

( 58,286

)

 

 

( 51,027

)

Proceeds from sales of treasury stock

 

 

104,578

 

 

 

89,875

 

 

 

50,749

 

Payments for repurchases of common stock

 

 

( 172,857

)

 

 

( 390,819

)

 

 

( 126,380

)

Borrowings on revolving lines of credit and short-term borrowings

 

 

2,285,900

 

 

 

2,962,800

 

 

 

2,323,500

 

Payments on revolving lines of credit and short-term borrowings

 

 

( 2,380,600

)

 

 

( 2,745,800

)

 

 

( 2,390,300

)

Payments of debt financing costs

 

 

—

 

 

 

—

 

 

 

( 2,236

)

Payments of long-term debt and finance lease obligations

 

 

( 85,972

)

 

 

( 75,817

)

 

 

( 779

)

Net cash used in financing activities

 

 

( 313,926

)

 

 

( 218,047

)

 

 

( 196,473

)

Effect of exchange rate changes on cash and cash equivalents

 

 

7,346

 

 

 

12,998

 

 

 

( 8,916

)

Net change in cash and cash equivalents

 

 

45,161

 

 

 

144,823

 

 

 

29,603

 

Cash and cash equivalents at beginning of year

 

 

282,270

 

 

 

137,447

 

 

 

107,844

 

Cash and cash equivalents at end of year

 

$

327,431

 

 

$

282,270

 

 

$

137,447

 

 
See accompanying Notes to Consolidated Financial Statements

48

 

WOODWARD, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In thousands, except per share amounts)

 

 

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

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

232,368

 

 

 

—

 

 

 

—

 

 

 

232,368

 

Other comprehensive income (loss), net of tax

 

 

—

 

 

 

—

 

 

 

19,101

 

 

 

( 3,504

)

 

 

6,295

 

 

 

21,892

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

21,892

 

Cash dividends paid ($ 0.85  per share)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

( 51,027

)

 

 

—

 

 

 

—

 

 

 

( 51,027

)

Purchases of treasury stock

 

 

—

 

 

 

( 302

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

( 126,380

)

 

 

—

 

 

 

( 126,682

)

Sales of treasury stock

 

 

—

 

 

 

377

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

50,090

 

 

 

—

 

 

 

50,467

 

Common shares issued for benefit plans

 

 

—

 

 

 

10,943

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

8,523

 

 

 

—

 

 

 

19,466

 

Stock-based compensation

 

 

—

 

 

 

23,383

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

23,383

 

Purchases of stock by deferred compensation

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

178

 

 

 

—

 

 

 

—

 

 

 

( 178

)

 

 

—

 

Distribution of stock from deferred compensation

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

( 4,183

)

 

 

—

 

 

 

—

 

 

 

4,183

 

 

 

—

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

372,971

 

 

 

—

 

 

 

—

 

 

 

372,971

 

Other comprehensive earnings (loss), net of tax

 

 

—

 

 

 

—

 

 

 

28,264

 

 

 

4,542

 

 

 

5,167

 

 

 

37,973

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

37,973

 

Cash dividends paid ($ 0.97  per share)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

( 58,286

)

 

 

—

 

 

 

—

 

 

 

( 58,286

)

Purchases of treasury stock

 

 

—

 

 

 

( 2,774

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

( 390,819

)

 

 

—

 

 

 

( 393,593

)

Sales of treasury stock

 

 

—

 

 

 

24,368

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

67,053

 

 

 

—

 

 

 

91,421

 

Common shares issued for benefit plans

 

 

—

 

 

 

13,967

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

7,922

 

 

 

—

 

 

 

21,889

 

Stock-based compensation

 

 

—

 

 

 

33,052

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

33,052

 

Purchases of stock by deferred compensation

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

173

 

 

 

—

 

 

 

—

 

 

 

( 173

)

 

 

—

 

Distribution of stock from deferred compensation

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

( 287

)

 

 

—

 

 

 

—

 

 

 

287

 

 

 

—

 

Balances as of September 30, 2024

 

$

106

 

 

$

396,554

 

 

$

( 39,129

)

 

$

( 5,177

)

 

$

11,608

 

 

$

( 32,698

)

 

$

2,662

 

 

$

3,223,259

 

 

$

( 1,410,805

)

 

$

( 2,662

)

 

$

2,176,416

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances as of September 30, 2024

 

$

106

 

 

$

396,554

 

 

$

( 39,129

)

 

$

( 5,177

)

 

$

11,608

 

 

$

( 32,698

)

 

$

2,662

 

 

$

3,223,259

 

 

$

( 1,410,805

)

 

$

( 2,662

)

 

$

2,176,416

 

Net earnings

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

442,111

 

 

 

—

 

 

 

—

 

 

 

442,111

 

Other comprehensive earnings (loss), net of tax

 

 

—

 

 

 

—

 

 

 

20,179

 

 

 

( 670

)

 

 

2,774

 

 

 

22,283

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

22,283

 

Cash dividends paid ($ 1.09  per share)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

( 64,975

)

 

 

—

 

 

 

—

 

 

 

( 64,975

)

Purchases of treasury stock

 

 

—

 

 

 

( 406

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

( 170,083

)

 

 

—

 

 

 

( 170,489

)

Sales of treasury stock

 

 

—

 

 

 

36,059

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

68,399

 

 

 

—

 

 

 

104,458

 

Common shares issued for benefit plans

 

 

—

 

 

 

18,378

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

6,534

 

 

 

—

 

 

 

24,912

 

Stock-based compensation

 

 

—

 

 

 

31,674

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

31,674

 

Purchases of stock by deferred compensation

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

150

 

 

 

—

 

 

 

—

 

 

 

( 150

)

 

 

—

 

Distribution of stock from deferred compensation

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

( 1,071

)

 

 

—

 

 

 

—

 

 

 

1,071

 

 

 

—

 

Balances as of September 30, 2025

 

$

106

 

 

$

482,259

 

 

$

( 18,950

)

 

$

( 5,847

)

 

$

14,382

 

 

$

( 10,415

)

 

$

1,741

 

 

$

3,600,395

 

 

$

( 1,505,955

)

 

$

( 1,741

)

 

$

2,566,390

 

 
See accompanying Notes to Consolidated Financial Statements

49

 

WOODWARD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share amounts)
Note 1. Operations and summary of significant accounting policies
Basis of presentation
The Consolidated Financial Statements are prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and include the accounts of Woodward, Inc. and its subsidiaries (collectively “Woodward” or “the Company”).

Nature of operations
Woodward is an independent designer, manufacturer, and service provider of energy control and optimization solutions. Woodward designs, produces, and services reliable, efficient, low-emission, and high-performance energy control products for diverse applications in challenging environments. Woodward has significant production and assembly facilities primarily in the United States, Europe, and Asia, and promotes its products and services through its worldwide locations.
Woodward’s strategic focus is providing energy control and optimization solutions for the aerospace and industrial markets. The precise and efficient control of energy, including motion, fluid, combustion, and electrical energy, is a growing requirement in the markets Woodward serves. Woodward’s customers look to it to optimize the efficiency, emissions, and operation of power equipment in both commercial and defense operations. Woodward’s core technologies leverage well across its markets and customer applications, enabling it to develop and integrate cost-effective and state-of-the-art fuel, combustion, fluid, actuation, and electronic systems. Woodward focuses its solutions and services primarily on serving original equipment manufacturers (“OEMs”) and equipment packagers, partnering with them to bring superior component and system solutions to their demanding applications. Woodward also provides service repair, maintenance, replacement, and other service support for its installed products.
Woodward’s components and integrated systems optimize performance of commercial aircraft, defense aircraft, military ground vehicles and other equipment, gas and steam turbines, industrial diesel, gas, biodiesel and dual-fuel reciprocating engines, and electrical power systems. Woodward’s innovative motion, fluid, combustion, and electrical energy control systems help its customers offer more cost-effective, cleaner, and more reliable equipment.

