FULLTEXT DEL 1 AV 2
10-Q – 2026-04-30 – wwd-20260331.htm
10-Q
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31 , 2026
or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to _____
Commission file number 001-39265
WOODWARD, INC.
(Exact name of registrant as specified in its charter)
Delaware
36-1984010
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
1081 Woodward Way , Fort Collins , Colorado
80524
(Address of principal executive offices)
(Zip Code)
( 970 ) 482-5811
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, par value $0.001455 per share
WWD
NASDAQ Global Select Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer ☒ Accelerated Filer ☐ Non-accelerated Filer ☐ Smaller Reporting Company ☐
Emerging Growth Company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐ No ☒
As of April 29, 2026, 59,582,861 shares of the registrant’s common stock with a par value of $0.001455 per share were outstanding.
TABLE OF CONTENTS
Page
PART I – FINANCIAL INFORMATION
Item 1.
Financial Statements
1
Condensed Consolidated Statements of Earnings
1
Condensed Consolidated Statements of Comprehensive Earnings
2
Condensed Consolidated Balance Sheets
3
Condensed Consolidated Statements of Cash Flows
4
Condensed Consolidated Statements of Stockholders’ Equity
5
Notes to Condensed Consolidated Financial Statements
7
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
30
Forward-Looking Statements
30
Overview
31
Results of Operations
33
Liquidity and Capital Resources
37
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
42
Item 4.
Controls and Procedures
42
PART II – OTHER INFORMATION
Item 1.
Legal Proceedings
42
Item 1A.
Risk Factors
42
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
42
Item 5.
Other Information
43
Item 6.
Exhibits
44
Signatures
44
PART I – FINANCI AL INFORMATION
Item 1. Financi al Statements
WOODWARD, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended
Six Months Ended
March 31,
March 31,
2026
2025
2026
2025
Net sales
$
1,090,568
$
883,629
$
2,087,022
$
1,656,354
Costs and expenses:
Cost of goods sold
774,660
643,530
1,478,953
1,226,621
Selling, general and administrative expenses
102,285
83,842
197,270
153,538
Research and development costs
46,119
37,230
83,875
67,437
Restructuring charges
6,815
—
6,815
—
Interest expense
12,035
11,889
22,379
24,230
Interest income
( 715
)
( 1,021
)
( 1,416
)
( 2,398
)
Other income, net
( 18,058
)
( 24,804
)
( 37,432
)
( 47,891
)
Total costs and expenses
923,141
750,666
1,750,444
1,421,537
Earnings before income taxes
167,427
132,963
336,578
234,817
Income tax expense
33,414
24,014
68,846
38,777
Net earnings
$
134,013
$
108,949
$
267,732
$
196,040
Earnings per share:
Basic earnings per share
$
2.25
$
1.83
$
4.48
$
3.30
Diluted earnings per share
$
2.19
$
1.78
$
4.36
$
3.20
Weighted Average Common Shares Outstanding:
Basic
59,611
59,432
59,725
59,323
Diluted
61,276
61,344
61,462
61,258
See accompanying Notes to Condensed Consolidated Financial Statements
1
WOODWARD, INC.
CONDENSED CONSOLIDATED STATE MENTS OF COMPREHENSIVE EARNINGS
(In thousands)
(Unaudited)
Three Months Ended
Six Months Ended
March 31,
March 31,
2026
2025
2026
2025
Net earnings
$
134,013
$
108,949
$
267,732
$
196,040
Other comprehensive earnings:
Foreign currency translation adjustments
( 15,082
)
19,562
( 13,922
)
( 17,322
)
Net gain (loss) on foreign currency transactions designated as hedges of net investments
1,153
( 1,712
)
1,069
1,351
Taxes on changes in foreign currency translation adjustments
( 592
)
12
1,767
448
Foreign currency translation and hedge transactions adjustments, net of tax
( 14,521
)
17,862
( 11,086
)
( 15,523
)
Derivative related other comprehensive earnings:
Unrealized gain (loss) on fair value adjustment of derivative instruments
7,329
( 11,402
)
9,177
8,966
Reclassification of net realized (gain) loss on derivatives to earnings
( 7,791
)
16,560
( 7,257
)
( 11,123
)
Derivative adjustments, net of tax
( 462
)
5,158
1,920
( 2,157
)
Pension and other postretirement medical liability other comprehensive earnings:
Amortization of:
Net prior service cost
135
195
270
392
Net actuarial (gain)
( 197
)
( 167
)
( 396
)
( 334
)
Foreign currency exchange rate changes on pension and other postretirement medical liabilities
( 65
)
202
( 105
)
( 124
)
Taxes on changes in pension and other postretirement medical liability adjustments
32
( 19
)
66
( 34
)
Pension and other postretirement benefit plan adjustments, net of tax
( 95
)
211
( 165
)
( 100
)
Total comprehensive earnings
$
118,935
$
132,180
$
258,401
$
178,260
See accompanying Notes to Condensed Consolidated Financial Statements
2
WOODWARD, INC.
CONDENSED CONSOLIDATE D BALANCE SHEETS
(In thousands, except per share amounts)
(Unaudited)
March 31,
September 30,
2026
2025
ASSETS
Current assets:
Cash and cash equivalents, including restricted cash of $ 3,600 as of March 31, 2026
$
501,169
$
327,431
Accounts receivable, less allowance for uncollectible amounts of $ 13,107 and $ 9,725 , respectively
931,231
831,116
Inventories
704,465
654,608
Income taxes receivable
69,743
1,553
Other current assets
65,314
69,706
Total current assets
2,271,922
1,884,414
Property, plant and equipment, net
1,034,798
986,623
Goodwill
825,503
832,288
Intangible assets, net
408,801
428,080
Deferred income tax assets
44,737
118,711
Other assets
383,351
380,027
Total assets
$
4,969,112
$
4,630,143
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt
$
623,000
$
122,300
Current portion of long-term debt
46,905
122,934
Accounts payable
305,855
289,417
Income taxes payable
54,532
59,655
Accrued liabilities
281,463
313,083
Total current liabilities
1,311,755
907,389
Long-term debt, less current portion
453,373
456,968
Deferred income tax liabilities
105,332
107,669
Other liabilities
573,192
591,727
Total liabilities
2,443,652
2,063,753
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
544,888
482,259
Accumulated other comprehensive losses
( 19,746
)
( 10,415
)
Deferred compensation
1,918
1,741
Retained earnings
3,832,274
3,600,395
4,359,440
4,074,086
Treasury stock at cost, 13,367 shares and 13,060 shares, respectively
( 1,832,062
)
( 1,505,955
)
Treasury stock held for deferred compensation, at cost, 27 shares and 28 shares, respectively
( 1,918
)
( 1,741
)
Total stockholders' equity
2,525,460
2,566,390
Total liabilities and stockholders' equity
$
4,969,112
$
4,630,143
See accompanying Notes to Condensed Consolidated Financial Statements
3
WOODWARD, INC.
CONDENSED CONSOLIDATED STAT EMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Six Months Ended March 31,
2026
2025
Cash flows from operating activities:
Net earnings
$
267,732
$
196,040
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization
58,944
55,442
Net loss (gain) on sales of assets and businesses
36
( 20,049
)
Stock-based compensation
21,123
19,376
Deferred income taxes
75,581
( 1,503
)
Changes in operating assets and liabilities:
Trade accounts receivable
( 59,624
)
( 41,912
)
Unbilled receivables (contract assets)
( 49,077
)
( 25,310
)
Costs to fulfill a contract
5,697
( 7,180
)
Inventories
( 52,633
)
( 49,582
)
Accounts payable and accrued liabilities
9,871
( 14,065
)
Contract liabilities
( 2,263
)
1,707
Income taxes
( 72,296
)
1,152
Retirement benefit obligations
( 2,032
)
( 1,859
)
Other
4,205
84
Net cash provided by operating activities
205,264
112,341
Cash flows from investing activities:
Payments for purchase of property, plant, and equipment
( 96,720
)
( 51,990
)
Proceeds from sale of assets
—
33
Proceeds from short-term investments
65
2,923
Proceeds from business divestitures
—
44,896
Payments for acquisitions, net of cash acquired
( 2,808
)
—
Net cash (used in) investing activities
( 99,463
)
( 4,138
)
Cash flows from financing activities:
Cash dividends paid
( 35,853
)
( 31,453
)
Proceeds from sales of treasury stock
40,388
49,717
Payments for repurchases of common stock
( 355,297
)
( 79,493
)
Borrowings on revolving lines of credit and short-term borrowings
2,010,053
1,350,200
Payments on revolving lines of credit and short-term borrowings
( 1,509,353
)
( 1,306,100
)
Payments of long-term debt and finance lease obligations
( 75,507
)
( 473
)
Net cash provided by (used in) financing activities
74,431
( 17,602
)
Effect of exchange rate changes on cash and cash equivalents
( 6,494
)
( 8,730
)
Net change in cash and cash equivalents
173,738
81,871
Cash and cash equivalents, including restricted cash, at beginning of year
327,431
282,270
Cash and cash equivalents, including restricted cash, at end of period
$
501,169
$
364,141
See accompanying Notes to Condensed Consolidated Financial Statements
4
WOODWARD, INC.
CONDENSED CONSOLIDATED STA TE MENTS OF STOCKHOLDERS’ EQUITY
(In thousands)
(Unaudited)
Stockholders' equity
Accumulated other comprehensive (loss) earnings
Common stock
Additional paid-in capital
Foreign currency translation adjustments
Unrealized derivative gains (losses)
Minimum retirement benefit liability adjustments
Total accumulated other comprehensive (loss) earnings
Deferred compensation
Retained earnings
Treasury stock at cost
Treasury stock held for deferred compensation
Total stockholders' equity
Balances as of January 1, 2025
$
106
$
414,175
$
( 72,514
)
$
( 12,492
)
$
11,297
$
( 73,709
)
$
1,752
$
3,295,569
$
( 1,427,720
)
$
( 1,752
)
$
2,208,421
Net earnings
—
—
—
—
—
—
—
108,949
—
—
108,949
Other comprehensive earnings (loss), net of tax
—
—
17,862
5,158
211
23,231
—
—
—
—
23,231
Cash dividends paid ($ 0.28 per share)
—
—
—
—
—
—
—
( 16,672
)
—
—
( 16,672
)
Purchase of treasury stock
—
—
—
—
—
—
—
—
( 44,020
)
—
( 44,020
)
Sales of treasury stock
—
4,504
—
—
—
—
—
—
16,326
—
20,830
Common shares issued for benefit plans
—
17,763
—
—
—
—
—
—
6,295
—
24,058
Stock-based compensation
—
12,710
—
—
—
—
—
—
—
—
12,710
Purchases of stock by deferred compensation
—
—
—
—
—
—
34
—
—
( 34
)
—
Distribution of stock from deferred compensation
—
—
—
—
—
—
( 23
)
—
—
23
—
Balances as of March 31, 2025
$
106
$
449,152
$
( 54,652
)
$
( 7,334
)
$
11,508
$
( 50,478
)
$
1,763
$
3,387,846
$
( 1,449,119
)
$
( 1,763
)
$
2,337,507
Balances as of January 1, 2026
106
497,787
( 15,515
)
( 3,465
)
14,312
( 4,668
)
1,947
3,717,350
( 1,623,087
)
( 1,947
)
2,587,488
Net earnings
—
—
—
—
—
—
—
134,013
—
—
134,013
Other comprehensive earnings (loss), net of tax
—
—
( 14,521
)
( 462
)
( 95
)
( 15,078
)
—
—
—
—
( 15,078
)
Cash dividends paid ($ 0.32 per share)
—
—
—
—
—
—
—
( 19,089
)
—
—
( 19,089
)
Purchases of treasury stock
—
—
—
—
—
—
—
—
( 225,503
)
—
( 225,503
)
Sales of treasury stock
—
6,720
—
—
—
—
—
—
13,003
—
19,723
Common shares issued for benefit plans
—
26,288
—
—
—
—
—
—
3,525
—
29,813
Stock-based compensation
—
14,093
—
—
—
—
—
—
—
—
14,093
Purchases of stock by deferred compensation
—
—
—
—
—
—
17
—
—
( 17
)
—
Distribution of stock from deferred compensation
—
—
—
—
—
—
( 46
)
—
—
46
—
Balances as of March 31, 2026
$
106
$
544,888
$
( 30,036
)
$
( 3,927
)
$
14,217
$
( 19,746
)
$
1,918
$
3,832,274
$
( 1,832,062
)
$
( 1,918
)
$
2,525,460
5
WOODWARD, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In thousands)
(Unaudited)
Stockholders' equity
Accumulated other comprehensive (loss) earnings
Common
stock
Additional
paid-in
capital
Foreign
currency
translation
adjustments
Unrealized
derivative
gains
(losses)
Minimum retirement benefit liability adjustments
Total
accumulated
other
comprehensive
(loss) earnings
Deferred
compensation
Retained
earnings
Treasury
stock at
cost
Treasury
stock held for deferred compensation
Total stockholders'
equity
Balances as of September 30, 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
—
—
—
—
—
—
—
196,040
—
—
196,040
Other comprehensive earnings (loss), net of tax
—
—
( 15,523
)
( 2,157
)
( 100
)
( 17,780
)
—
—
—
—
( 17,780
)
Cash dividends paid ($ 0.53 per share)
—
—
—
—
—
—
—
( 31,453
)
—
—
( 31,453
)
Purchase of treasury stock
—
—
—
—
—
—
—
—
( 79,493
)
—
( 79,493
)
Sales of treasury stock
—
14,844
—
—
—
—
—
—
34,645
—
49,489
Common shares issued for benefit plans
—
18,378
—
—
—
—
—
—
6,534
—
24,912
Stock-based compensation
—
19,376
—
—
—
—
—
—
—
—
19,376
Purchases of stock by deferred compensation
—
—
—
—
—
—
82
—
—
( 82
)
—
Distribution of stock from deferred compensation
—
—
—
—
—
—
( 981
)
—
—
981
—
Balances as of March 31, 2025
$
106
$
449,152
$
( 54,652
)
$
( 7,334
)
$
11,508
$
( 50,478
)
$
1,763
$
3,387,846
$
( 1,449,119
)
$
( 1,763
)
$
2,337,507
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
Net earnings
—
—
—
—
—
—
—
267,732
—
—
267,732
Other comprehensive earnings (loss), net of tax
—
—
( 11,086
)
1,920
( 165
)
( 9,331
)
—
—
—
—
( 9,331
)
Cash dividends paid ($ 0.60 per share)
—
—
—
—
—
—
—
( 35,853
)
—
—
( 35,853
)
Purchases of treasury stock
—
—
—
—
—
—
—
—
( 354,890
)
—
( 354,890
)
Sales of treasury stock
—
15,218
—
—
—
—
—
—
25,258
—
40,476
Common shares issued for benefit plans
—
26,288
—
—
—
—
—
—
3,525
—
29,813
Stock-based compensation
—
21,123
—
—
—
—
—
—
—
—
21,123
Purchases of stock by deferred compensation
—
—
—
—
—
—
281
—
—
( 281
)
—
Distribution of stock from deferred compensation
—
—
—
—
—
—
( 104
)
—
—
104
—
Balances as of March 31, 2026
$
106
$
544,888
$
( 30,036
)
$
( 3,927
)
$
14,217
$
( 19,746
)
$
1,918
$
3,832,274
$
( 1,832,062
)
$
( 1,918
)
$
2,525,460
See accompanying Notes to Condensed Consolidated Financial Statements
6
WOODWARD, INC.