Summary of significant accounting policies
Principles of consolidation: These Consolidated Financial Statements are prepared in accordance with U.S. GAAP and include the accounts of Woodward and its wholly and majority-owned subsidiaries. Transactions within and between these companies are eliminated.

Use of estimates: The preparation of the Consolidated Financial Statements requires management to make use of estimates and assumptions that affect the reported amount of assets and liabilities, at the date of the financial statements and the reported revenues and expenses recognized during the reporting period, and certain financial statement disclosures. Significant estimates include allowances for uncollectible amounts, net realizable value of inventories, customer rebates earned, useful lives of property and identifiable intangible assets, the evaluation of impairments of property, identifiable intangible assets and goodwill, the provision for income tax and related valuation reserves, the valuation of assets and liabilities acquired in business combinations, 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 members, and contingencies. Actual results could differ from those estimates.

Foreign currency exchange rates: The assets and liabilities of substantially all subsidiaries outside the United States are translated at fiscal year-end rates of exchange, and earnings and cash flow statements are translated at weighted-average rates of exchange. The exchange rate in effect at the time of the cash flow is used for significant or infrequent cash flows, such as payments for a business acquisition, for which the use of weighted-average rates of exchange could result in a substantially different cash flow. Translation adjustments are accumulated with other comprehensive (losses) earnings as a separate component of stockholders’ equity and are presented net of tax effects in the Consolidated Statements of Stockholders’ Equity. The effects of changes in foreign currency exchange rates on loans between consolidated subsidiaries that are considered permanent in nature are also accumulated with other comprehensive earnings, net of tax.

50

 

The Company is exposed to market risks related to fluctuations in foreign currency exchange rates because some sales transactions, and certain assets and liabilities of its domestic and foreign subsidiaries, are denominated in foreign currencies. Selling, general and administrative expenses include a net foreign currency loss of $ 512 in fiscal year 2025, a net foreign currency loss of $ 8,369 in fiscal year 2024, and a net foreign currency loss of $ 1,020 in fiscal year 2023 .

Revenue recognition: Revenue is recognized on contracts with customers for arrangements in which quantities and pricing are fixed and/or determinable and are generally based on customer purchase orders, often within the framework of a long-term supply arrangement with the customer. Woodward has determined that it is the principal in its sales transactions, as Woodward is primarily responsible for fulfilling the promised performance obligations, has discretion to establish the selling price, and generally assumes the inventory risk. Woodward recognizes revenue for performance obligations within a customer contract when control of the associated product or service is transferred to the customer. Some of Woodward’s contracts with customers contain a single performance obligation, while other contracts contain multiple performance obligations. Each product within a contract generally represents a separate performance obligation as Woodward does not provide significant installation and integration services, the products do not customize each other, and the products can function independently of each other.
A contract's transaction price is allocated to each performance obligation and recognized as revenue when, or as, the customer obtains control of the associated product or service. When there are multiple performance obligations within a contract, Woodward generally uses the observable standalone sales price for each distinct product or service within the contract to allocate the transaction price to the distinct products or services. In instances when a standalone sales price for each product or service is not observable within the contract, Woodward allocates the transaction price to each performance obligation using an estimate of the standalone selling price for each product or service, which is generally based on incurred costs plus a reasonable margin, for each distinct product or service in the contract.
When determining the transaction price of each contract, Woodward considers contractual consideration payable by the customer and variable consideration that may affect the total transaction price. Variable consideration, consisting of early payment discounts, rebates, and other sources of price variability, are included in the estimated transaction price based on both customer-specific information as well as historical experience.

Customers sometimes trade in used products in exchange for new or refurbished products. In addition, Woodward’s customers sometimes provide inventory to Woodward which will be integrated into final products sold to those customers. Woodward obtains control of these exchanged products and customer provided inventory, and therefore, both are forms of noncash consideration. Noncash consideration paid by customers on overall sales transactions is additive to the transaction price. Woodward’s net sales and cost of goods sold include the value of such noncash consideration for the same amount, with no resulting impact to earnings before income taxes. Upon receipt of such inventory, Woodward recognizes an inventory asset and a contract liability.
Point in time and over time revenue recognition: Control of the products generally transfers to the customer at a point in time, if the customer does not control the products as they are produced. Performance obligations are satisfied and revenue is recognized over time if: (i) the customer receives the benefits as Woodward performs work, (ii) if the customer controls the asset as it is being enhanced, or (iii) if the product being produced for the customer has no alternative use to Woodward and Woodward has an enforceable right to payment with a profit. For products being produced for the customer that have no alternative use to Woodward and Woodward has an enforceable right to payment with a profit, and where the products are substantially the same and have the same pattern of transfer to the customer, revenue is recognized as a series of distinct products. As Woodward satisfies MRO performance obligations, revenue is recognized over time, as the customer, rather than Woodward, controls the asset being enhanced. When services are provided, revenue from those services is recognized over time because control is transferred continuously to customers as Woodward performs the work.
For services that are not short-term in nature, MRO, and sales of products that have no alternative use to Woodward and an enforceable right to payment with a profit, Woodward uses an actual cost input measure to determine the extent of progress towards completion of the performance obligation. For these revenue streams, revenue is recognized over time as work is performed based on the relationship between actual costs incurred to-date for each contract and the total estimated costs for such contract at completion of the performance obligation (the cost-to-cost method). Woodward has concluded that this measure of progress best depicts the transfer of assets to the customer because incurred costs are integral to Woodward’s completion of the performance obligation under the specific customer contract and correlate directly to the transfer of control to the customer. Contract costs include labor, material, and overhead. Contract cost estimates are based on various assumptions to project the outcome of future events. These assumptions include labor

51

 

productivity, and availability; the complexity of the work to be performed; the cost and availability of materials; the performance of subcontractors; and the availability and timing of funding from the customer. Revenues, including estimated fees or profits, are recorded proportionally as costs are incurred.
If at any time the estimate of contract profitability indicates an anticipated loss on the contract, Woodward recognizes provisions for estimated losses on uncompleted contracts in the period in which such losses are determined. In situations where the creditworthiness of a customer becomes in doubt, Woodward ceases to recognize the over-time revenue on the associated customer contract.
Occasionally, Woodward sells maintenance or service arrangements, extended warranties, or other stand ready services. Woodward recognizes revenue from such arrangements as a series of performance obligations over the time period in which the services are available to the customer.

Material rights and costs to fulfill a contract : Customers sometimes pay consideration to Woodward for product engineering and development activities that do not result in the immediate transfer of distinct products or services to the customer. There is an implicit assumption that without the customer making such advance payments to Woodward, Woodward’s future sales of products or services to the customer would be at a higher selling price; therefore, such payments create a “material right” to the customer that effectively gives the customer an option to acquire future products or services, at a discount, that are dependent upon the product engineering and development. Material rights are recorded as contract liabilities and will be recognized over time when control of the related products or services are transferred to the customer.
Woodward capitalizes costs of product engineering and development identified as material rights up to the amount of customer funding as costs to fulfill a contract are incurred because the costs incurred up to the amount of the customer funding commitment are recoverable. Product engineering and development costs in excess of contractual customer funding are expensed as incurred. Woodward recognizes the deferred material rights as revenue based on a percentage of actual sales to total estimated lifetime sales of the related developed products as the customers exercise their option to acquire additional products or services at a discount. Woodward amortizes the capitalized costs to fulfill a contract as cost of goods sold proportionally to the recognition of the associated deferred material rights. Estimated total lifetime sales are reviewed at least annually and more frequently when circumstances warrant a modification to the previous estimate.
Woodward does not capitalize incremental costs of obtaining a contract, as Woodward does not pay sales commissions or incur other incremental costs related to contracts with Woodward’s customers for arrangements in which quantities and pricing are fixed and/or determinable.