NOTES TO CONDENSED CONSOLIDA TED FINANCIAL STATEMENTS
(In thousands, except per share amounts)
(Unaudited)
Note 1. Basis of presentation
The Condensed Consolidated Financial Statements of Woodward, Inc. (“Woodward” or the “Company”) as of March 31, 2026 and for the three and six months ended March 31, 2026 and 2025, included herein, have not been audited by an independent registered public accounting firm. These unaudited Condensed Consolidated Financial Statements reflect all normal recurring adjustments that, in the opinion of management, are necessary to present fairly Woodward’s financial position as of March 31, 2026, and the statements of earnings, comprehensive earnings, cash flows, and changes in stockholders’ equity for the periods presented herein. The results of operations for the three and six months ended March 31, 2026 and 2025 are not necessarily indicative of the operating results to be expected for other interim periods or for the full fiscal year. Dollar and share amounts contained in these unaudited Condensed Consolidated Financial Statements are in thousands, except per share amounts, unless otherwise noted.
The unaudited Condensed Consolidated Financial Statements included herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim reporting. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been condensed or omitted pursuant to such rules and regulations. Accordingly, these unaudited Condensed Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and Notes thereto included in Woodward’s most recent Annual Report on Form 10-K filed with the SEC and other financial information filed with the SEC.
Management is required to use estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements, the reported revenues and expenses recognized during the reporting period, and certain financial statement disclosures, in the preparation of the unaudited Condensed Consolidated Financial Statements included herein. Significant estimates in these unaudited Condensed Consolidated Financial Statements include allowances for credit losses; net realizable value of inventories; variable consideration including customer rebates earned and payable and early payment discounts; warranty reserves; useful lives of property and identifiable intangible assets; the evaluation of impairments of property, intangible assets, and goodwill; the provision for income tax and related valuation reserves; the valuation of derivative instruments; assumptions used in the determination of the funded status and annual expense of pension and postretirement employee benefit plans; the valuation of stock compensation instruments granted to members, board members and any other eligible recipients; estimates of incremental borrowing rates used when estimating the present value of future lease payments; assumptions used when including renewal options or non-exercise of termination options in lease terms; estimates of total lifetime sales used in the recognition of revenue associated with material rights and balance sheet classification of the related contract liability; estimates of total sales contract costs when recognizing revenue under the cost-to-cost method; and contingencies. Actual results could vary from Woodward’s estimates.
Note 2. New accounting standards
From time to time, the Financial Accounting Standards Board (“FASB”) or other standards setting bodies issue new accounting pronouncements. Updates to the FASB Accounting Standards Codification (“ASC”) are communicated through issuance of an Accounting Standards Update (“ASU”).
In December 2023, the FASB issued ASU 2023-09, "Income Taxes (Topic 740): Improvements to Income Tax Disclosures." The purpose of ASU 2023-09 is to provide enhanced annual 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, "Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): 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
7
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
The amount of revenue recognized as point in time or over time was as follows:
Three Months Ended March 31, 2026
Three Months Ended March 31, 2025
Aerospace
Industrial
Consolidated
Aerospace
Industrial
Consolidated
Point in time
$
278,555
$
221,071
$
499,626
$
223,025
$
178,801
$
401,826
Over time
424,766
166,176
590,942
338,704
143,099
481,803
Total net sales
$
703,321
$
387,247
$
1,090,568
$
561,729
$
321,900
$
883,629
Six Months Ended March 31, 2026
Six Months Ended March 31, 2025
Aerospace
Industrial
Consolidated
Aerospace
Industrial
Consolidated
Point in time
$
532,200
$
435,042
$
967,242
$
415,010
$
333,869
$
748,879
Over time
806,018
313,762
1,119,780
640,601
266,874
907,475
Total net sales
$
1,338,218
$
748,804
$
2,087,022
$
1,055,611
$
600,743
$
1,656,354
Accounts Receivable
Accounts receivable consisted of the following:
March 31, 2026
September 30, 2025
Billed receivables
Trade accounts receivable
$
536,474
$
477,217
Other (Chinese financial institutions)
—
104
Total billed receivables
536,474
477,321
Current unbilled receivables (contract assets)
407,864
363,520
Total accounts receivable
944,338
840,841
Less: Allowance for uncollectible amounts
( 13,107
)
( 9,725
)
Total accounts receivable, net
$
931,231
$
831,116
As of March 31, 2026, “Other assets” on the Condensed Consolidated Balance Sheets includes $ 13,668 of unbilled receivables not expected to be invoiced and collected within a period of 12 months, compared to $ 10,963 as of September 30, 2025.
Accounts receivable in Woodward’s Condensed Consolidated Financial Statements represent the net amount expected to be collected, and an allowance for uncollectible amounts related to credit losses is established based on expected losses. Expected losses are estimated by reviewing specific customer accounts, taking into consideration accounts receivable aging, credit risk of the customers, and historical payment history, as well as current and forecasted economic conditions and other relevant factors.
The allowance for uncollectible amounts and change in expected credit losses for trade accounts receivable and unbilled receivables (contract assets) consisted of the following:
Three Months Ended March 31,
Six Months Ended March 31,
2026
2025
2026
2025
Balance, beginning
$
13,426
$
7,793
$
9,725
$
7,738
Changes in estimates
( 179
)
599
3,450
806
Write-offs
—
( 120
)
( 78
)
( 120
)
Other 1
( 140
)
286
10
134
Balance, ending
$
13,107
$
8,558
$
13,107
$
8,558
(1) Includes effects of foreign exchange rate changes during the period.
8
Contract liabilities
Contract liabilities consisted of the following:
March 31, 2026
September 30, 2025
Current
Noncurrent
Current
Noncurrent
Deferred revenue from material rights from JV formation
$
7,689
$
230,266
$
7,298
$
229,878
Deferred revenue from advanced invoicing and/or prepayments from customers
21,672
569
14,944
2,115
Liability related to customer supplied inventory
22,226
—
19,640
—
Deferred revenue from material rights related to engineering and development funding
9,080
186,376
7,353
199,465
Net contract liabilities
$
60,667
$
417,211
$
49,235
$
431,458
Woodward recognized revenue of $ 8,951 in the three months and $ 23,481 in the six months ended March 31, 2026 from contract liabilities balances recorded as of October 1, 2025, compared to $ 5,035 in the three months and $ 21,118 in the six months ended March 31, 2025 from contract liabilities balances recorded as of October 1, 2024.
Remaining performance obligations
Remaining performance obligations related to the aggregate amount of the total contract transaction price of firm orders for which the performance obligation has not yet been recognized in revenue as of March 31, 2026 were $ 3,777,552 , compared to $ 3,195,156 as of September 30, 2025 , the majority of which relates to Woodward’s Aerospace segment in both periods. Woodward expects to recognize almost all remaining performance obligations within two years after March 31, 2026.
Remaining performance obligations related to material rights that have not yet been recognized in revenue as of March 31, 2026 were $ 491,444 , of which $ 8,594 is expected to be recognized in the remainder of fiscal year 2026 , $ 17,350 is expected to be recognized in fiscal year 2027 , and the remaining balance is expected to be recognized thereafter. Woodward expects to recognize revenue from performance obligations related to material rights over the life of the underlying programs, which may be as long as forty years .
Disaggregation of Revenue
Woodward designs, produces, and services reliable, efficient, low-emission, and high-performance energy control products for diverse applications in markets throughout the world. Woodward reports financial results for each of its reportable segments, Aerospace and Industrial, and further disaggregates its revenue from contracts with customers by primary market as Woodward believes this best depicts how the nature, amount, timing, and uncertainty of its revenue and cash flows are affected by economic factors. We focus primarily on serving original equipment manufacturers (“OEMs”) and equipment packagers, partnering with them to bring superior component and system solutions to their demanding applications. We also provide repair, maintenance, replacement, and other services support for our installed products. We have traditionally referred to this part of our business as “aftermarket”; however, to better reflect the nature and scope of these offerings, we will now refer to it as “services.”
Revenue by primary market for the Aerospace reportable segment was as follows:
Three Months Ended March 31,
Six Months Ended March 31,
2026
2025
2026
2025
Commercial OEM
$
218,015
$
167,461
$
405,954
$
321,537
Commercial services
275,374
201,861
520,280
365,711
Defense OEM
150,932
137,928
289,165
250,710
Defense services
59,000
54,479
122,819
117,653
Total Aerospace segment net sales
$
703,321
$
561,729
$
1,338,218
$
1,055,611
Revenue by primary market for the Industrial reportable segment was as follows:
Three Months Ended March 31,
Six Months Ended March 31,
2026
2025
2026
2025
Power generation
$
135,870
$
126,482
$
258,710
$
241,490
Transportation
176,914
132,096
343,222
239,361
Oil and gas
74,463
63,322
146,872
119,892
Total Industrial segment net sales
$
387,247
$
321,900
$
748,804
$
600,743
9
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 three and six months ended March 31, 2025 have been reclassified for comparability. The reclassification had no impact on total Industrial segment net sales or the Company's financial results.
T he customers who each account for approximately 10% or more of net sales of each of Woodward’s reportable segments were as follows:
Three Months Ended March 31, 2026
Three Months Ended March 31, 2025
Aerospace
The Boeing Company, GE Aerospace, RTX Corporation
RTX Corporation, GE Aerospace, The Boeing Company
Industrial
Rolls-Royce PLC, Caterpillar, Inc.
Rolls-Royce PLC, Caterpillar, Inc.
Six Months Ended March 31, 2026
Six Months Ended March 31, 2025
Aerospace
GE Aerospace, The Boeing Company, RTX Corporation
RTX Corporation, GE Aerospace, The Boeing Company
Industrial
Rolls-Royce PLC, Caterpillar, Inc.
Rolls-Royce PLC, GE Vernova, Caterpillar, Inc.
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.
The following is a reconciliation of net earnings to basic earnings per share and diluted earnings per share:
Three Months Ended March 31,
Six Months Ended March 31,
2026
2025
2026
2025
Numerator:
Net earnings
$
134,013
$
108,949
$
267,732
$
196,040
Denominator:
Basic shares outstanding
59,611
59,432
59,725
59,323
Dilutive effect of stock options; restricted and performance stock units
1,665
1,912
1,737
1,935
Diluted shares outstanding
61,276
61,344
61,462
61,258
Income per common share:
Basic earnings per share
$
2.25
$
1.83
$
4.48
$
3.30
Diluted earnings per share
$
2.19
$
1.78
$
4.36
$
3.20
The following stock option grants and restricted stock awards were outstanding but were excluded from the computation of diluted earnings per share because their inclusion would have been anti-dilutive:
Three Months Ended March 31,
Six Months Ended March 31,
2026
2025
2026
2025
Restricted stock and option awards
9
21
5
10
Weighted-average price
$
391.53
$
193.09
$
391.53
$
193.09
The weighted-average shares of common stock outstanding for basic and diluted earnings per share included the weighted-average treasury stock shares held for deferred compensation obligations of the following:
Three Months Ended March 31,
Six Months Ended March 31,
2026
2025
2026
2025
Weighted-average treasury stock shares held for deferred compensation obligations
28
30
29
35
Note 5. Leases
Lessee arrangements
10
Woodward has entered into operating leases for certain facilities and equipment with terms in excess of one year under agreements that expire at various dates. Some leases require the payment of property taxes, insurance, maintenance costs, or other similar costs in addition to rental payments. Woodward has also entered into finance leases for equipment with terms in excess of one year under agreements that expire at various dates.
Lease-related assets and liabilities were as follows:
Classification on the Condensed Consolidated Balance Sheets
March 31, 2026
September 30, 2025
Assets:
Operating lease
Other assets
$
23,876
$
25,274
Finance lease
Property, plant, and equipment, net
2,362
2,896
Total lease assets
26,238
28,170
Current liabilities:
Operating lease
Accrued liabilities
5,606
5,465
Finance lease
Current portion of long-term debt
1,062
1,032
Noncurrent liabilities:
Operating lease
Other liabilities
18,994
20,199
Finance lease
Long-term debt, less current portion
1,396
1,902
Total lease liabilities
$
27,058
$
28,598
Lease-related expenses were as follows:
Three Months Ended March 31,
Six Months Ended March 31,
2026
2025
2026
2025
Operating lease expense
$
1,995
$
1,899
$
4,053
$
3,695
Amortization of finance lease assets
243
242
485
483
Interest on finance lease liabilities
31
42
64
86
Variable lease expense
503
375
902
568
Short-term lease expense
178
55
204
108
Total lease expense
$
2,950
$
2,613
$
5,708
$
4,940
Lease-related supplemental cash flow information was as follows:
Six Months Ended March 31,
2026
2025
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases
$
3,194
$
2,982
Operating cash flows for finance leases
64
86
Financing cash flows for finance leases
511
474
Right-of-use assets obtained in exchange for recorded lease obligations:
Operating leases
2,271
3,852
Finance leases
43
1,069
Lessor arrangements
Woodward has assessed its manufacturing contracts and concluded that certain contracts for the manufacture of customer products met the criteria to be considered a leasing arrangement (“embedded leases”) with Woodward as the lessor. The specific manufacturing contracts that met the criteria were those that utilized Woodward property, plant, and equipment and which are substantially (more than 90%) dedicated to the manufacturing of the product(s) for a single customer. Woodward has dedicated manufacturing lines with three of its customers representing embedded leases, all of which qualified as operating leases with undefined quantities of future customer purchase commitments.
11
Although Woodward expects to allocate some portion of future net sales to these customers to embedded lessor arrangements, it cannot provide expected future undiscounted lease payments from property, plant, and equipment leased to customers as of March 31, 2026. If, in the future, customers reduce purchases of related products from Woodward, the Company believes it will derive additional value from the underlying equipment by repurposing its use to support other customer arrangements.
Revenue from contracts with customers that included embedded operating leases, which are included in “ Net sales ” in the Condensed Consolidated Statements of Earnings, was $ 1,016 for the three months and $ 2,042 for the six months ended March 31, 2026, compared to $ 903 for the three months and $ 1,937 for the six months ended March 31, 2025.
The carrying amount of property, plant, and equipment leased to others through embedded leasing arrangements, included in “Property, plant, and equipment, net” on the Condensed Consolidated Balance Sheets, follows:
March 31, 2026
September 30, 2025
Property, plant, and equipment
$
41,243
$
41,593
Less accumulated depreciation
( 30,143
)
( 29,110
)
Property, plant, and equipment, net
$
11,100
$
12,483
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 s ystems 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.
Unamortized deferred revenue recorded in connection with the JV formation included:
March 31, 2026
September 30, 2025
Accrued liabilities
$
7,689
$
7,298
Other liabilities
230,266
229,878
Amortization of the deferred gain recognized as an increase to net sales was $ 2,017 for the three months and $ 4,116 for the six months ended March 31, 2026, and $ 1,607 for the three months and $ 2,630 for the six months ended March 31, 2025.
Other income related to Woodward’s equity interest in the earnings of the JV were as follows:
Three Months Ended March 31,
Six Months Ended March 31,
2026
2025
2026
2025
Other income
$
15,558
$
11,386
$
30,935
$
21,542
Cash distributions to Woodward from the JV, recognized in “Other, net” in “Net cash provided by operating activities” on the Condensed Consolidated Statements of Cash Flows, were as follows:
Three Months Ended March 31,
Six Months Ended March 31,
2026
2025
2026
2025
Cash distributions
$
11,500
$
10,000
$
25,500
$
21,000
Net sales to the JV were as follows:
Three Months Ended March 31,
Six Months Ended March 31,
2026
2025
2026
2025
Net sales
$
31,220
$
24,270
$
55,775
$
44,966
Woodward net sales includes a reduction of $ 22,228 for the three months and $ 42,901 for the six months ended March 31, 2026, compared to $ 19,630 for the three months and $ 35,169 for the six months ended March 31, 2025, related to royalties, associated with the contributed IP owed to the JV by Woodward on sales by Woodward directly to third-party services customers.
12
The Condensed Consolidated Balance Sheets include “Accounts receivable” related to amounts the JV owed Woodward, “Accounts payable” related to amounts Woodward owed the JV, and “Other assets” related to Woodward’s net investment in the JV, as follows:
March 31, 2026
September 30, 2025
Accounts receivable
$
6,523
$
5,377
Accounts payable
9,571
8,370
Other assets
28,504
23,069
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 March 31, 2026
At September 30, 2025
Level 1
Level 2
Level 3
Total
Level 1
Level 2
Level 3
Total
Financial assets:
Investments in money markets and depository accounts
$
56,525
$
—
$
—
$
56,525
$
30,256
$
—
$
—
$
30,256
Equity securities
39,648
—
—
39,648
37,846
—
—
37,846
Total financial assets
$
96,173
$
—
$
—
$
96,173
$
68,102
$
—
$
—
$
68,102
Financial liabilities:
Cross-currency interest rate swaps
$
—
$
17,741
$
—
$
17,741
$
—
$
27,406
$
—
$
27,406
Total financial liabilities
$
—
$
17,741
$
—
$
17,741
$
—
$
27,406
$
—
$
27,406
Investments in money markets and depository accounts: The Company sometimes invests 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 money markets and depository accounts are considered equal to the fair value given the highly liquid nature of the investments.
Equity securities: Woodward holds marketable equity securities, through investments in various mutual funds, related to its deferred compensation program. Based on Woodward’s intentions regarding these instruments, marketable equity securities are classified as trading securities. The trading securities are reported at fair value, with realized gains and losses recognized in “Other income, net” on the Condensed Consolidated Statements of Earnings. The trading securities are included in “Other assets” in the Condensed Consolidated Balance Sheets. The fair values of Woodward’s trading securities are based on the quoted market prices for the net asset value of the various mutual funds.
Cross-currency interest rate swaps: Woodward holds cross-currency interest rate swaps, which are accounted for at fair value. The swaps in an asset position are included in “Other current assets” and “Other assets,” and swaps in a liability position are included in “Accrued liabilities” and “Other liabilities” in the Condensed Consolidated Balance Sheets. The fair values of Woodward’s cross-currency interest rate swaps are determined using a market approach that is based on observable inputs other than quoted market prices, including contract terms, interest rates, currency rates, and other market factors.
Cash, trade accounts receivable, accounts payable, and short-term borrowings are not remeasured to fair value, as the carrying cost of each approximates its respective fair value.
13
The estimated fair values and carrying costs of other financial instruments that are not required to be remeasured at fair value in the Condensed Consolidated Balance Sheets were as follows:
At March 31, 2026
At September 30, 2025
Fair Value
Hierarchy
Level
Estimated
Fair Value
Carrying
Cost
Estimated
Fair Value
Carrying
Cost
Assets:
Notes receivable from municipalities
2
$
5,071
$
5,056
$
5,444
$
5,392
Liabilities:
Long-term debt
2
483,645
500,827
566,582
580,547
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 Woodward at the end of the period for similarly rated municipal notes of similar maturity, which is a level 2 input as defined by the U.S. GAAP fair value hierarchy. The interest rates used to estimate the fair value of the long-term notes were 3.2 % at March 31, 2026 and 3.0 % at September 30, 2025.
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 4.5 % at March 31, 2026 and 4.2 % at September 30, 2025.
Woodward does not have expected credit losses related to any financial assets that are not required to be remeasured at fair value.
Note 8. Derivative instruments and hedging activities
Derivative instruments not designated or qualifying as hedging instruments
In May 2020, Woodward entered into 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-rate debt under the 2018 Notes (as defined in Note 15, Credit facilities, short-term borrowings, and long-term debt, in the Notes to the Consolidated Financial Statements included in Part II, Item 8 of Woodward’s most recently filed Form 10-K) and Woodward’s then existing revolving credit agreement. The net interest income of the 2020 Fixed-Rate Cross-Currency Swaps is recorded as a reduction to “Interest expense” in Woodward’s Condensed Consolidated Statements of Earnings. The total notional value of the 2020 Fixed-Rate Cross-Currency Swaps was $ 315,000 at March 31, 2026. See Note 7, Financial Instruments and fair value measurements for the related fair value of the derivative instruments as of March 31, 2026.
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 Woodward Barbados Euro Financing SRL ("Euro Barbados"), a wholly owned subsidiary of Woodward, 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 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 Condensed Consolidated Statements of Earnings. Reclassifications out of accumulated OCI of the change in fair value occur each reporting period based upon changes in the spot rate remeasurement of the Euro and 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.
14
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 were a net foreign exchange gain of $ 1,153 for the three months and a foreign exchange gain of $ 1,069 for the six months ended March 31, 2026, compared to a net foreign exchange loss of $ 1,712 for the three months and a foreign exchange gain of $ 1,351 for the six months ended March 31, 2025.
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:
Three months ended March 31,
Six months ended March 31,
Derivatives in:
Location
2026
2025
2026
2025
(Gain) loss reclassified from accumulated OCI into earnings
Selling, general and administrative expenses
$
( 7,791
)
$
16,560
$
( 7,257
)
$
( 11,123
)
(Gain) loss recognized in accumulated OCI
Selling, general and administrative expenses
( 7,329
)
11,402
( 9,177
)
( 8,966
)
The remaining unrecognized gains and losses in Woodward’s Condensed Consolidated Balance Sheets associated with derivative instruments that were previously entered into by Woodward, which are classified in accumulated OCI, were net losses of $ 4,322 as of March 31, 2026 and $ 5,830 as of September 30, 2025 .
Note 9. Supplemental statement of cash flows information
Six Months Ended March 31,
2026
2025
Interest paid
$
17,838
$
18,366
Income taxes paid
62,977
43,141
Income tax refunds received
2,886
4,182
Non-cash activities:
Purchases of property, plant and equipment on account
10,808
6,292
Common shares issued from treasury to settle benefit obligations
29,813
24,912
Receivables related to business acquisitions and divestitures
—
7,003
Note 10. Acquisitions and Divestitures
Acquisitions
On March 9, 2026 , Woodward entered into a definitive agreement to acquire Jet Research Development, Inc., doing business as Valve Research & Manufacturing Company, a Florida-based manufacturer of high-precision flow control valves for aerospace applications ("Valve Research Acquisition"). The Valve Research Acquisition, included within the Aerospace reportable segment, adds precision electromagnetic valve solutions, including solenoid valves, check valves, and relief valves to Woodward’s comprehensive aerospace controls capabilities. It also provides new growth opportunities across commercial and defense aerospace OEM applications, including Next Generation Single Aisle (NSA) programs. Solenoid technology for precision flow control plays a vital role in both current and future defense and commercial aircraft programs.
The Valve Research Acquisition includes intellectual property, operations assets, associated real estate, and talent. The Valve Research Acquisition closed on April 1, 2026 (the "Closing Date"), and the Company paid aggregate cash consideration of $ 120,972 , subject to post-Closing adjustments. The cash consideration was financed through the use of cash on hand.
15
As the Valve Research Acquisition was completed subsequent to March 31, 2026, the Company has not yet completed the accounting for the business combination, including the preliminary purchase price allocation. Accordingly, the Company is unable to provide amounts recognized as of the Closing Date for major classes of assets and liabilities related to the Valve Research Acquisition. This information, at least on a provisional basis, will be available in the Quarterly Report on Form 10-Q to be filed for the quarterly period ended June 30, 2026.
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 $ 40,286 , net of cash acquired and after net working capital adjustments. The Safran Acquisition, included within the Aerospace reportable segment, expands the Company’s electromechanical actuation portfolio and was financed through existing cash balances. The Company incurred acquisition-related costs of $ 9,348 in fiscal year 2025 that were expensed as incurred and recorded in "Selling, general and administrative expenses" within the Condensed Consolidated Statement of Earnings.