Contract liabilities: Advance payments and billings in excess of revenue recognized represent contract liabilities and are recorded as deferred revenues when customers remit contractual cash payments in advance of Woodward satisfying performance obligations under contractual arrangements, including those with performance obligations satisfied over time. Woodward generally receives advance payments from customers related to maintenance or service arrangements, extended warranties, or other stand ready services, which it recognizes over the performance period. Contract liabilities are satisfied when revenue is recognized and the performance obligation is satisfied. Advance payments and billings in excess of revenue recognized are included in deferred revenue, which is classified as current or noncurrent based on the timing of when Woodward expects to recognize revenue.

Customer payments : Woodward occasionally agrees to make payments to certain customers in order to participate in anticipated sales activity. Payments made to customers are accounted for as a reduction of revenue unless they are made in exchange for identifiable goods or services with fair values that can be reasonably estimated. Reductions in revenue associated with these customer payments are recognized immediately to the extent that the payments cannot be attributed to anticipated future sales, and are recognized in future periods to the extent that the payments relate to anticipated future sales. Such determinations are based on the facts and circumstances underlying each payment.

Purchase accounting : Business combinations are accounted for using the purchase method of accounting. Under this method, assets and liabilities, including intangible assets, are recorded at their fair values as of the acquisition date. Acquisition costs in excess of amounts assigned to assets acquired and liabilities assumed are recorded as goodwill. Transaction-related costs associated with business combinations are expensed as incurred.

Stock-based compensation: Compensation cost relating to stock-based payment awards made to members and directors is recognized in the financial statements using a fair value method. Non-qualified stock option awards, restricted stock units, and performance restricted stock units are issued under Woodward’s stock-based compensation plans. The cost of such awards, measured at the grant date, is based on the estimated fair value of the award.

52

 

Forfeitures are estimated at the time of each grant in order to estimate the portion of the award that will ultimately vest. The estimate is based on Woodward’s historical rates of forfeitures and is updated periodically. The portion of the award that is ultimately expected to vest is recognized as expense over the requisite service periods, which is generally the vesting period of the awards.

Research and development costs: Company funded expenditures related to new product development and significant product enhancement and/or upgrade activities are expensed as incurred and are separately reported in the Consolidated Statements of Earnings.

Income taxes: Deferred income taxes are provided for the temporary differences between the financial reporting basis and the tax basis of Woodward’s assets, liabilities, and certain unrecognized gains and losses recorded in accumulated other comprehensive (losses) earnings. Woodward provides for taxes that may be payable if undistributed earnings of overseas subsidiaries were to be remitted to the United States, except for those earnings that it considers to be indefinitely invested.

Cash equivalents: Highly liquid investments purchased with an original maturity of three months or less are considered to be cash equivalents.

Accounts receivable: Almost all of Woodward’s sales are made on credit and result in accounts receivable, which are recorded at the amount invoiced and are generally not collateralized. In the normal course of business, not all accounts receivable are collected and, therefore, an allowance for uncollectible amounts is provided equal to the amount that Woodward believes ultimately will not be collected. In establishing the amount of the allowance related to the credit risk of accounts receivable, customer-specific information is considered related to delinquent accounts, past loss experience, bankruptcy filings, deterioration in the customer’s operating results or financial position, current and forecasted economic conditions, and other relevant factors. Bad debt losses are deducted from the allowance, and the related accounts receivable balances are written off when the receivables are deemed uncollectible. Recoveries of accounts receivable previously written off are recognized when received. The allowance associated with anticipated other adjustments to the selling price or cash discounts is also established and is included in the allowance for uncollectible amounts. In establishing this amount, both customer-specific information as well as historical experience is considered.
In coordination with its customers and when terms are considered favorable to Woodward, Woodward from time-to-time transfers ownership to collect amounts due to Woodward for outstanding accounts receivable to third parties in exchange for cash. When the transfer of accounts receivable meets the criteria of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification ("ASC") Topic 860-10, “Transfers and Servicing,” and are without recourse, it is recognized as a sale and the accounts receivable is derecognized.
Unbilled receivables (contract assets) arise when the timing of billing differs from the timing of revenue recognized, such as when contract provisions require revenue to be recognized over time rather than at a point in time. Unbilled receivables primarily relate to performance obligations satisfied over time when the cost-to-cost method is utilized and the revenue recognized exceeds the amount billed to the customer as there is not yet a right to payment in accordance with contractual terms. Unbilled receivables are recorded as a contract asset when the revenue associated with the contract is recognized prior to billing and derecognized when billed in accordance with the terms of the contract.

For composition of accounts receivable, see Note 3, Revenue.
Inventories: Inventories are valued at the lower of cost or net realizable value, with cost being determined using methods that approximate a first-in, first-out basis.

Short-term investments: 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. Amounts with maturities of less than 365 days are classified as “Other current assets.”
Property, plant, and equipment: Property, plant, and equipment are recorded at cost and are depreciated over the estimated useful lives of the assets. Assets are generally depreciated using the straight-line method. Assets are tested for recoverability whenever events or circumstances indicate the carrying value may not be recoverable.

53

 

Estimated lives over which fixed assets are generally depreciated at September 30, 2025 were as follows:

Land improvements

 

 

10

 

 

–

 

 

20

 

years

Buildings and improvements

 

 

10

 

 

–

 

 

40

 

years

Leasehold improvements

 

 

1

 

 

–

 

 

10

 

years

Machinery and production equipment

 

 

3

 

 

–

 

 

25

 

years

Computer equipment and software

 

 

3

 

 

–

 

 

15

 

years

Office furniture and equipment

 

 

3

 

 

–

 

 

15

 

years

Other

 

 

3

 

 

–

 

 

5

 

years

Included in computer equipment and software are Woodward’s enterprise resource planning (“ERP”) systems, which have an estimated useful life of 15 years. All other computer equipment and software is generally depreciated over three years to five years .

Leases: Right-of-use (“ROU”) assets and lease liabilities are recognized at the lease commencement date based on the estimated present value of the remaining fixed lease payments over the lease term. In determining the estimated present value of lease payments, Woodward discounts the fixed lease payments using the rate implicit in the agreement or, if the implicit rate is not known, using the incremental borrowing rate. Woodward’s incremental borrowing rate is based on the information available at the lease commencement date, with consideration given to Woodward’s recent debt issuances as well as publicly available data for instruments with similar characteristics.
For operating leases, lease expense is recognized over the expected lease term and classified as cost of goods sold or selling, general and administrative expenses based on the nature of the underlying leased asset. For finance leases, the ROU asset is recognized over the shorter of the useful life of the asset, consistent with Woodward’s normal depreciation policy, or the lease term, and is classified as cost of goods sold, selling, general and administrative expense, or research and development expense, based on the nature and use of the underlying leased asset.
Certain of Woodward’s operating lease agreements include variable payments that are passed through by the landlord, such as insurance, taxes, and common area maintenance, payments based on the usage of the asset, and rental payments adjusted periodically for inflation. Pass-through charges, payments due to changes in usage of the asset, and payments due to changes in indexation are included within variable rent expense and are recognized in the period in which the variable obligation for the payments was incurred.

Goodwill: Woodward tests goodwill for impairment at the reporting unit level on an annual basis and more often if an event occurs or circumstances change that indicates the fair value of a reporting unit may be below its carrying amount. Based on the relevant U.S. GAAP authoritative guidance, Woodward aggregates components of a single operating segment into a reporting unit, if appropriate.
In fiscal year 2025, Woodward used the qualitative approach and was not required to conduct the quantitative analysis. Woodward applied its best judgment when assessing the reasonableness of the assumptions used to determine the fair value of the reporting unit.

In each of fiscal year 2024 and fiscal year 2023, Woodward performed the quantitative assessment consisting of comparing the implied fair value of each reporting unit with its carrying amount that includes goodwill. If the carrying amount of the reporting unit exceeds its implied fair value, Woodward compares the implied fair value of goodwill with the recorded carrying amount of goodwill. If the carrying amount of goodwill exceeds the implied fair value of goodwill, an impairment loss would be recognized to reduce the carrying amount to its implied fair value.
Based on the results of Woodward’s annual goodwill impairment testing, no impairment charges were recorded in the year ended September 30, 2025, 2024, or 2023 or since the goodwill was originally recorded.