During the first quarter of fiscal 2026, the Company substantially completed its evaluation of the fair value of assets acquired and liabilities assumed related to the Safran Acquisition. The following table presents the preliminary fair ‑ value determinations of the assets acquired and liabilities assumed as of July 21, 2025:
Assets:
Accounts Receivable
$
6,103
Inventories
11,833
Other current assets
3,125
Property, plant, and equipment
6,945
Goodwill
17,462
Other assets
4,527
Total assets
$
49,995
Liabilities:
Accrued liabilities
$
4,447
Accounts payable
588
Income tax payable
189
Other noncurrent liabilities
4,485
Total liabilities
$
9,709
During the first quarter of fiscal year 2026, we made certain measurement period adjustments to the acquired assets and the assumed liabilities due to clarification of information utilized to determine fair value during the measurement period. The measurement period adjustment was a working capital adjustment that resulted in the reduction of goodwill.
The majority of the goodwill is expected to be deductible for tax purposes and represents the estimated value of the acquired workforce, expanded sales opportunities on the next generation of aircraft, and other synergies expected from the integration of the Safran Acquisition with Woodward’s Aerospace segment.
Divestitures
The Company periodically reviews its business and from time to time may sell businesses, assets, or product lines as part of business rationalization. Any gain or loss recognized due to divestitures is recorded within the line item “Other income, net” in the Condensed Consolidated Statements of Earnings.
In connection with certain product rationalization activities, during the six months ended March 31, 2025, the Company sold certain product lines and its heavy-duty gas turbine combustion parts product line, included in the Industrial segment, to third parties. The Company received cash proceeds of $ 44,896 and recognized a pretax gain of $ 20,524 during the six months ended March 31, 2025.
16
Note 11. Inventories
March 31, 2026
September 30, 2025
Raw materials
$
224,611
$
192,373
Work in progress
176,037
163,275
Component parts (1)
403,308
382,650
Finished goods
106,480
102,746
Customer supplied inventory
22,226
19,640
On-hand inventory for which control has transferred to the customer
( 228,197
)
( 206,076
)
$
704,465
$
654,608
(1) Component parts include items that can be sold separately as finished goods or included in the manufacture of other products.
Note 12. Property, plant, and equipment
March 31, 2026
September 30, 2025
Land and land improvements
$
103,810
$
95,172
Buildings and building improvements
639,239
626,144
Leasehold improvements
15,816
15,900
Machinery and production equipment
908,199
885,473
Computer equipment and software
123,394
116,706
Office furniture and equipment
44,202
43,312
Other
33,621
33,591
Construction in progress
145,666
111,580
2,013,947
1,927,878
Less accumulated depreciation
( 979,149
)
( 941,255
)
Property, plant, and equipment, net
$
1,034,798
$
986,623
Woodward had depreciation expense as follows:
Three Months Ended March 31,
Six Months Ended March 31,
2026
2025
2026
2025
Depreciation expense
$
22,482
$
20,794
$
44,178
$
41,756
Note 13. Goodwill
September 30, 2025
Reduction from Working Capital Adjustment
Effects of Foreign Currency Translation
March 31, 2026
Aerospace
$
473,779
$
( 931
)
$
47
$
472,895
Industrial
358,509
—
( 5,901
)
352,608
Consolidated
$
832,288
$
( 931
)
$
( 5,854
)
$
825,503
In the first quarter of 2026, a working capital adjustment was made that resulted in a reduction of goodwill of $ 931 .
17
Note 14. Intangible assets, net
March 31, 2026
September 30, 2025
Gross
Carrying
Value
Accumulated
Amortization
Net
Carrying
Amount
Gross
Carrying
Value
Accumulated
Amortization
Net
Carrying
Amount
Intangible assets with finite lives:
Customer relationships and contracts:
Aerospace
$
281,683
$
( 253,588
)
$
28,095
$
281,683
$
( 251,109
)
$
30,574
Industrial
392,991
( 133,176
)
259,815
401,778
( 125,909
)
275,869
Total
$
674,674
$
( 386,764
)
$
287,910
$
683,461
$
( 377,018
)
$
306,443
Intellectual property:
Aerospace
$
—
$
—
$
—
$
—
$
—
$
—
Industrial
3,139
( 3,139
)
—
3,139
( 3,139
)
—
Total
$
3,139
$
( 3,139
)
$
—
$
3,139
$
( 3,139
)
$
—
Process technology:
Aerospace
$
44,570
$
( 41,281
)
$
3,289
$
44,570
$
( 40,973
)
$
3,597
Industrial
89,930
( 38,800
)
51,130
87,640
( 37,610
)
50,030
Total
$
134,500
$
( 80,081
)
$
54,419
$
132,210
$
( 78,583
)
$
53,627
Intangible asset with indefinite life:
Trade name:
Aerospace
$
—
$
—
$
—
$
—
$
—
$
—
Industrial
66,472
—
66,472
68,010
—
68,010
Total
$
66,472
$
—
$
66,472
$
68,010
$
—
$
68,010
Total intangibles:
Aerospace
$
326,253
$
( 294,869
)
$
31,384
$
326,253
$
( 292,082
)
$
34,171
Industrial
552,532
( 175,115
)
377,417
560,567
( 166,658
)
393,909
Consolidated Total
$
878,785
$
( 469,984
)
$
408,801
$
886,820
$
( 458,740
)
$
428,080
Woodward recorded amortization expense associated with intangibles of the following:
Three Months Ended March 31,
Six Months Ended March 31,
2026
2025
2026
2025
Amortization expense
$
7,424
$
6,772
$
14,766
$
13,686
Future amortization expense associated with intangibles is expected to be:
Year Ending September 30:
2026 (Remaining)
$
14,618
2027
29,498
2028
29,147
2029
28,242
2030
28,214
Thereafter
212,610
$
342,329
Note 15. Credit facilities, short-term borrowings, and long-term debt
As of March 31, 2026, Woodward’s short-term borrowings and availability under its various short-term credit facilities were as follows:
Total availability
Outstanding letters of credit and guarantees
Banker acceptance notes issued
Outstanding
borrowings
Remaining
availability
Revolving credit facility
$
1,000,000
$
( 7,875
)
$
—
$
( 623,000
)
$
369,125
Foreign lines of credit and overdraft facilities
25,600
( 23
)
( 51
)
—
25,526
Foreign performance guarantee facilities
33
—
—
—
33
$
1,025,633
$
( 7,898
)
$
( 51
)
$
( 623,000
)
$
394,684
18
Revolving credit facility
Woodward maintains a $ 1,000,000 revolving credit facility established under a revolving credit agreement among Woodward, a syndicate of lenders and Wells Fargo Bank, National Association, as administrative agent, which provides for the option to increase available borrowings up to $ 1,500,000 , subject to lenders’ participation (as amended in October 2022, the “Second Amended and Restated Revolving Credit Agreement”). Borrowings under the Second Amended and Restated Revolving Credit Agreement can be made by Woodward and certain Woodward foreign subsidiaries in U.S. dollars or in foreign currencies other than the U.S. dollar and generally bear interest at the Euro Interbank Offered Rate (“Euribor”), Sterling Overnight Index Average (“SONIA”), Tokyo Interbank Offered Rate (“TIBOR”), and Secured Overnight Financing Rate (“SOFR”) base rates plus 0.875 % to 1.75 %. The Second Amended and Restated Revolving Credit Agreement matures on October 21, 2027 .
Under the Second Amended and Restated Revolving Credit Agreement, there were $ 623,000 in principal amount of borrowings outstanding as of March 31, 2026 at an effective interest rate of 4.78 % as compared to $ 122,300 in principal borrowings outstanding as of September 30, 2025 at an effective interest rate of 5.41 %. All of the borrowings outstanding were classified as short-term borrowings based on Woodward's intent and ability to pay this amount in the next 12 months.
Short-term borrowings
Woodward has other foreign lines of credit and foreign overdraft facilities at various financial institutions, which are generally reviewed annually for renewal and are subject to the usual terms and conditions applied by the financial institutions. Pursuant to the terms of the related facility agreements, Woodward’s foreign performance guarantee facilities are limited in use to providing performance guarantees to third parties. There were no borrowings outstanding on Woodward’s foreign lines of credit and foreign overdraft facilities as of March 31, 2026 and September 30, 2025.
Series I and L Notes
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.
Note 16. Accrued liabilities
March 31, 2026
September 30, 2025
Salaries and other member benefits
$
130,666
$
175,110
Product warranties and related liabilities
18,885
25,504
Interest payable
8,773
10,211
Accrued restructuring
3,647
—
Accrued retirement benefits
2,915
2,986
Net current contract liabilities
60,667
49,235
Taxes, other than income
14,480
15,367
Other
41,430
34,670
$
281,463
$
313,083
Product warranties and related liabilities
Provisions of Woodward’s sales agreements include product warranties customary to these types of agreements. Accruals are established for specifically identified warranty issues and related liabilities that are probable to result in future costs. Warranty costs are accrued as revenue is recognized on a non-specific basis whenever past experience indicates a normal and predictable pattern exists.
Changes in accrued product warranties and related liabilities were as follows:
Three Months Ended March 31,
Six Months Ended March 31,
2026
2025
2026
2025
Beginning of period
$
17,773
$
19,008
25,504
$
18,844
Additions, net of recoveries
3,097
5,841
5,476
9,346
Reductions for settlement
( 1,931
)
( 4,030
)
( 12,051
)
( 7,044
)
Foreign currency exchange rate changes
( 54
)
127
( 44
)
( 200
)
End of period
$
18,885
$
20,946
$
18,885
$
20,946
19
Restructuring charges
On January 12, 2026, the Company approved a plan to wind-down its on-highway natural gas truck manufacturing operations in China (the “China OH Business”). This decision follows prior unsuccessful efforts to divest the China OH Business and is a strategic step to align the Industrial segment portfolio with priority end-markets and long-term growth opportunities. As a result of the China OH Business wind-down, during the three months ended March 31, 2026, the Company incurred $ 6,815 of restructuring charges for employee severance and benefit costs, as well as additional wind-down charges. All of the restructuring charges recorded during the three months ended March 31, 2026 were recorded as nonsegment expenses and are expected to be paid within twelve months.
Period Activity
Balances as of September 30, 2025
Charges
Payments
Non-cash
activity
Balances as of March 31, 2026
Workforce management costs associated with:
China On-Highway Wind-down
$
—
$
6,815
$
( 2,836
)
$
( 332
)
$
3,647
Total
$
—
$
6,815
$
( 2,836
)
$
( 332
)
$
3,647
In addition to the restructuring charges recognized in the first six months of fiscal year 2026, the Company anticipates incurring additional costs associated with the China OH Business wind-down such as expenses associated with equipment relocation, accelerated depreciation, and inventory write-offs over the coming year. The Company anticipates these additional expenses, which are expected to be approximately $ 13,000 in total, will be substantially complete by the end of fiscal year 2026.
Note 17. Other liabilities
March 31, 2026
September 30, 2025
Net accrued retirement benefits, less amounts recognized within accrued liabilities
$
88,815
$
88,112
Total unrecognized tax benefits
18,576
12,130
Deferred economic incentives (1)
5,548
6,158
Noncurrent operating lease liabilities
18,994
20,199
Net noncurrent contract liabilities
417,211
431,458
Cross-currency swap derivative liability
17,741
27,406
Other
6,307
6,264
$
573,192
$
591,727
(1) Woodward receives certain economic incentives from various state and local authorities related to capital expansion projects. Such amounts are initially recorded as deferred credits and are being recognized as a reduction to pre-tax expense over the economic lives of the related capital expansion projects.
Note 18. Other income, net
Three Months Ended March 31,
Six Months Ended March 31,
2026
2025
2026
2025
Equity interest in the earnings of the JV
$
( 15,558
)
$
( 11,386
)
$
( 30,935
)
$
( 21,542
)
Net loss (gain) on sales of assets and businesses
18
( 10,806
)
36
( 20,049
)
Net loss on investments in deferred compensation program
1,369
1,034
762
1,133
Other components of net periodic pension and other postretirement benefit, excluding service cost and interest expense
( 3,259
)
( 3,323
)
( 6,552
)
( 6,639
)
Other
( 628
)
( 323
)
( 743
)
( 794
)
$
( 18,058
)
$
( 24,804
)
$
( 37,432
)
$
( 47,891
)
Note 19. Income taxes
The determination of the estimated annual effective tax rate is based upon a number of significant estimates and judgments. In addition, as a global commercial enterprise, Woodward’s tax expense can be impacted by changes in tax rates, tax laws, the finalization of tax audits and reviews, changes in the estimate of the amount of undistributed foreign earnings that Woodward considers indefinitely reinvested, issuance of future guidance, interpretation, and rule-making,
20
and other factors that cannot be predicted with certainty. As such, there can be significant volatility in interim tax provisions.