Other intangibles: Other intangibles are recognized apart from goodwill whenever an acquired intangible asset arises from contractual or other legal rights, or whenever it is capable of being separated or divided from the acquired entity and sold, transferred, licensed, rented, or exchanged, either individually or in combination with a related contract, asset, or liability. Woodward amortizes the cost of other intangibles over their useful lives unless such lives are deemed indefinite. The cost of finite-lived other intangibles are amortized over their respective useful life using patterns that reflect the periods over which the economic benefits of the assets are expected to be realized. Amortization expense is allocated to cost of goods sold and selling, general and administrative expenses based on the nature of the intangible asset. Finite-lived other intangible assets are reviewed for impairment whenever an event occurs or circumstances change indicating that the related carrying amount of the other intangible asset may not be recoverable. Impairment losses are recognized if the carrying amount of an intangible is both not recoverable and exceeds its fair value.

54

 

Woodward has recorded no impairment charges related to its other intangibles in the year ended September 30, 2025, 2024, or 2023.
Estimated lives over which intangible assets are amortized at September 30, 2025 were as follows:
 

Customer relationships and contracts

 

 

11

 

 

–

 

 

30

 

 

years

Intellectual property

 

17  years

Process technology

 

 

10

 

 

–

 

 

30

 

 

years

Woodward has one indefinitely lived intangible asset consisting of the Woodward L’Orange trade name. The Woodward L’Orange trade name intangible asset is tested for impairment on an annual basis and more often if an event occurs or circumstances change that indicate the fair value of the Woodward L’Orange intangible asset may be below its carrying amount.
In fiscal year 2025, Woodward used the qualitative approach and was not required to conduct the quantitative assessment. Woodward applied its best judgment when assessing the reasonableness of the assumptions used to determine the fair value of the reporting unit. In each of fiscal year 2024 and fiscal year 2023, Woodward performed the quantitative assessment which consists of comparing the fair value of the Woodward L’Orange trade name intangible asset, determined using discounted cash flows based on the relief from royalty method under the income approach, with its carrying amount. If the carrying amount of the Woodward L’Orange trade name intangible asset exceeds its fair value, an impairment loss would be recognized to reduce the carrying amount to its fair value. Woodward has not recorded any impairment charges against the L'Orange trade name intangible asset since it was acquired.

Impairment of long-lived assets: Woodward reviews the carrying amount of its long-lived assets or asset groups to be used in operations whenever events or changes in circumstances indicate that the carrying amount of the assets might not be recoverable. Factors that would necessitate an impairment assessment include a significant adverse change in the extent or manner in which an asset is used, a significant adverse change in legal factors or the business climate that could affect the value of the asset, or a significant decline in the observable market value of an asset, among others.
If such facts indicate a potential impairment, the Company would assess the recoverability of an asset group by determining if the carrying amount of the asset group exceeds the sum of the projected undiscounted cash flows expected to result from the use and eventual disposition of the assets over the remaining economic life of the primary asset in the asset group. If the recoverability test indicates that the carrying amount of the asset group is not recoverable, the Company will estimate the fair value of the asset group using appropriate valuation methodologies, which would typically include an estimate of discounted cash flows. Any impairment would be measured as the difference between the asset group’s carrying amount and its estimated fair value.

Investment in marketable equity securities: Woodward holds marketable equity securities. 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, net.” The trading securities are included in “Other assets.”

Investments in unconsolidated subsidiaries: Investments in, and operating results of, entities in which Woodward does not have a controlling financial interest or the ability to exercise significant influence over the operations are included in the financial statements using the cost method of accounting. Investments and operating results of entities in which Woodward does not have a controlling interest but does have the ability to exercise significant influence over operations are included in the financial statements using the equity method of accounting.

Deferred compensation: The Company maintains a deferred compensation program as part of its overall compensation package for certain members.
Deferred compensation obligations will be settled either by delivery of a fixed number of shares of Woodward’s common stock (in accordance with certain eligible members’ irrevocable elections) or in cash. Woodward has contributed shares of its common stock into a trust (the "rabbi trust") established for the future settlement of deferred compensation obligations that are payable in shares of Woodward’s common stock. Common stock held by the trust is reflected in the Consolidated Balance Sheets as “Treasury stock held for deferred compensation” and the related deferred compensation obligation is reflected as a separate component of equity in amounts equal to the fair value of the common stock at the dates of contribution. Deferred compensation obligations that will be settled in cash are accounted for on an accrual basis in accordance with the terms of the underlying contract and are reflected in the Consolidated Balance Sheet as “Other liabilities.”

55

 

Financial instruments: The Company’s financial instruments include cash and cash equivalents, short-term investments, investments in the deferred compensation program, notes receivable from municipalities, investments in term deposits, cross-currency interest rate swaps, and debt. Because of their short-term maturity, the carrying amount of cash and cash equivalents and short-term debt approximate fair value. Financial assets and liabilities recorded at fair value in the Consolidated Balance Sheets are categorized based upon a fair value hierarchy established by U.S. GAAP, which prioritizes the inputs used to measure fair value into the following levels:
Level 1: Inputs based on quoted market prices in active markets for identical assets or liabilities at the measurement date.
Level 2: Quoted prices included in Level 1, such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable and can be corroborated by observable market data.
Level 3: Inputs reflect management’s best estimates and assumptions of what market participants would use in pricing the asset or liability at the measurement date. The inputs are unobservable in the market and significant to the valuation of the instruments.
Further information on the fair value of financial instruments can be found at Note 7, Financial instruments and fair value measurements .

Derivatives: The Company is exposed to various global market risks, including the effect of changes in interest rates, foreign currency exchange rates, changes in certain commodity prices, and fluctuations in various producer indices. From time to time, Woodward enters into derivative instruments for risk management purposes only, including derivatives designated as accounting hedges and/or those utilized as economic hedges. Woodward uses interest rate related derivative instruments to manage its exposure to fluctuations of interest rates. Woodward does not enter into or issue derivatives for trading or speculative purposes.
By using derivative and/or hedging instruments to manage its risk exposure, Woodward is subject, from time to time, to credit risk and market risk on those derivative instruments. Credit risk arises from the potential failure of the counterparty to perform under the terms of the derivative and/or hedging instrument. When the fair value of a derivative contract is positive, the counterparty owes Woodward, which creates credit risk for Woodward. Woodward mitigates this credit risk by entering into transactions only with counterparties that are believed to be creditworthy. Market risk arises from the potential adverse effects on the value of derivative and/or hedging instruments that result from a change in interest rates, commodity prices, or foreign currency exchange rates. Woodward minimizes this market risk by establishing and monitoring parameters that limit the types and degree of market risk that may be undertaken.
From time to time, in order to hedge against foreign currency exposure, Woodward designates certain non-derivative financial instrument loans as net investment hedges. Foreign exchange gains or losses on these loans are recognized in foreign currency translation adjustments within total comprehensive (losses) earnings. Also, to hedge against the foreign currency exposure attributable to non-functional currency denominated intercompany loans, Woodward has entered into derivative instruments in fair value hedging relationships and cash flow hedging relationships.
Further information on net investment hedges and derivative instruments in fair value and cash flow hedging relationships, including the Company’s policy in accounting for these derivatives, can be found at Note 8, Derivative instruments and hedging activities .