The following table sets forth the tax expense and the effective tax rate for Woodward’s earnings before income taxes:
Three Months Ended March 31,
Six Months Ended March 31,
2026
2025
2026
2025
Earnings before income taxes
$
167,427
$
132,963
$
336,578
$
234,817
Income tax expense
33,414
24,014
68,846
38,777
Effective tax rate
20.0
%
18.1
%
20.5
%
16.5
%
The increases in the effective tax rates for the three months ended March 31, 2026 and the six months ended March 31, 2026 compared to the same periods of the prior fiscal year were primarily attributable to remeasurement to tax reserves, the current year elimination of the U.S. intangible income tax benefit due to the one-time reversal of research costs previously capitalized, a reduction to the U.S. Federal Research and Development Credit, and unfavorable state tax law changes. These increases were partially offset by increases in the tax benefit from stock-based compensation.
Gross unrecognized tax benefits were $ 24,329 as of March 31, 2026 and $ 17,271 as of September 30, 2025. At March 31, 2026, the amount of the liability for unrecognized tax benefits that, if recognized, would impact Woodward’s effective tax rate was $ 14,438 . At this time, Woodward believes it is reasonably possible that the liability for unrecognized tax benefits will decrease by as much as $ 1,326 in the next 12 months due to the completion of review by tax authorities, lapses of statutes, and the settlement of tax positions. Woodward’s tax expense includes accruals for potential interest and penalties related to unrecognized tax benefits and all other interest and penalties related to tax payments.
Woodward’s tax returns are subject to audits by U.S. federal, state, and foreign tax authorities, and these audits are at various stages of completion at any given time. Reviews of tax matters by authorities and lapses of the applicable statutes of limitation may result in changes to tax expense. Woodward’s fiscal years remaining open to examination for U.S. Federal income taxes include fiscal years 2022 and thereafter. Woodward’s fiscal years remaining open to examination for significant U.S. state income tax jurisdictions include fiscal years 2020 and thereafter. Woodward’s fiscal years remaining open to examination in significant foreign jurisdictions include 2018 and thereafter.
Note 20. Retirement benefits
Woodward provides various retirement benefits to eligible members of the Company, including contributions to various defined contribution plans, pension benefits associated with defined benefit plans, postretirement medical benefits, and postretirement life insurance benefits. Eligibility requirements and benefit levels vary depending on member location.
Woodward's U.S. employees receive an annual contribution of Woodward stock, equal to 5 % of their eligible prior year wages, to their personal Woodward Retirement Saving Plan accounts. Woodward fulfilled its annual Woodward stock contribution obligation using shares held in treasury stock by issuing a total of 78 shares of common stock for a value of $ 29,813 in the second quarter of fiscal year 2026, compared to a total of 126 shares of common stock for a value of $ 24,058 in the second quarter of fiscal year 2025.
Defined contribution plans
Most of the Company’s U.S. members are eligible to participate in the U.S. defined contribution plan. The U.S. defined contribution plan allows members to defer part of their annual income for income tax purposes into their personal 401(k) accounts. The Company makes matching contributions to eligible member accounts, which are also deferred for member personal income tax purposes. Certain non-U.S. members are also eligible to participate in similar non-U.S. plans.
T he amount of expense associated with defined contribution plans were as follows:
Three Months Ended March 31,
Six Months Ended March 31,
2026
2025
2026
2025
Company costs
$
16,505
$
13,627
$
31,246
$
25,970
21
Defined benefit plans
Woodward has defined benefit plans that provide pension benefits for certain retired members in the United States, the United Kingdom, Japan, and Germany. Woodward also provides other postretirement benefits to its members including postretirement medical benefits and life insurance benefits. Postretirement medical benefits are provided to certain current and retired members and their covered dependents, and beneficiaries in the United States. Life insurance benefits are provided to certain retirees in the United States under frozen plans, which are no longer available to current members. A September 30 measurement date is utilized to value plan assets and obligations for all of Woodward’s defined benefit pension and other postretirement benefit plans.
U.S. GAAP requires that, for obligations outstanding as of September 30, 2025, the funded status reported in interim periods shall be the same asset or liability recognized in the previous year end statement of financial position adjusted for (a) subsequent accruals of net periodic benefit cost that exclude the amortization of amounts previously recognized in other comprehensive income (for example, subsequent accruals of service cost, interest cost, and return on plan assets) and (b) contributions to a funded plan or benefit payments.
The components of the net periodic retirement pension costs recognized were as follows:
Three Months Ended March 31,
United States
Other Countries
Total
2026
2025
2026
2025
2026
2025
Service cost
$
199
$
230
$
338
$
343
$
537
$
573
Interest cost
1,770
1,718
793
717
2,563
2,435
Expected return on plan assets
( 2,617
)
( 2,748
)
( 641
)
( 604
)
( 3,258
)
( 3,352
)
Amortization of:
Net actuarial loss (gain)
34
42
( 119
)
( 98
)
( 85
)
( 56
)
Prior service cost
129
190
6
5
135
195
Net periodic retirement pension (benefit) cost
$
( 485
)
$
( 568
)
$
377
$
363
$
( 108
)
$
( 205
)
Contributions paid
$
—
$
—
$
692
$
490
$
692
$
490
Six Months Ended March 31,
United States
Other Countries
Total
2026
2025
2026
2025
2026
2025
Service cost
$
398
$
459
$
673
$
691
$
1,071
$
1,150
Interest cost
3,540
3,437
1,579
1,445
5,119
4,882
Expected return on plan assets
( 5,235
)
( 5,496
)
( 1,276
)
( 1,218
)
( 6,511
)
( 6,714
)
Amortization of:
Net actuarial loss (gain)
68
85
( 239
)
( 198
)
( 171
)
( 113
)
Prior service cost
258
381
12
11
270
392
Net periodic retirement pension (benefit) cost
$
( 971
)
$
( 1,134
)
$
749
$
731
$
( 222
)
$
( 403
)
Contributions paid
$
—
$
—
$
1,112
$
874
$
1,112
$
874
The components of net periodic retirement pension costs other than the service cost and interest cost components are included in the line item “Other income, net”, and the interest component is included in the line item “Interest expense” in the Condensed Consolidated Statements of Earnings.
The components of the net periodic other postretirement benefit costs recognized were as follows:
Three Months Ended March 31,
Six Months Ended March 31,
2026
2025
2026
2025
Interest cost
$
178
$
180
$
355
$
359
Amortization of:
Net actuarial gain
( 112
)
( 111
)
( 225
)
( 221
)
Net periodic other postretirement cost
$
66
$
69
$
130
$
138
Contributions paid
$
394
$
408
$
791
$
794
The components of net periodic other postretirement benefit costs other than the service cost and interest cost components are included in the line item “Other income, net”, and the interest cost is included in the line item “Interest expense” in the Condensed Consolidated Statements of Earnings.
22
The amount of cash contributions made to these plans in any year is dependent upon several factors, including minimum funding requirements in the jurisdictions in which Woodward operates and arrangements made with trustees of certain foreign plans. As a result, the actual funding in fiscal year 2026 may differ from the current estimate. Woodward estimates its remaining cash contributions in fiscal year 2026 will be as follows:
Retirement pension benefits:
United States
$
433
United Kingdom
186
Japan
—
Germany
541
Other postretirement benefits
1,588
Note 21. Stockholders’ equity
Common stock and treasury stock
Activity in common stock and treasury stock shares was as follows:
Common Stock
Treasury Stock
Treasury stock held for deferred compensation
Balances as of January 1, 2025
72,960
( 13,607
)
( 31
)
Purchase of treasury stock
—
( 243
)
—
Sales of treasury stock
—
344
—
Common shares issued for benefit plans
—
126
—
Distribution of stock from deferred compensation
—
—
1
Balances as of March 31, 2025
72,960
( 13,380
)
( 30
)
Balances as of January 1, 2026
72,960
( 13,174
)
( 28
)
Purchase of treasury stock
—
( 631
)
—
Sales of treasury stock
—
360
—
Common shares issued for benefit plans
—
78
—
Distribution of stock from deferred compensation
—
—
1
Balances as of March 31, 2026
72,960
( 13,367
)
( 27
)
Common Stock
Treasury Stock
Treasury stock held for deferred compensation
Balances as of September 30, 2024
72,960
( 13,787
)
( 45
)
Purchase of treasury stock
—
( 449
)
—
Sales of treasury stock
—
725
—
Common shares issued for benefit plans
—
131
—
Purchases of stock by deferred compensation
—
—
( 1
)
Distribution of stock from deferred compensation
—
—
16
Balances as of March 31, 2025
72,960
( 13,380
)
( 30
)
Balances as of September 30, 2025
72,960
( 13,060
)
( 28
)
Purchase of treasury stock
—
( 1,086
)
—
Sales of treasury stock
—
701
—
Common shares issued for benefit plans
—
78
—
Purchases of stock by deferred compensation
—
—
( 1
)
Distribution of stock from deferred compensation
—
—
2
Balances as of March 31, 2026
72,960
( 13,367
)
( 27
)
Stock repurchase program
In January 2024, the Board of Directors of the Company (the "Board") authorized a program for the repurchase of up to $ 600,000 of Woodward’s outstanding shares of common stock on the open market or in privately negotiated transactions
23
over a three-year period ending in January 2027 (the “2024 Authorization”). During the six months ended March 31, 2026 , Woodward repurchased 153 shares of its common stock for $ 39,145 under the 2024 Authorization, all held for reissuance. During the six months ended March 31, 2025 , Woodward repurchased 449 shares of its common stock for $ 79,493 under the 2024 Authorization, all held for reissuance.
In November 2025, Woodward completed the 2024 Authorization, and subsequently the Board authorized a new program for the repurchase of up to $ 1,800,000 of Woodward’s outstanding shares of common stock on the open market or in privately negotiated transactions over a three-year period ending in November 2028 (the "2026 Authorization"). During the six months ended March 31, 2026 , Woodward repurchased 933 shares of its common stock for $ 315,745 under the 2026 Authorization, all held for reissuance.
Stock-based compensation
Provisions governing non-qualified stock option awards ("stock options" or "options"), restricted stock units ("RSUs"), and performance restricted stock units ("PSUs") are included in the 2017 Omnibus Incentive Plan, as amended from time to time (the “2017 Plan”).
The 2017 Plan was first approved by Woodward’s stockholders in January 2017. The Board delegated authority to administer the 2017 Plan to the Human Capital & Compensation Committee of the Board, including, but not limited to, the power to determine the recipients of awards and the terms of those awards.
Stock options
Stock option awards are granted with an exercise price equal to the market price of Woodward’s stock at the date the grants are awarded, a ten-year term, and generally have a four-year vesting schedule at a rate of 25 % per year.
The fair value of options granted is estimated as of the grant date using the Black-Scholes-Merton option-valuation model. Woodward calculates the expected term, which represents the average period of time that stock options granted are expected to be outstanding, based upon historical experience of plan participants. Expected volatility is based on historical volatility using daily stock price observations. The estimated dividend yield is based upon Woodward’s historical dividend practice and the market value of its common stock. The risk-free rate is based on the U.S. treasury yield curve, for periods within the contractual life of the stock option, at the time of grant.
The following is a summary of the activity for stock option awards:
Three Months Ended March 31, 2026
Six Months Ended March 31, 2026
Number of options
Weighted-Average Exercise Price per Share
Number of options
Weighted-Average Exercise Price per Share
Beginning balance
1,942
$
92.48
2,249
$
91.25
Granted
17
391.53
17
391.53
Exercised
( 287
)
81.78
( 594
)
82.65
Forfeited
( 1
)
83.24
( 1
)
83.24
Ending balance
1,671
$
97.33
1,671
$
97.33
Changes in non-vested stock options were as follows:
Three Months Ended March 31, 2026
Six Months Ended March 31, 2026
Number of options
Weighted-Average Grant Date Fair Value per Share
Number of options
Weighted-Average Grant Date Fair Value Per Share
Beginning balance
247
$
48.33
473
$
43.40
Granted
17
173.79
17
173.79
Vested
( 31
)
64.60
( 257
)
41.21
Forfeited
—
—
—
—
Ending balance
233
$
55.26
233
$
55.26
24
Information about stock options that have vested, or are expected to vest, and are exercisable at March 31, 2026 was as follows:
Number of options
Weighted-Average Exercise Price
Weighted-Average Remaining Life in Years
Aggregate Intrinsic Value
Options outstanding
1,671
$
97.33
4.8
$
436,191
Options vested and exercisable
1,439
91.91
4.4
382,708
Options vested and expected to vest
1,663
96.84
4.8
434,762
Restricted stock units
The Company generally grants RSUs to eligible employees under its form RSU Agreement for Employees and Consultants (the “Standard Form RSU Agreement”). RSUs granted under the Standard Form RSU Agreement prior to November 14, 2023 generally have a four-year vesting schedule at a rate of 25 % per year, and RSUs granted after November 14, 2023 generally have a three-year vesting schedule at a rate of 33.3 % per year, in each case generally subject to continued employment. The fair value of RSUs granted is estimated using the closing price of the Company’s stock on the grant date.
The Company has also granted RSUs to certain employees under its form attraction and retention RSU agreement (the “Form Attraction and Retention RSU Agreement”), which has from time to time been used for new hires and specific retention purposes. RSUs granted under the Form Attraction and Retention RSU Agreement are generally scheduled to fully vest on the third or fourth anniversary of the respective grant dates, and in each case, subject to continued employment.
A summary of the activity for RSUs:
Three Months Ended March 31, 2026
Six Months Ended March 31, 2026
Number of units
Weighted-Average Grant Date Fair Value
Number of units
Weighted-Average Grant Date Fair Value
Beginning balance
264
$
159.51
309
$
148.31
Granted
55
391.53
62
378.10
Released
( 82
)
159.64
( 132
)
139.31
Forfeited
( 1
)
188.05
( 3
)
131.21
Ending balance
236
$
213.07
236
$
213.07
Performance restricted stock units
PSUs represent the right to receive a share of the Company’s common stock subject to the achievement of conditions established by the Human Capital & Compensation Committee of the Board and measured over a three-year performance period. Partial vesting in these awards may occur after separation from the Company for retirement eligible employees. The Company awards two types of PSUs, one of which is subject to a market condition (the “rTSR PSUs”) and the other is subject to a performance condition (the “ROIC PSUs”). Subject to the terms of the applicable award agreement, full or partial vesting in these awards may occur upon or after separation from the Company in certain circumstances.
Market condition awards
The market condition associated with the rTSR PSU awards is based on the Company's relative total shareholder return ("TSR") compared to the TSR generated by the other companies that comprise the S&P 400 Midcap Index over a three-year performance period. Performance at target will result in vesting and issuance of the number of PSUs granted, equal to 100 % payout. For rTSR PSUs granted prior to September 30, 2025, performance below or above target can result in an issuance of between 0 % to 150 % of the target number of rTSR PSUs granted. For rTSR PSUs granted after September 30, 2025, performance below or above target can result in an issuance of 0 % to 200 % of the target number of rTSR PSUs granted. Expense is recognized based on the weighted average grant date fair value on a straight line basis over the service period, irrespective as to whether the market condition is achieved.
25
The fair value of the rTSR PSUs at the grant date was determined based upon a Monte Carlo valuation method. The assumptions used in the Monte Carlo method to value the rTSR PSUs granted, which includes the grant date fair value outcome from the Monte Carlo method, were as follows:
March 31, 2026
March 31, 2025
March 31, 2024
Expected volatility
30.7
%
30.9
%
30.2
%
Risk free interest rate
3.4
%
4.1
%
4.5
%
Expected life
3 years
3 years
3 years
Grant date fair value
$
367.56
$
196.63
$
146.47
The PSUs granted receive dividend equivalent units; therefore, no discount was applied for Woodward’s dividends.
A summary of the activity for market condition awards:
Six Months Ended March 31, 2026
Number of units
Weighted-Average Grant Date Fair Value
Beginning balance
104
$
167.17
Granted
15
367.56
Forfeited
—
—
Ending balance
119
$
193.29
There was no activity for market condition awards during the three months ended March 31, 2026.
Performance condition awards
The performance condition associated with the ROIC PSU awards is based on an internal return on invested capital growth metric. Each of these performance conditions is measured over the same three-year performance period. The cumulative result of these performance conditions can result in a number of shares earned in the range of 0 % to 200 % of the target number of shares granted.
The fair value on the date of grant of the ROIC PSUs is equal to the market price of the Company’s stock at the date of the grant, and the amount of expense recognized over the vesting period is subject to adjustment based on the expected attainment of the performance condition.
A summary of the activity for performance condition awards:
Six Months Ended March 31, 2026
Number of units
Weighted-Average Grant Date Fair Value
Beginning balance
—
$
—
Granted
15
298.15
Forfeited
—
—
Ending balance
15
$
298.15
There was no activity for performance condition awards during the three months ended March 31, 2026.
Stock-based compensation expense
Woodward recognizes stock-based compensation expense on a straight-line basis over the requisite service period. Pursuant to the form agreements used by the Company, with terms approved by the administrator of the applicable plan, the requisite service period can be less than the stated vesting period based on grantee’s retirement eligibility. As such, the recognition of stock-based compensation expense associated with some grants can be accelerated to a period of less than the stated vesting period, including immediate recognition of stock-based compensation expense on the date of grant.
At March 31, 2026 , there was approximately $ 43,646 of total unrecognized compensation expense related to non-vested stock-based compensation arrangements, including stock options, RSUs, and PSUs. The pre-vesting forfeiture rates for purposes of determining stock-based compensation expense recognized were estimated to be 0 % for members of the Board and 7.2 % for all others. The remaining unrecognized compensation cost is expected to be recognized over a weighted-average period of approximately 2 years.
26
Note 22. Commitments and contingencies
Woodward is currently involved in claims, pending or threatened litigation or other legal proceedings, investigations and/or regulatory proceedings arising in the normal course of business, including, among others, those relating to product liability claims, employment matters, worker’s compensation claims, contractual disputes, product warranty claims, and alleged violations of various laws and regulations. Woodward accrues for known individual matters using estimates of the most likely amount of loss where it believes that it is probable the matter will result in a loss when ultimately resolved and such loss is reasonably estimable. Legal costs are expensed as incurred and are classified in “Selling, general and administrative expenses” on the Condensed Consolidated Statements of Earnings.
Woodward is partially self-insured in the United States for healthcare and worker’s compensation up to predetermined amounts, above which third-party insurance applies. Management regularly reviews the probable outcome of related claims and proceedings, the expenses expected to be incurred, the availability and limits of the insurance coverage, and the established accruals for liabilities.
While the outcome of pending claims, legal and regulatory proceedings, and investigations cannot be predicted with certainty, management believes that any liabilities that may result from these claims, proceedings, and investigations will not have a material effect on Woodward’s liquidity, financial condition, or results of operations.
Under the Company’s severance and change in control agreements with its current corporate officers, Woodward would be required to pay termination benefits to any such officer if such officer’s employment is terminated without Cause or for Good Reason (as each term is defined therein). The amount of such benefits would vary depending on whether such termination occurs during a specified period within a change of control.
Note 23. Segment information
Woodward’s segments are composed of similar product groupings that serve the same or similar end markets. Based on this approach, Woodward has two reportable segments that are also its operating segments: Aerospace and Industrial, as described below in further detail. Woodward uses segment information internally to manage its business, including the assessment of segment performance and decisions for the allocation of resources between segments.
Our Aerospace segment designs, manufactures, and services systems and products for the management of fuel, air, combustion, and motion control. These products include fuel pumps, metering units, actuators, air valves, specialty valves, fuel nozzles, and thrust reverser actuation systems for turbine engines and nacelles, as well as flight deck controls, actuators, servocontrols, motors, and sensors for aircraft. These products are used on commercial and private aircraft and rotorcraft, as well as on military fixed-wing aircraft and rotorcraft, guided weapons, and other defense systems.
Our Industrial segment designs, produces, and services systems and products for the management of energy in the form of fuel, air, fluids, gases, motion, combustion, and electricity. These products include actuators, valves, pumps, fuel injection systems, solenoids, ignition systems, control systems, electronics and software, and sensors. Our products are used on industrial gas turbines (including heavy frame, aeroderivative, and small industrial gas turbines), steam turbines, compressors, and reciprocating engines (including low speed, medium speed, and high-speed engines that operate on various fuels, including natural gas, diesel, heavy fuel oil, and new lower carbon alternative fuels in both single and dual-fuel applications). The equipment on which our products are found is used to: generate power; to extract, distribute, and refine energy sources; to mine other commodities; and to convert fuel to work in transportation and freight (both marine and locomotives), mobile, and industrial equipment applications.
Nonsegment expenses consist of corporate office expenses, including compensation, benefits, depreciation, restructuring charges, and other administrative costs.
The accounting policies of the reportable segments are the same as those of the Company. The Aerospace and Industrial segments maintain separate financial information that is reviewed by the Chief Operating Decision Maker (“CODM”), who is the Company’s Chief Executive Officer. The CODM uses forecast-to-actual variances and year-over-year variances on a monthly basis when assessing segment performance and forecasts in deciding how to allocate resources among the segments. The CODM evaluates the performance of the Company’s segments based on reportable segment operating profit. In connection with that assessment, Woodward generally excludes matters such as certain charges for restructuring, interest income and expense, certain gains and losses from asset dispositions, or other unusual and/or non-operationally related expenses.
27
A summary of consolidated net sales and segment operating profit by segment follows:
Three Months Ended March 31, 2026
Six Months Ended March 31, 2026
Aerospace
Industrial
Total
Aerospace
Industrial
Total
Net sales
$
703,321
$
387,247
$
1,090,568
$
1,338,218
$
748,804
$
2,087,022
Cost of goods sold
506,058
268,272
774,330
959,858
518,433
1,478,291
Selling, general and administrative expenses
27,912
39,488
67,400
56,531
70,277
126,808
Research and development costs
29,416
14,906
44,322
51,434
29,178
80,612
Other segment items 1
( 18,140
)
( 1,140
)
( 19,280
)
( 36,075
)
( 1,799
)
( 37,874
)
Reportable segment operating profit
$
158,075
$
65,721
$
223,796
$
306,470
$
132,715
$
439,185
Three Months Ended March 31, 2025
Six Months Ended March 31, 2025
Aerospace
Industrial
Total
Aerospace
Industrial
Total
Net sales
$
561,729
$
321,900
$
883,629
$
1,055,611
$
600,743
$
1,656,354
Cost of goods sold
407,063
235,704
642,767
782,815
442,623
1,225,438
Selling, general and administrative expenses
22,490
26,813
49,303
40,965
47,917
88,882
Research and development costs
21,223
14,372
35,595
38,851
25,638
64,489
Other segment items 1
( 13,663
)
( 956
)
( 14,619
)
( 26,361
)
( 1,599
)
( 27,960
)
Reportable segment operating profit
$
124,616
$
45,967
$
170,583
$
219,341
$
86,164
$
305,505
(1) Other segment items mainly includes our equity interest in the earnings of the JV, other components of net periodic pension and other postretirement benefit, excluding service cost and interest expense, and net gain/loss on sales of assets and businesses.
A summary of consolidated earnings before income taxes was as follows:
Three Months Ended March 31,
Six Months Ended March 31,
2026
2025
2026
2025
Reportable segment operating profit
$
223,796
$
170,583
$
439,185
$
305,505
Nonsegment expenses
( 45,049
)
( 26,752
)
( 81,644
)
( 48,856
)
Interest expense, net
( 11,320
)
( 10,868
)
( 20,963
)
( 21,832
)
Consolidated earnings before income taxes
$
167,427
$
132,963
$
336,578
$
234,817
Segment assets consist of accounts receivable, inventories, property, plant, and equipment, net, goodwill, and other intangibles, net. A summary of consolidated total assets was as follows:
March 31, 2026
September 30, 2025
Segment assets:
Aerospace
$
2,276,086
$
2,110,805
Industrial
1,506,784
1,501,503
Unallocated corporate property, plant, and equipment, net
122,023
120,502
Other unallocated assets
1,064,219
897,333
Consolidated total assets
$
4,969,112
$
4,630,143
A summary of consolidated capital expenditures was as follows:
Six Months Ended March 31,
2026
2025
Segment capital expenditures:
Aerospace
$
67,742
$
19,047
Industrial
19,515
11,871
Unallocated corporate amounts
9,013
21,072
Consolidated capital expenditures
$
96,270
$
51,990
28
A summary of consolidated depreciation and amortization was as follows:
Three Months Ended March 31,
Six Months Ended March 31,
2026
2025
2026
2025
Segment depreciation and amortization:
Aerospace
$
13,232
$
12,607
$
26,297
$
25,341
Industrial
13,127
11,979
25,909
24,115
Unallocated corporate amounts
3,547
2,980
6,738
5,986
Consolidated depreciation and amortization
$
29,906
$
27,566
$
58,944
$
55,442
Note 24. Subsequent events
On April 22, 2026, the Board declared a cash dividend of $ 0.32 per share for the quarter, payable on June 4, 2026 for stockholders of record as of May 21, 2026 .
On April 15, 2026, Woodward entered into a definitive agreement to sell the Aerospace pilot controls product line to ONTIC Engineering and Manufacturing, Inc. for $ 180,000 , subject to purchase price adjustments. The agreement for the sale of the product line is expected to result in an accounting gain and close later in fiscal year 2026.