Postretirement benefits: The Company provides various benefits to certain current and former members through defined benefit pension and postretirement plans. For financial reporting purposes, net periodic benefits expense and related obligations are calculated using a number of significant actuarial assumptions. Changes in net periodic expense and funding status may occur in the future due to changes in these assumptions. The funded status of defined pension and postretirement plans recognized in the statement of financial position is measured as the difference between the fair market value of the plan assets and the benefit obligation. For a defined benefit pension plan, the benefit obligation is the projected benefit obligation; for any other defined benefit postretirement plan, such as a retiree health-care plan, the benefit obligation is the accumulated benefit obligation. Any over-funded status is recognized as an asset and any underfunded status is recognized as a liability.
Projected benefit obligation is the actuarial present value as of the measurement date of all benefits attributed by the plan benefit formula to employee service rendered before the measurement date using assumptions as to future compensation levels if the plan benefit formula is based on those future compensation levels. The accumulated benefit

56

 

obligation is the actuarial present value of benefits (whether vested or unvested) attributed by the plan benefit formula to employee service rendered before the measurement date and based on employee service and compensation, if applicable, prior to that date. The accumulated benefit obligation differs from the projected benefit obligation in that it includes no assumption about future compensation levels.

Note 2. New accounting standards
From time to time, the FASB or other standards setting bodies issue new accounting pronouncements. Updates to the ASC are communicated through issuance of an Accounting Standards Update (“ASU”).
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.
In November 2024, the FASB issued ASU 2024-03, "Disaggregation of Income Statement Expenses" the purpose of ASU 2024-03 is to provide enhanced disclosures about significant expenses on the Consolidated Statement of Earnings. The amendments in ASU 2024-03 are effective for fiscal years beginning after December 15, 2026 (fiscal year 2028 for Woodward), and interim periods within fiscal years beginning after December 15, 2027 (fiscal year 2029 for Woodward), with early adoption permitted, and are to be applied either on a prospective basis to financial statements issued for reporting periods after the effective date or on a retrospective basis to all periods presented. Woodward is currently assessing the impact on its Consolidated Statement of Earnings disclosures.

Note 3. Revenue
Sales of products
Woodward primarily generates revenue through the manufacture and sale of engineered aerospace and industrial products, including revenue derived from MRO performance obligations performed on products originally manufactured by Woodward and subsequently returned by OEM or other end-user customers. The majority of Woodward’s costs incurred to satisfy MRO performance obligations are related to replacing and/or refurbishing component parts of the returned products to restore the units back to a condition generally comparable to that of the unit upon its initial sale to an OEM customer. Therefore, Woodward considers almost all of its revenue to be derived from product sales, including those related to MRO.

 

 

Year Ended September 30,

 

 

 

2025

 

 

2024

 

 

2023

 

Manufactured products

 

 

81

%

 

 

83

%

 

 

84

%

MRO

 

 

17

%

 

 

15

%

 

 

14

%

Services

 

 

2

%

 

 

2

%

 

 

2

%

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

 

 

For the Year Ended September 30,

 

 

 

2025

 

 

2024

 

 

2023

 

 

 

Aerospace

 

 

Industrial

 

 

Consolidated

 

 

Aerospace

 

 

Industrial

 

 

Consolidated

 

 

Aerospace

 

 

Industrial

 

 

Consolidated

 

Point in time

 

$

916,671

 

 

$

712,627

 

 

$

1,629,298

 

 

$

853,728

 

 

$

780,794

 

 

$

1,634,522

 

 

$

748,278

 

 

$

708,458

 

 

$

1,456,736

 

Over time

 

 

1,396,135

 

 

 

541,631

 

 

 

1,937,766

 

 

 

1,174,890

 

 

 

514,837

 

 

 

1,689,727

 

 

 

1,019,825

 

 

 

438,005

 

 

 

1,457,830

 

Total net sales

 

$

2,312,806

 

 

$

1,254,258

 

 

$

3,567,064

 

 

$

2,028,618

 

 

$

1,295,631

 

 

$

3,324,249

 

 

$

1,768,103

 

 

$

1,146,463

 

 

$

2,914,566

 

 

57

 

Material rights and costs to fulfill a contract
Amounts recognized related to changes in estimated total lifetime sales for material rights and costs to fulfill contracts with customers follows:

 

 

Year Ended September 30,

 

 

 

2025

 

 

2024

 

 

2023

 

Revenue

 

$

1,462

 

 

$

17,154

 

 

$

1,460

 

Cost of goods sold

 

 

1,855

 

 

 

15,486

 

 

 

1,736

 

Amounts recognized related to amortization of costs to fulfill contracts and contract liabilities, which were not related to changes in estimate, follows:

 

 

Year Ended September 30,

 

 

 

2025

 

 

2024

 

 

2023

 

Revenue

 

$

4,521

 

 

$

7,230

 

 

$

6,741

 

Cost of goods sold

 

 

3,717

 

 

 

3,112

 

 

 

5,559

 

As of September 30, 2025 , “Other assets” on the Consolidated Balance Sheets included $ 203,171 of capitalized costs to fulfill contracts with customers, compared to $ 185,102 as of September 30, 2024.
Accounts receivable and contract assets
Customer receivables include amounts billed and currently due from customers as well as unbilled amounts (contract assets) and are included in “Accounts receivable” in Woodward’s Consolidated Balance Sheets. Amounts are billed in accordance with contractual terms, which are generally tied to shipment of the products to the customer, or as work progresses in accordance with contractual terms. Billed accounts receivable are typically due within 60 days. Woodward’s contracts with customers generally have no financing components.
Accounts receivable consisted of the following:

 

 

September 30, 2025

 

 

September 30, 2024

 

Billed receivables

 

 

 

 

 

 

Trade accounts receivable

 

$

477,217

 

 

$

455,831

 

Other (Chinese financial institutions)

 

 

104

 

 

 

1,403

 

Total billed receivables

 

 

477,321

 

 

 

457,234

 

Current unbilled receivables (contract assets)

 

 

363,520

 

 

 

320,570

 

Total accounts receivable

 

 

840,841

 

 

 

777,804

 

Less: Allowance for uncollectible amounts

 

 

( 9,725

)

 

 

( 7,738

)

Total accounts receivable, net

 

$

831,116

 

 

$

770,066

 

As of September 30, 2025, “Other assets” on the Consolidated Balance Sheets includes $ 10,963 of unbilled receivables not expected to be invoiced and collected within a period of 12 months, compared to $ 11,237 as of September 30, 2024. Unbilled receivables not expected to be invoiced and collected within a period of 12 months are primarily attributable to the timing of revenue recognized in excess of billings in the Aerospace segment.
Billed and unbilled accounts receivable from the U.S. Government were less than 10 % of total billed and unbilled accounts receivable at September 30, 2025 and September 30, 2024.

58

 

The allowance for uncollectible amounts and change in expected credit losses for trade accounts receivable and unbilled receivables (contract assets) consisted of the following:

 

 

Year Ended September 30,

 

 

 

2025

 

 

2024

 

 

2023

 

Balance, beginning

 

$

7,738

 

 

$

5,847

 

 

$

3,922

 

Changes in estimates

 

 

1,879

 

 

 

3,219

 

 

 

7,211

 

Write-offs

 

 

( 347

)

 

 

( 586

)

 

 

( 5,305

)

Other 1

 

 

455

 

 

 

( 742

)

 

 

19

 

Balance, ending

 

$

9,725

 

 

$

7,738

 

 

$

5,847

 

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

Contract liabilities
Contract liabilities consisted of the following:

 

 

September 30, 2025

 

 

September 30, 2024

 

 

 

Current

 

 

Noncurrent

 

 

Current

 

 

Noncurrent

 

Deferred revenue from material rights from JV formation

 

$

7,298

 

 

$

229,878

 

 

$

6,580

 

 

$

232,164

 

Deferred revenue from advanced invoicing and/or prepayments from customers

 

 

14,944

 

 

 

2,115

 

 

 

23,706

 

 

 

6,437

 

Liability related to customer supplied inventory

 

 

19,640

 

 

 

—

 

 

 

20,563

 

 

 

—

 

Deferred revenue from material rights related to engineering and development funding

 

 

7,353

 

 

 

199,465

 

 

 

5,942

 

 

 

186,008

 

Net contract liabilities

 

$

49,235

 

 

$

431,458

 

 

$

56,791

 

 

$

424,609

 

The current portion of contract liabilities is included in “Accrued liabilities” and the noncurrent portion is included in “Other liabilities” of Woodward’s Consolidated Balance Sheets. Woodward recognized revenue of $ 31,998 in the year ended September 30, 2025 from contract liabilities balances recorded as of September 30, 2024, compared to $ 44,398 in the year ended September 30, 2024 from contract liabilities balances recorded as of September 30, 2023.
The amount of revenue recognized related to noncash consideration received from customers follows:

 

 

For the Year Ended September 30,

 

 

 

2025

 

 

2024

 

 

2023

 

Aerospace

 

$

68,059

 

 

$

61,323

 

 

$

50,329

 

Industrial

 

 

3,089

 

 

 

4,974

 

 

 

1,939

 

Consolidated

 

$

71,148

 

 

$

66,297

 

 

$

52,268

 

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 September 30, 2025 was $ 3,195,156 , compared to $ 2,932,793 as of September 30, 2024 , the majority of which in both periods relate to Woodward’s Aerospace segment. Woodward expects to recognize almost all of these remaining performance obligations within two years after September 30, 2025.
Remaining performance obligations related to material rights that have not yet been recognized in revenue as of September 30, 2025 was $ 513,570 , of which $ 13,517 is expected to be re cognized in fiscal year 2026 , and the 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 40 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 and by geographical area as Woodward believes this best depicts how the nature, amount, timing, and uncertainty of its revenue and cash flows are affected by economic factors.

59

 

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

 

 

Year Ended September 30,

 

 

 

2025

 

 

2024

 

 

2023

 

Commercial OEM

 

$

690,962

 

 

$

738,394

 

 

$

651,275

 

Commercial services

 

 

823,547

 

 

 

640,823

 

 

 

547,625

 

Defense OEM

 

 

561,288

 

 

 

406,810

 

 

 

368,653

 

Defense services

 

 

237,009

 

 

 

242,591

 

 

 

200,550

 

Total Aerospace segment net sales

 

$

2,312,806

 

 

$

2,028,618

 

 

$

1,768,103

 

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

 

 

Year Ended September 30,

 

 

 

2025

 

 

2024

 

 

2023

 

Power generation

 

$

488,940

 

 

$

443,667

 

 

$

382,536

 

Transportation

 

 

507,376

 

 

 

624,762

 

 

 

527,498

 

Oil and gas

 

 

257,942

 

 

 

227,202

 

 

 

236,429

 

Total Industrial segment net sales

 

$

1,254,258

 

 

$

1,295,631

 

 

$

1,146,463

 

Based on changes in market dynamics, the Company has refined its Industrial end market presentation to better align certain sales within power generation, transportation, and oil and gas. Accordingly, sales for the years ended September 30, 2025 and 2024 have been reclassified for comparability. The reclassification had no impact on total Industrial or the consolidated financial results.

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

 

 

For the Year Ended September 30,

 

 

2025

 

2024

 

2023

Aerospace

 

RTX Corporation, GE Aerospace, The Boeing Company

 

RTX Corporation,
 The Boeing Company

 

RTX Corporation, General Electric Company, The Boeing Company

Industrial

 

Rolls-Royce PLC, Caterpillar Inc., GE Vernova

 

Weichai Power, Rolls-Royce PLC

 

Rolls-Royce PLC, Caterpillar Inc., Weichai Power

Net sales by geographic area, as determined based on the location of the customer, were as follows:

 

 

Year Ended September 30,

 

 

 

2025

 

 

2024

 

 

2023

 

 

 

Aerospace

 

 

Industrial

 

 

Consolidated

 

 

Aerospace

 

 

Industrial

 

 

Consolidated

 

 

Aerospace

 

 

Industrial

 

 

Consolidated

 

United States

 

$

1,585,173

 

 

$

329,108

 

 

$

1,914,281

 

 

$

1,404,223

 

 

$

294,033

 

 

$

1,698,256

 

 

$

1,254,954

 

 

$

283,121

 

 

$

1,538,075

 

Germany

 

 

72,883

 

 

 

202,539

 

 

 

275,422

 

 

 

72,583

 

 

 

196,775

 

 

 

269,358

 

 

 

80,450

 

 

 

193,392

 

 

 

273,842

 

Europe, excluding Germany

 

 

224,302

 

 

 

341,286

 

 

 

565,588

 

 

 

202,421

 

 

 

297,517

 

 

 

499,938

 

 

 

163,222

 

 

 

273,757

 

 

 

436,979

 

China

 

 

148,192

 

 

 

137,678

 

 

 

285,870

 

 

 

96,136

 

 

 

293,908

 

 

 

390,044

 

 

 

56,773

 

 

 

186,713

 

 

 

243,486

 

Asia, excluding China

 

 

61,965

 

 

 

187,240

 

 

 

249,205

 

 

 

59,103

 

 

 

163,603

 

 

 

222,706

 

 

 

37,107

 

 

 

162,922

 

 

 

200,029

 

Other countries

 

 

220,291

 

 

 

56,407

 

 

 

276,698

 

 

 

194,152

 

 

 

49,795

 

 

 

243,947

 

 

 

175,597

 

 

 

46,558

 

 

 

222,155

 

Total net sales

 

$

2,312,806

 

 

$

1,254,258

 

 

$

3,567,064

 

 

$

2,028,618

 

 

$

1,295,631

 

 

$

3,324,249

 

 

$

1,768,103

 

 

$

1,146,463

 

 

$

2,914,566

 

 
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, restricted stock units, and performance stock units.

60

 

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

 

 

Year Ended September 30,

 

 

 

2025

 

 

2024

 

 

2023

 

Numerator:

 

 

 

 

 

 

 

 

 

Net earnings

 

$

442,111

 

 

$

372,971

 

 

$

232,368

 

Denominator:

 

 

 

 

 

 

 

 

 

Basic shares outstanding

 

 

59,563

 

 

 

60,076

 

 

 

59,908

 

Dilutive effect of stock options; restricted and performance stock units

 

 

1,901

 

 

 

2,008

 

 

 

1,574

 

Diluted shares outstanding

 

 

61,464

 

 

 

62,084

 

 

 

61,482

 

Income per common share:

 

 

 

 

 

 

 

 

 

Basic earnings per share

 

$

7.42

 

 

$

6.21

 

 

$

3.88

 

Diluted earnings per share

 

$

7.19

 

 

$

6.01

 

 

$

3.78

 

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:

 

 

Year Ended September 30,

 

 

 

2025

 

 

2024

 

 

2023

 

Options

 

 

25

 

 

 

63

 

 

 

561

 

Weighted-average option price

 

$

186.19

 

 

$

135.26

 

 

$

114.88

 

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:

 

 

Year Ended September 30,

 

 

 

2025

 

 

2024

 

 

2023

 

Weighted-average treasury stock shares held for deferred compensation obligations

 

 

33

 

 

 

51

 

 

 

88

 

 
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.
None of Woodward’s lease agreements contain significant residual value guarantees, restrictions, or covenants. As of September 30, 2025, Woodward has not entered into any lease arrangements that have not yet commenced but would create significant rights and obligations. Woodward does not have any lease transactions between related parties.
Lease-related assets and liabilities follows:

 

 

Classification on the Consolidated Balance Sheets

 

September 30, 2025

 

 

September 30, 2024

 

Assets:

 

 

 

 

 

 

 

 

Operating lease assets

 

Other assets

 

$

25,274

 

 

$

27,135

 

Finance lease assets

 

Property, plant, and equipment, net

 

 

2,896

 

 

 

2,516

 

Total lease assets

 

 

 

 

28,170

 

 

 

29,651

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Operating lease liabilities

 

Accrued liabilities

 

 

5,465

 

 

 

5,029

 

Finance lease liabilities

 

Current portion of long-term debt

 

 

1,032

 

 

 

719

 

Noncurrent liabilities:

 

 

 

 

 

 

 

 