29
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looki ng Statements
This Quarterly Report on Form 10-Q (this "Form 10-Q"), including “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” contains forward-looking statements regarding future events and our future results within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact are statements that are deemed forward-looking statements. These statements are based on current expectations, estimates, forecasts, and projections about the industries in which we operate and the beliefs and assumptions of management. Words such as “anticipate,” “believe,” “estimate,” “seek,” “goal,” “expect,” “forecast,” “intend,” “continue,” “outlook,” “plan,” “project,” “target,” “strive,” “can,” “could,” “may,” “should,” “will,” “would,” variations of such words, and similar expressions are intended to identify such forward-looking statements. In addition, any statements that refer to projections of our future financial performance, our anticipated growth and trends in our businesses, and other characteristics of future events or circumstances are forward-looking statements. Forward-looking statements may include, among others, statements relating to:
• future sales, earnings, cash flow, uses of cash, and other measures of financial performance, including our assumptions underlying our expectations;
• trends in our business and the markets in which we operate, including expectations for those markets, our customers and their business and products;
• our ability to manage risks from operating internationally, including the impacts of tariffs on our markets in which we operate as well as our supply chain;
• expectations regarding demand for our products;
• our expected expenses in future periods and trends in such expenses over time;
• our expectations regarding margins and the impact of specific products, product mix, and our strategic actions on margins;
• descriptions of our plans and expectations for future operations, including our strategic initiatives and impact of such initiatives;
• plans and expectations relating to the performance of our joint venture with GE Aerospace;
• the expected levels of activity in particular industries or markets and the effects of changes in those levels;
• the scope, nature, or impact of acquisition activity and integration of such acquisition into our business;
• the impact of restructuring activities;
• the research, development, production, and support of new products and services;
• our plans, objectives, expectations, and intentions with respect to business opportunities that may be available to us;
• our liquidity, including our ability to meet capital spending requirements and operations;
• future dividends and repurchases of common stock;
• future levels of indebtedness and capital spending;
• the stability of financial institutions, including those lending to us;
• pension and other postretirement plan assumptions and future contributions;
• our tax rate and other effects of the changes in U.S. federal tax law and other tax law;
• availability of raw materials and components used in our products;
• expectations relating to environmental and emissions regulations;
• effects of data privacy, data protection, and cybersecurity regulations;
• our ability to develop competitive technologies or products and to compete effectively in our markets;
• our consolidated customer base and ability to enhance customer experience;
• our ability to manage risks related to U.S. Government contracting, including defense activity and spending patterns;
• our ability to attract, retain, and develop qualified personnel;
• our continued access to a stable workforce and our ability to maintain favorable labor relations;
• our ability to structure our operations in light of evolving market conditions;
• our ability to mitigate the ongoing impacts of inflation and tariffs;
• the impact of legal proceedings, investigations, claims and other regulatory proceedings;
• the impact of future prices for fossil fuels and commodity prices for oil, natural gas, and other minerals;
• the impact of our ability to protect our intellectual property and technological know-how on our business, financial condition, results of operations, and cash flows; and
• the impact of any potential physical or cybersecurity attacks and other information technology system or network interruptions or intrusions on our operations, business, including our financial condition, operating results, and reputation.
All these forward-looking statements are only predictions and are subject to risks, uncertainties, and assumptions that are difficult to predict and are subject to a number of factors and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. Factors that could cause actual results and the timing of certain events to differ materially from the forward-looking statements include, but are not limited to, risk factors described in Woodward's filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K for the year ended September 30, 2025, which was filed on November 25, 2025, and other risks described in Woodward’s filings with the Securities and Exchange Commission.
30
We undertake no obligation to revise or update any forward-looking statements for any reason, except as required by applicable law. Unless we have indicated otherwise or the context otherwise requires, references in this Form 10-Q to “Woodward,” “the Company,” “we,” “us,” and “our” refer to Woodward, Inc. and its consolidated subsidiaries.
Except where we have otherwise indicated or the context otherwise requires, amounts presented in this Form 10-Q are in thousands, except per share amounts.
OVERV IEW
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 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.
On February 20, 2026, the U.S. Supreme Court ruled that tariffs imposed under the International Emergency Economic Powers Act ("IEEPA") were not authorized by the statute, although it did not establish a process for recovery. Subsequent cases were filed after the U.S. Supreme Court ruling, which resulted in an order requiring U.S. Customs and Border Protection (“CBP”) to establish an administrative process through which applicable tariffs could be recovered. The Company is the importer of record for certain merchandise that was previously subject to such tariffs under IEEPA. The CBP has proposed and worked to develop an administrative process, which went live on April 20, 2026. However, significant uncertainty remains as to the effectiveness, timing, and process for tariff recovery. The Company is evaluating the ruling and potential actions available to it, including actions that may be taken to preserve or protect its rights and remedies. In addition, Woodward is not able to accurately estimate the financial effects of any tariff recovery at this time based on a variety of factors, including the unknown amount that can be directly recovered, the percentage of recovery that may be required to be returned to our customers, and the amount that can be recovered from third parties to whom Woodward paid increased costs due to tariffs. The Company is actively evaluating the applicable rulings and administrative actions taken by CBP to determine the best and most efficient course of action to recover such tariffs. Because the process, timing, and amount of any recovery are uncertain, the Company is unable to accurately estimate the financial impacts on the financial statements.
The United States-Iran Conflict
In March 2026, in response to the military conflict between the United States and Iran, the North Atlantic Treaty Organization (“NATO”) members (including the United States) announced targeted economic sanctions on Iran and Iranian enterprises. Fluctuations in oil prices resulting from the conflict have the potential to significantly disrupt global supply chains, increase production costs, and create economic uncertainty. The impact of any additional sanctions, trade restrictions, or limitations on oil supply remain uncertain due to the fluid nature of the military conflict as it is unfolding. Potential impacts could include supply chain and logistics disruptions, volatility in foreign exchange rates and interest rates, inflationary pressures on raw materials and energy, heightened cybersecurity threats, and other restrictions. In addition, we are monitoring uncertainties in the geopolitical environment and the extent to which they could impact airline traffic and/or defense spending levels in the U.S. and other countries; if such impacts occur, we expect the significant impacts to us would likely begin in fiscal year 2027.
China Wind-Down
On January 12, 2026, the Company approved a plan to wind-down its on-highway natural gas truck manufacturing operations in China (the “China OH Business”). This decision follows prior unsuccessful efforts to divest the China OH Business and is a strategic step to align the Industrial segment portfolio with priority end-markets and long-term growth opportunities. The China OH Business has not significantly contributed to the Company's overall financial performance on a consistent basis.
In connection with this action, we have incurred $6,815 in the three months ended March 31, 2026 and expect to incur pre-tax charges of approximately $13,000 for the remainder of fiscal year 2026. The majority of these charges are expected to be recognized in the third quarter of fiscal year 2026, and the wind-down is expected to be substantially completed by the end of fiscal year 2026.
31
Operational Highlights
Quarter and Year-to-Date Highlights
Three Months Ended
March 31,
Six Months Ended
March 31,
2026
2025
2026
2025
Net sales:
Aerospace segment
$
703,321
$
561,729
$
1,338,218
$
1,055,611
Industrial segment
387,247
321,900
748,804
600,743
Consolidated net sales
$
1,090,568
$
883,629
$
2,087,022
$
1,656,354
Earnings:
Aerospace segment
$
158,075
$
124,616
$
306,470
$
219,341
Segment earnings as a percent of segment net sales
22.5
%
22.2
%
22.9
%
20.8
%
Industrial segment
$
65,721
$
45,967
$
132,715
$
86,164
Segment earnings as a percent of segment net sales
17.0
%
14.3
%
17.7
%
14.3
%
Consolidated net earnings
$
134,013
$
108,949
$
267,732
$
196,040
Adjusted net earnings
$
139,126
$
103,390
$
272,845
$
185,956
Effective tax rate
20.0
%
18.1
%
20.5
%
16.5
%
Adjusted effective tax rate
20.2
%
17.7
%
20.5
%
16.1
%
Consolidated diluted earnings per share
$
2.19
$
1.78
$
4.36
$
3.20
Consolidated adjusted diluted earnings per share
$
2.27
$
1.69
$
4.44
$
3.04
Earnings before interest and taxes ("EBIT")
$
178,747
$
143,831
$
357,541
$
256,649
Adjusted EBIT
$
185,562
$
136,461
$
364,356
$
243,435
Earnings before interest, taxes, depreciation, and amortization ("EBITDA")
$
208,653
$
171,397
$
416,485
$
312,091
Adjusted EBITDA
$
215,468
$
164,027
$
423,300
$
298,877
Adjusted net earnings, adjusted earnings per share, adjusted effective tax rate, EBIT, adjusted EBIT, EBITDA, and adjusted EBITDA are non-U.S. GAAP financial measures. A description of these measures as well as a reconciliation of these non-U.S. GAAP financial measures to the most directly comparable U.S. GAAP financial measures can be found under the caption “Non-U.S. GAAP Financial Measures” in this Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Liquidity Highlights
Net cash provided by operating activities for the first half of fiscal year 2026 was $205,264, compared to $112,341 for the first half of fiscal year 2025. The increase in cash provided by operating activities for the first half of fiscal year 2026 as compared to the same period of fiscal year 2025 was primarily attributable to increased earnings.
For the first half of fiscal year 2026, free cash flow was $108,544, compared to $60,351 for the first half of fiscal year 2025. We define free cash flow as net cash provided by operating activities less payments for property, plant, and equipment. The increase in free cash flow for the first half of fiscal year 2026 as compared to the same period of fiscal year 2025 was primarily attributable to increased earnings, partially offset by higher capital expenditures. 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 fiscal year 2026 and fiscal year 2027. The site is expected to become operational in 2027, and we continue to expect a meaningful increase in capital expenditures over the second half of fiscal year 2026 related to the construction of this facility. 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 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations.
At March 31, 2026, we held $501,169 in cash and cash equivalents and had total outstanding debt of $1,123,278. We have additional borrowing availability of $369,125, net of outstanding letters of credit, under our revolving credit agreement. At March 31, 2026, we also had additional borrowing capacity of $25,526 under various foreign lines of credit and foreign overdraft facilities.
32
RESULTS OF OPERATIONS
The following table sets forth condensed consolidated statements of earnings data as a percentage of net sales for each period indicated:
Three Months Ended
Six Months Ended
March 31, 2026
% of Net Sales
March 31, 2025
% of Net Sales
March 31, 2026
% of Net Sales
March 31, 2025
% of Net Sales
Net sales
$
1,090,568
100
%
$
883,629
100
%
$
2,087,022
100
%
$
1,656,354
100
%
Costs and expenses:
Cost of goods sold
774,660
71.0
%
643,530
72.8
%
1,478,953
70.9
%
1,226,621
74.1
%
Selling, general, and administrative expenses
102,285
9.4
%
83,842
9.5
%
197,270
9.5
%
153,538
9.3
%
Research and development costs
46,119
4.2
%
37,230
4.2
%
83,875
4.0
%
67,437
4.1
%
Restructuring charges
6,815
0.6
%
—
0.0
%
6,815
0.3
%
—
0.0
%
Interest expense
12,035
1.1
%
11,889
1.3
%
22,379
1.1
%
24,230
1.5
%
Interest income
(715
)
(0.1
)%
(1,021
)
(0.1
)%
(1,416
)
(0.1
)%
(2,398
)
(0.2
)%
Other income, net
(18,058
)
(1.7
)%
(24,804
)
(2.8
)%
(37,432
)
(1.8
)%
(47,891
)
(2.9
)%
Total costs and expenses
923,141
84.6
%
750,666
85.0
%
1,750,444
83.9
%
1,421,537
85.8
%
Earnings before income taxes
167,427
15.4
%
132,963
15.0
%
336,578
16.1
%
234,817
14.2
%
Income tax expense
33,414
3.1
%
24,014
2.7
%
68,846
3.3
%
38,777
2.3
%
Net earnings
$
134,013
12.3
%
$
108,949
12.3
%
$
267,732
12.8
%
$
196,040
11.8
%
Other select financial data:
March 31, 2026
September 30, 2025
Net working capital
$
960,167
$
977,025
Total debt
1,123,278
702,202
Total stockholders' equity
2,525,460
2,566,390
Net Sales
Consolidated net sales for the second quarter of fiscal year 2026 increased by $206,939, or 23.4%, compared to the same period of fiscal year 2025. Consolidated net sales for the first half of fiscal year 2026 increased by $430,668, or 26.0%, compared to the same period of fiscal year 2025.
Details of the changes in consolidated net sales were as follows:
Three-Month Period
Six-Month Period
Consolidated net sales for the period ended March 31, 2025
$
883,629
$
1,656,354
Aerospace volume
97,771
185,021
Industrial volume
33,276
85,865
Effects of changes in price
57,243
126,907
Effects of changes in foreign currency rates
18,649
32,875
Consolidated net sales for the period ended March 31, 2026
$
1,090,568
$
2,087,022
The increases in Aerospace segment net sales in the second quarter and first half of fiscal year 2026 as compared to the same periods of fiscal year 2025 were primarily attributable to higher sales volumes and price realization.
The increases in Industrial segment net sales in the second quarter and first half of fiscal year 2026 as compared to the same periods of fiscal year 2025 were primarily attributable to higher sales volumes, price realization, and favorable foreign currency impacts.
Costs and Expenses
Cost of goods sold increased by $131,130 to $774,660 for the second quarter of fiscal year 2026, from $643,530 for the second quarter of fiscal year 2025. Cost of goods sold decreased to 71.0% of net sales for the second quarter of fiscal year 2026, compared to 72.8% of net sales for the second quarter of fiscal year 2025.
Cost of goods sold increased by $252,332 to $1,478,953 for the first half of fiscal year 2026, from $1,226,621 for the first half of fiscal year 2025. Cost of goods sold decreased to 70.9% of net sales for the first half of fiscal year 2026, compared to 74.1% of net sales for the first half of fiscal year 2025.
33
The increases in cost of goods sold on an absolute basis in the second quarter and first half of fiscal year 2026 compared to the same periods of fiscal year 2025 were primarily due to higher sales volumes and net inflationary impacts on material and labor costs.
Gross margin (as measured by net sales less cost of goods sold, divided by net sales) was 29.0% for the second quarter of fiscal year 2026, compared to 27.2% for the second quarter of fiscal year 2025. Gross margin was 29.1% for the first half of fiscal year 2026, compared to 25.9% for the first half of fiscal year 2025. The increases in gross margin for the second quarter and first half of fiscal year 2026 as compared to the same periods of fiscal year 2025 were primarily attributable to higher sales volumes and price realization.
Selling, general, and administrative expenses increased by $18,443, or 22.0%, to $102,285 for the second quarter of fiscal year 2026, compared to $83,842 for the second quarter of fiscal year 2025. Selling, general, and administrative expenses as a percentage of net sales decreased to 9.4% for the second quarter of fiscal year 2026, compared to 9.5% for the second quarter of fiscal year 2025. The increase in selling, general, and administrative expenses on an absolute basis for the second quarter of fiscal year 2026 as compared to the same period of fiscal year 2025 was primarily due to a reserve for a product performance claim in our Industrial segment, increased expenses relating to headcount, and increased variable annual incentive compensation costs.
Selling, general, and administrative expenses increased by $43,732, or 28.5%, to $197,270 for the first half of fiscal year 2026, compared to $153,538 for the first half of fiscal year 2025. Selling, general, and administrative expenses as a percentage of net sales increased to 9.5% for the first half of fiscal year 2026, compared to 9.3% for the first half of fiscal year 2025. The increase in selling, general, and administrative expenses for the first half of fiscal year 2026 as compared to the same period of fiscal year 2025 was primarily due to a reserve for a product performance claim in our Industrial segment, higher project-related costs, higher labor costs, and increased variable annual incentive compensation costs.
Research and development ("R&D") costs were $46,119, or 4.2% of net sales, for the second quarter of fiscal year 2026, as compared to $37,230, or 4.2% of net sales, for the second quarter of fiscal year 2025. R&D costs were $83,875, or 4.0% of net sales, for the first half of fiscal year 2026, as compared to $67,437, or 4.1% of net sales, for the first half of fiscal year 2025. R&D costs increased in the second quarter and first half of fiscal year 2026, primarily due to early-stage efforts to compete for the next single-aisle aircraft platform . We expect R&D costs to increase in fiscal year 2026 as compared to fiscal year 2025, and we anticipate additional increases in future years as next-generation aircraft program timelines become more defined. Our R&D activities extend across almost all of our customer base, and we anticipate ongoing variability in R&D costs due to the timing of customer business needs on current and future programs.
Interest expense increased by $146, or 1.2%, to $12,035 for the second quarter of fiscal year 2026, compared to $11,889 for the second quarter of fiscal year 2025. Interest expense as a percentage of net sales was 1.1% for the second quarter of fiscal year 2026, compared to 1.3% for the second quarter of fiscal year 2025. The increase in interest expense on an absolute basis was primarily attributable to increased daily borrowings on the revolving credit facility during the second quarter of fiscal year 2026.
Interest expense decreased by $1,851, or 7.6%, to $22,379 for the first half of fiscal year 2026, compared to $24,230 for the first half of fiscal year 2025. Interest expense as a percentage of net sales was 1.1% for the first half of fiscal year 2026, compared to 1.5% for the first half of fiscal year 2025. The decrease was primarily attributable to a lower long-term debt balance, as on November 17, 2025, we paid the entire principal balance of $75,000 on the Series I and L Notes.
Other income, net decreased by $6,746 to $18,058 for the second quarter of fiscal year 2026, compared to $24,804 for the second quarter of fiscal year 2025. Other income decreased by $10,459 to $37,432 for the first half of fiscal year 2026, compared to $47,891 for the first half of fiscal year 2025. The decreases in other income for the second quarter and first half of fiscal year 2026 as compared to the same periods of fiscal 2025 were primarily attributable to a one-time gain related to product rationalization activities that was recognized in the prior year second quarter that did not occur in the current year second quarter, partially offset by an increase in earnings of the JV.
Income taxes were provided at an effective rate of 20.0% on earnings before income taxes for the second quarter of fiscal year 2026, compared to 18.1% for the second quarter of fiscal year 2025. Income taxes were provided at an effective rate of 20.5% on earnings before income taxes for the first half of fiscal year 2026, compared to 16.5% for the first half of fiscal year 2025. The increases in the effective tax rates for the second quarter and first half of fiscal year 2026, compared to the same periods of fiscal year 2025 were primarily attributable to remeasurement to tax reserves, the current year elimination of the U.S. intangible income tax benefit due to the one-time reversal of research costs previously capitalized, a reduction in the U.S. Federal Research and Development Credit, and unfavorable state tax law changes. These increases were partially offset by increases in the tax benefit from stock-based compensation.
34
Segment Results
The following table presents sales by segment:
Three Months Ended March 31,
Six Months Ended March 31,
2026
2025
2026
2025
Net sales:
Aerospace
$
703,321
64.5
%
$
561,729
63.6
%
$
1,338,218
64.1
%
$
1,055,611
63.7
%
Industrial
387,247
35.5
%
321,900
36.4
%
748,804
35.9
%
600,743
36.3
%
Consolidated net sales
$
1,090,568
100
%
$
883,629
100
%
$
2,087,022
100
%
$
1,656,354
100
%
The following table presents earnings by segment and reconciles segment earnings to consolidated net earnings:
Three Months Ended March 31,
Six Months Ended March 31,
2026
2025
2026
2025
Aerospace
$
158,075
$
124,616
$
306,470
$
219,341
Industrial
65,721
45,967
132,715
86,164
Nonsegment expenses
(45,049
)
(26,752
)
(81,644
)
(48,856
)
Interest expense, net
(11,320
)
(10,868
)
(20,963
)
(21,832
)
Consolidated earnings before income taxes
167,427
132,963
336,578
234,817
Income tax expense
(33,414
)
(24,014
)
(68,846
)
(38,777
)
Consolidated net earnings
$
134,013
$
108,949
$
267,732
$
196,040
The following table presents segment earnings as a percent of segment net sales:
Three Months Ended March 31,
Six Months Ended March 31,
2026
2025
2026
2025
Aerospace
22.5
%
22.2
%
22.9
%
20.8
%
Industrial
17.0
%
14.3
%
17.7
%
14.3
%
Aerospace
Aerospace segment net sales increased by $141,592, or 25.2%, to $703,321 for the second quarter of fiscal year 2026, compared to $561,729 for the second quarter of fiscal year 2025. Aerospace segment net sales increased by $282,607, or 26.8%, to $1,338,218 for the first half of fiscal year 2026, compared to $1,055,611 for the first half of fiscal year 2025.
The increases in Aerospace segment net sales in the second quarter and first half of fiscal year 2026 as compared to the same periods of the prior fiscal year 2025 were primarily attributable to increased sales volumes and price realization.
Commercial OEM sales increased in the second quarter as compared to the same period of fiscal year 2025, primarily due to increased airframer production rates. Commercial OEM sales increased in the first half of fiscal year 2026 as compared to the same period of fiscal year 2025, primarily due to increased airframer production rates and a tapering of destocking efforts by airframers. For the remainder of fiscal year 2026, we do not expect destocking efforts to have a large impact, as we believe our output is currently well-aligned with current airframer build rates.
Commercial services sales increased in the second quarter and first half of fiscal year 2026 as compared to the same periods of fiscal year 2025, primarily due to higher repair volume supported by sustained high aircraft utilization of legacy aircraft, as well as increased Leading Edge Aviation Propulsion ("LEAP") and Pratt & Whitney’s Geared Turbo Fan ("GTF") activity. We also experienced strong spare line replacement unit (“LRU”) sales in the second quarter and first half of fiscal year 2026 as compared to the same periods of fiscal year 2025. Spare LRU sales were generally consistent with what we experienced during the fourth quarter of fiscal year 2025 and the first quarter of fiscal year 2026.
Defense OEM sales increased in the second quarter and first half of fiscal year 2026 as compared to the same periods of fiscal year 2025, primarily driven by increased Joint Direct Attack Munition ("JDAM") pricing, which took effect during the fourth quarter of fiscal year 2025. Defense services sales increased in the second quarter and first half of fiscal year 2026 as compared to the same periods of fiscal year 2025, primarily due to price realization. We expect variability in Defense services sales, which is generally attributable to the cycling of various maintenance and upgrade programs, as well as actual usage.
Aerospace segment earnings increased by $33,459, or 26.8%, to $158,075 for the second quarter of fiscal year 2026, compared to $124,616 for the second quarter of fiscal year 2025. Aerospace segment earnings increased by $87,129, or 39.7%, to $306,470 for the first half of fiscal year 2026, compared to $219,341 for the first half of fiscal year 2025.
35
The increases in Aerospace segment earnings were due to the following:
Three months Ended December 31, 2025
Three months Ended March 31, 2026
Fiscal Year-to-Date
Earnings for the period ended fiscal year 2025
$
94,725
$
124,616
$
219,341
Sales volume and mix
26,065
40,690
66,755
Price, inflation, and productivity
43,314
23,574
66,888
Manufacturing expenses
(13,241
)
(6,359
)
(19,600
)
Annual variable incentive compensation expenses
(6,700
)
(6,765
)
(13,465
)
Research and development expenses
(3,995
)
(5,580
)
(9,575
)
Other, net
8,227
(12,101
)
(3,874
)
Earnings for the period ended fiscal year 2026
$
148,395
$
158,075
$
306,470
Following a change in management's data analysis methodology for acquisition results, the Company has refined its Aerospace earnings reconciliation to classify acquisition results under "sales volume and mix", rather than including them in "other, net". Accordingly, the earnings reconciliation for the first quarter of fiscal year 2026 has been reclassified for comparability. The reclassification had no impact on total Aerospace segment net earnings or the Company's financial results.
Aerospace segment earnings as a percentage of segment net sales were 22.5% for the second quarter of fiscal year 2026, compared to 22.2% for the second quarter of fiscal year 2025. Aerospace segment earnings as a percentage of segment net sales were 22.9% for the first half of fiscal year 2026, compared to 20.8% for the first half of fiscal year 2025. The increases in Aerospace segment earnings as a percentage of segment sales for the second quarter and first half of fiscal year 2026 were primarily attributable strength in commercial services, higher commercial OEM volumes, and solid price realization, partially offset by ongoing inflationary pressures and planned strategic investments to support future growth. The strategic investments include enhancements to our manufacturing capabilities to deliver the content on current platforms, incremental R&D tied to early-stage efforts to compete for the next single-aisle aircraft platform, and an enterprise resource planning system upgrade. While these initiatives are impacting margins, they are critical to position the company for sustained long-term growth, and we expect these investments to continue in fiscal year 2026 and fiscal year 2027.
Industrial
Industrial segment net sales increased by $65,347, or 20.3%, to $387,247 for the second quarter of fiscal year 2026, compared to $321,900 for the second quarter of fiscal year 2025. Industrial segment net sales increased by $148,061, or 24.6%, to $748,804 for the first half of fiscal year 2026, compared to $600,743 for the first half of fiscal year 2025.
The increases in Industrial segment net sales in the second quarter and first half of fiscal year 2026 as compared to the same periods of fiscal year 2025 were primarily attributable to higher sales volumes, price realization, and favorable foreign currency impacts.
Industrial segment earnings increased by $19,754, or 43.0%, to $65,721 for the second quarter of fiscal year 2026, compared to $45,967 for the second quarter of fiscal year 2025. Industrial segment earnings increased by $46,551, or 54.0%, to $132,715 for the first half of fiscal year 2026, compared to $86,164 for the first half of fiscal year 2025.
The increase in Industrial segment earnings was due to the following:
Three-Month Period
Six-Month Period
Earnings for the period ended March 31, 2025
$
45,967
$
86,164
Sales volume and mix
21,666
48,709
Price, inflation, and productivity
9,285
23,305
Annual variable incentive compensation expenses
(3,540
)
(7,320
)
Other, net
(7,657
)
(18,143
)
Earnings for the period ended March 31, 2026
$
65,721
$
132,715
Industrial segment earnings as a percentage of segment net sales were 17.0% for the second quarter of fiscal year 2026, compared to 14.3% for the second quarter of fiscal year 2025. Industrial segment earnings as a percentage of segment net sales were 17.7% for the first half of fiscal year 2026, compared to 14.3% for the first half of fiscal year 2025.
36
Nonsegment
Nonsegment expenses increased by $18,297 to $45,049 for the second quarter of fiscal year 2026, compared to $26,752 for the second quarter of fiscal year 2025. Nonsegment expenses increased by $32,788 to $81,644 for the first half of fiscal year 2026, compared to $48,856 for the first half of fiscal year 2025.
The significant items that impacted nonsegment expenses were as follows:
Three Months Ended March 31,
Six Months Ended March 31,
2026
2025
2026
2025
Nonsegment expenses
$
(45,049
)
$
(26,752
)
$
(81,644
)
$
(48,856
)
Restructuring charges
6,815
—
6,815
—
Product rationalization
—
(11,163
)
—
(20,524
)
Business development activities
—
3,793
—
7,310