Operating lease liabilities

 

Other liabilities

 

 

20,199

 

 

 

22,670

 

Finance lease liabilities

 

L ong-term debt, less current portion

 

 

1,902

 

 

 

2,017

 

Total lease liabilities

 

 

 

$

28,598

 

 

$

30,435

 

 

61

 

Supplemental lease-related information was as follows:

 

 

September 30, 2025

 

 

September 30, 2024

 

Weighted average remaining lease term

 

 

 

 

 

 

Operating leases

 

7.3  years

 

 

8.1  years

 

Finance leases

 

3.0  years

 

 

3.8  years

 

Weighted average discount rate

 

 

 

 

 

 

Operating leases

 

 

4.5

%

 

 

4.4

%

Finance leases

 

 

5.0

%

 

 

4.6

%

Lease-related expenses were as follows:

 

 

Year Ended September 30,

 

 

 

2025

 

 

2024

 

 

2023

 

Operating lease expense

 

$

7,568

 

 

$

6,804

 

 

$

6,213

 

Amortization of financing lease assets

 

 

967

 

 

 

820

 

 

 

914

 

Interest on financing lease liabilities

 

 

162

 

 

 

138

 

 

 

157

 

Variable lease expense

 

 

1,200

 

 

 

1,299

 

 

 

917

 

Short-term lease expense

 

 

205

 

 

 

164

 

 

 

196

 

Total lease expense

 

$

10,102

 

 

$

9,225

 

 

$

8,397

 

Lease-related supplemental cash flow information was as follows:

 

 

Year Ended September 30,

 

 

 

2025

 

 

2024

 

 

2023

 

Cash paid for amounts included in the measurement of lease liabilities:

 

 

 

 

 

 

 

 

 

Operating cash flows for operating leases

 

$

6,044

 

 

$

5,375

 

 

$

5,151

 

Operating cash flows for finance leases

 

 

162

 

 

 

138

 

 

 

157

 

Financing cash flows for finance leases

 

 

971

 

 

 

818

 

 

 

779

 

Right-of-use assets obtained in exchange for recorded lease obligations:

 

 

 

 

 

 

 

 

 

Operating leases

 

 

6,016

 

 

 

6,117

 

 

 

2,230

 

Finance leases

 

 

1,171

 

 

 

—

 

 

 

48

 

Maturities of lease liabilities were as follows:

Year Ending September 30:

 

Operating Leases

 

 

Finance Leases

 

2026

 

$

6,561

 

 

$

1,146

 

2027

 

 

5,435

 

 

 

1,143

 

2028

 

 

4,554

 

 

 

555

 

2029

 

 

3,406

 

 

 

204

 

2030

 

 

2,638

 

 

 

89

 

Thereafter

 

 

7,612

 

 

 

—

 

Total lease payments

 

 

30,206

 

 

 

3,137

 

Less: imputed interest

 

 

( 4,542

)

 

 

( 203

)

Total lease obligations

 

$

25,664

 

 

$

2,934

 

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 is substantially (more than 90%) dedicated to the manufacturing of the product(s) for a single customer. Woodward has dedicated manufacturing lines with three 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 September 30, 2025. 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.

62

 

Woodward recognizes revenue from the embedded lessor arrangements based on the value of the underlying dedicated property, plant, and equipment. There are no fixed payments that the customers under the embedded lessor arrangements are obligated to pay. Therefore, all the customer payments under the embedded lessor arrangements are considered variable with the associated leasing revenue recognized when the revenue from underlying product sale related to variable lease payment is recognized . Revenue from contracts with customers that included embedded operating leases, which is included in “ Net sales ” at the Consolidated Statements of Earnings, was $ 3,947 for the fiscal year ended September 30, 2025 , compared to $ 5,486 for the fiscal year ended September 30, 2024 and $ 5,030 for the fiscal year ended September 30, 2023.
The carrying amount of property, plant, and equipment leased to others through embedded leasing arrangements, included in “Property, plant, and equipment, net” at the Consolidated Balance Sheets, was as follows:

 

 

September 30, 2025

 

 

September 30, 2024

 

Property, plant, and equipment

 

$

41,593

 

 

$

48,495

 

Less accumulated depreciation

 

 

( 29,110

)

 

 

( 32,994

)

Property, plant, and equipment, net

 

$

12,483

 

 

$

15,501

 

 
Note 6. Joint venture
In fiscal year 2016, Woodward and GE consummated the formation of a strategic joint venture (the “JV”). For purposes of the JV, GE has been acting through GE Aerospace since April 2024. The JV was formed to develop, manufacture, and support fuel systems for specified existing and all future GE commercial aircraft engines that produce thrust in excess of 50,000 pounds. Woodward is accounting for its 50 % ownership interest in the JV using the equity method of accounting. The JV is a related party to Woodward, and transactions between Woodward and the JV are included in our Aerospace segment.
Un amortized deferred revenue from material rights in connection with the JV formation included:

 

 

September 30, 2025

 

 

September 30, 2024

 

Accrued liabilities

 

$

7,298

 

 

$

6,580

 

Other liabilities

 

 

229,878

 

 

 

232,164

 

Amortization of the deferred revenue (material right) recognized as an increase to sales was $ 6,462 for the fiscal year ended September 30, 2025, $ 6,294 for the fiscal year ended September 30, 2024, and $ 5,020 for the fiscal year ended September 30, 2023.
Other income related to Woodward’s equity interest in the earnings of the JV were as follows:

 

 

For the Year Ended September 30,

 

 

 

2025

 

 

2024

 

 

2023

 

Other income

 

$

45,850

 

 

$

41,191

 

 

$

36,846

 

As part of the JV formation, GE pays contingent consideration to Woodward consisting of 15 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, 2025, 2024, and 2023, which were recorded as deferred income and included in “Net cash provided by operating activities” on the Consolidated Statements of Cash Flows.
Cash distribu tions to Woodward from the JV, recognized in "Other, net" in Net cash provided by operating activities on the Consolidated Statements of Cash Flows, were as follows:

 

 

Year Ended September 30,

 

 

 

2025

 

 

2024

 

 

2023

 

Cash distributions

 

$

42,000

 

 

$

38,000

 

 

$

29,000

 

Net sales to the JV were as follows:

 

 

For the Year Ended September 30,

 

 

 

2025

 

 

2024

 

 

2023

 

Net sales

 

$

97,576

 

 

$

80,708

 

 

$

47,607

 

 

63

 

Woodward net sales include a reduction of $ 71,030 for the fiscal year ended September 30, 2025, $ 63,794 for the fiscal year ended September 30, 2024, and $ 49,624 for the fiscal year ended September 30, 2023 related to royalties owed to the JV by Woodward on sales by Woodward directly to third-party commercial services customers.

The 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:

 

 

September 30, 2025

 

 

September 30, 2024

 

Accounts receivable

 

$

5,377

 

 

$

5,205

 

Accounts payable

 

 

8,370

 

 

 

11,378

 

Other assets

 

 

23,069

 

 

 

19,219

 

Woodward records in “Other liabilities” amounts invoiced to the JV for support of the JV’s engineering and development projects as an increase to contract liabilities and records in “Other assets” related incurred expenditures as costs to fulfill a contract. Contract liabilities and costs to fulfill a contract were as follows:

 

 

September 30, 2025

 

 

September 30, 2024

 

Contract liabilities

 

$

78,985

 

 

$

78,226

 

Costs to fulfill a contract

 

 

78,985

 

 

 

78,226

 

Woodward recognized revenue of $ 1,488 in the fiscal year ended September 30, 2025, from contract liabilities, recorded as of September 30, 2024, compared to $ 812 in the fiscal year ended September 30, 2024, from contract liabilities recorded as of September 30, 2023. Comparatively, Woodward recognized cost of goods sold of $ 1,488 in the fiscal year ended September 30, 2025, from contract assets recorded as of September 30, 2024, compared to $ 1,236 in the fiscal year ended September 30, 2024, from contract assets recorded as of September 30, 2023.
No reductions in costs to fulfill a contract or contract liabilities were recorded during the fiscal year ended September 30, 2025 as a result of the termination of joint venture engineering and development projects. In the fiscal year ended September 30, 2024, Woodward recognized a $ 9,680 reduction in the contract liability and a $ 9,680 reduction in costs to fulfill a contract related to the termination of a JV engineering and development project previously recognized as a material right.

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.

 

 

At September 30, 2025

 

 

At September 30, 2024

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Financial assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investments in banks and financial institutions

 

$

30,256

 

 

$

—

 

 

$

—

 

 

$

30,256

 

 

$

23,128

 

 

$

—

 

 

$

—

 

 

$

23,128

 

Equity securities

 

 

37,846

 

 

 

—

 

 

 

—

 

 

 

37,846

 

 

 

30,782

 

 

 

—

 

 

 

—

 

 

 

30,782

 

Cross-currency interest rate swaps

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Total financial assets

 

$

68,102

 

 

$

—

 

 

$

—

 

 

$

68,102

 

 

$

53,910

 

 

$

—

 

 

$

—

 

 

$

53,910

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cross-currency interest rate swaps

 

$

—

 

 

$

27,406

 

 

$

—

 

 

$

27,406

 

 

$

—

 

 

$

12,004

 

 

$

—

 

 

$

12,004

 

Total financial liabilities

 

$

—

 

 

$

27,406

 

 

$

—

 

 

$

27,406

 

 

$

—

 

 

$

12,004

 

 

$

—

 

 

$

12,004

 

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 banks and financial institutions 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

64

 

securities are classified as trading securities. The trading securities are reported at fair value, with realized gains and losses recognized in “Other income, net” on the Consolidated Statements of Earnings. The trading securities are included in “Other assets” in the 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 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 Consolidated Balance Sheets were as follows :

 

 

 

 

At September 30, 2025

 

 

At September 30, 2024

 

 

 

Fair Value
Hierarchy
Level

 

Estimated
Fair Value

 

 

Carrying
Cost

 

 

Estimated
Fair Value

 

 

Carrying
Cost

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Notes receivable from municipalities

 

2

 

$

5,444

 

 

$

5,392

 

 

$

6,961

 

 

$

6,514

 

Investments in short-term time deposits

 

2

 

 

67

 

 

 

66

 

 

 

3,064

 

 

 

3,064

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Long-term debt

 

2

 

$

566,582

 

 

$

580,547

 

 

$

634,071

 

 

$

656,360

 

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 payments received at an interest rate available to the Company 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 3.0 % at September 30, 2025 and 2.7 % at September 30, 2024.
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 was 5.3 % at September 30, 2025 and 6.8 % at September 30, 2024.
The fair value of long-term debt was estimated based on a model that discounted future principal and interest payments at interest rates available to the Company at the end of the period for similar debt of the same maturity, which is a level 2 input as defined by the U.S. GAAP fair value hierarchy. The weighted-average interest rates used to estimate the fair value of long-term debt were 4.2 % at September 30, 2025 and 4.5 % at September 30, 2024 .

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 ) 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 Consolidated Statements of Earnings. The 2020 Floating-Rate Cross-Currency Swap expired on May 31, 2023

65

 

and, as such, is no longer recorded on the Consolidated Balance Sheets. As of September 30, 2025 , the total notional value of the 2020 Fixed-Rate Cross-Currency Swaps was $ 315,000 . See Note 7, Financial instruments and fair value measurements , for the related fair value of the derivative instruments as of September 30, 2025.
Derivatives instruments in fair value hedging relationships
In May 2020, Woodward entered into a U.S. 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 U.S. 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 U.S. 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 expenses” in Woodward’s 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 U.S. 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.
Derivative instruments in cash flow hedging relationships
In May 2020, Woodward entered into five U.S. 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 U.S. dollar denominated intercompany loans over a 13-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 expenses” in Woodward’s 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 U.S. 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 are net foreign exchange losses of $ 2,263 for the fiscal year ended September 30, 2025 , compared to net foreign exchange losses of $ 2,381 for the fiscal year ended September 30, 2024 , and net foreign exchange losses of $ 3,090 for the fiscal year ended September 30, 2023.

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Impact of derivative instruments designated as qualifying hedging instruments
The following table discloses the amounts recognized in relation to the cash flow hedges designated as qualifying hedging instruments:

 

 

 

 

Year Ended September 30,

 

Derivatives in:

 

Location

 

2025

 

 

2024

 

 

2023

 

Loss reclassified from accumulated OCI into earnings

 

Selling, general and administrative expenses

 

$

22,435

 

 

$

23,093

 

 

$

32,285

 

Loss recognized in accumulated OCI

 

Selling, general and administrative expenses

 

 

23,105

 

 

 

18,551

 

 

 

35,712

 

 

 

 

$

45,540

 

 

$

41,644

 

 

$

67,997

 

The following table discloses the amounts recognized in relation to the fair value hedges designated as qualifying hedging instruments:

 

 

 

 

Year Ended September 30,

 

Derivatives in:

 

Location

 

2025

 

 

2024

 

 

2023

 

Loss reclassified from accumulated OCI into earnings

 

Selling, general and administrative expenses

 

$

—

 

 

$

—

 

 

$

939

 

Loss recognized in accumulated OCI

 

Selling, general and administrative expenses

 

 

—

 

 

 

—

 

 

 

875

 

 

 

 

$

—

 

 

$

—

 

 

$

1,814

 

The remaining unrecognized gains and losses in Woodward’s Consolidated Balance Sheets associated with derivative instruments that were previously entered into by Woodward, which are classified in accumulated OCI were net losses of $ 5,830 as of September 30, 2025 and $ 5,160 as of September 30, 2024 .

Note 9. Supplemental statement of cash flows information

 

 

Year Ended September 30,

 

 

 

2025

 

 

2024

 

 

2023

 

Interest paid

 

$

34,725

 

 

$

36,700

 

 

$

35,306

 

Income taxes paid

 

 

105,427

 

 

 

152,049

 

 

 

92,509

 

Income tax refunds received

 

 

4,672

 

 

 

6,521

 

 

 

3,661

 

Non-cash activities:

 

 

 

 

 

 

 

 

 

Purchases of property, plant and equipment on account

 

 

12,173

 

 

 

22,056

 

 

 

11,276

 

Common shares issued from treasury to settle benefit obligations

 

 

24,912

 

 

 

21,889

 

 

 

19,466

 

Receivables related to business divestitures

 

 

1,750

 

 

 

—

 

 

 

—

 

 
Note 10. Acquisitions and Divestitures
Acquisitions
On July 21, 2025 , the Company acquired 100 % of the outstanding equity interests of Safran Electronics and Defense Canada, Inc. and certain net assets of Safran’s electro-mechanical actuation business in the United States and Mexico (“Safran Acquisition”) for total consideration of $ 41,678 , net of cash acquired and subject to net working capital adjustments to be finalized in fiscal year 2026. The acquisition, included within the Aerospace reportable segment, expands the Company’s electromechanical actuation portfolio and was financed through the use of cash on hand. The Company incurred acquisition-related costs of $ 9,348 in fiscal year 2025 that were expend as incurred and recorded in Selling, general and administrative expenses within the Consolidated Statement of Earnings.

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The following table summarizes the preliminary determination of the fair value of the assets acquired and liabilities assumed that are included in the Consolidated Balance Sheet as of September 30, 2025:

 

 

July 21, 2025

 

Assets:

 

 

 

Accounts Receivable

 

$

8,032

 

Inventories

 

 

12,514

 

Other current assets

 

 

3,125

 

Property, plant, and equipment

 

 

6,945

 

Goodwill

 

 

18,389

 

Other assets

 

 

4,528

 

Total assets

 

$

53,533

 

Liabilities:

 

 

 

Accrued liabilities

 

$

4,201

 

Accounts payable

 

 

2,981