What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-04-30 compared with 2026-02-04 · 192 added, 97 removed, 255 unchanged (53% of the section changed)

10 unchanged sentences

• 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, in particular our expectations with respect to natural gas trucks in China;

• expectations regarding demand for our products;

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

42 unchanged sentences

Woodward is closely tracking costs from our supply base and customer forecasts regarding the potential impact of currently announced tariff levels, changes to such levels, and actual and potential retaliatory trade actions.

We have experienced and are expecting minimal levels of cost pressure as a result of the implemented tariffs.

We 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 January 12, 2026, the Company approved a plan to wind-down our on-highway natural gas truck manufacturing operations in China (the “China OH Business”).

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 our overall financial performance on a consistent basis.

The wind-down is expected to be substantially completed by the end of fiscal year 2026.

In connection with this action, we expect to incur pre-tax charges of approximately $20,000 to $25,000.

The majority of these charges are expected to be recognized in the second and third quarters of fiscal year 2026.

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.

Operational Highlights

Quarter Highlights

Quarter and Year-to-Date Highlights

Three Months Ended

Six Months Ended

Aerospace segment

17 unchanged sentences

GAAP financial measures.

A description of these measures as well as a reconciliation of these

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.

2 unchanged sentences

Liquidity Highlights

Net cash provided by operating activities for the first three months of fiscal year 2026 was $114,437, compared to $34,516 for the first three months of fiscal year 2025.

The increase in cash provided by operating activities for the first three months of fiscal year 2026 as compared to the same period of fiscal year 2025 was primarily attributable to increased earnings and the timing of certain tax payments.

For the first quarter of fiscal year 2026, free cash flow was $70,308, compared to $942 for the first quarter of fiscal year 2025.

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 quarter of fiscal year 2026 as compared to the same period of fiscal year 2025 was primarily attributable to increased earnings and the timing of certain tax payments, partially offset by higher capital expenditures.

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.

4 unchanged sentences

GAAP Financial Measures” in this Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations.

At December 31, 2025, we held $454,245 in cash and cash equivalents and had total outstanding debt of $888,038.

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 December 31, 2025, we also had additional borrowing capacity of $25,315 under various foreign lines of credit and foreign overdraft facilities.

At March 31, 2026, we also had additional borrowing capacity of $25,526 under various foreign lines of credit and foreign overdraft facilities.

RESULTS OF OPERATIONS

1 unchanged sentence

Three Months Ended

December 31, 2025

Six Months Ended

March 31, 2026

% of Net Sales

December 31, 2024

March 31, 2025

% of Net Sales

March 31, 2026

% of Net Sales

March 31, 2025

% of Net Sales

Costs and expenses:

2 unchanged sentences

Research and development costs

Restructuring charges

Interest expense

5 unchanged sentences

Other select financial data:

December 31, 2025

March 31, 2026

September 30, 2025

1 unchanged sentence

Total stockholders' equity

Consolidated net sales for the first quarter of fiscal year 2026 increased by $223,729, or 29.0%, compared to the same period of fiscal year 2025.

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

Consolidated net sales for the three months ended December 31, 2024

Six-Month Period

Consolidated net sales for the period ended March 31, 2025

Aerospace volume

2 unchanged sentences

Effects of changes in foreign currency rates

Consolidated net sales for the three months ended December 31, 2025

The increase in both Aerospace and Industrial segment net sales in the first quarter of fiscal year 2026 as compared to the same period of fiscal year 2025 was primarily attributable to higher sales volumes and price realization.

Consolidated net sales for the period ended March 31, 2026

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 $121,202 to $704,293 for the first quarter of fiscal year 2026, from $583,091 for the first quarter of fiscal year 2025.

Cost of goods sold decreased to 70.7% of net sales for the first quarter of fiscal year 2026, compared to 75.5% of net sales for the first quarter of fiscal year 2025.

The increase in cost of goods sold on an absolute basis in the first quarter of fiscal year 2026 compared to the same period of fiscal year 2025 is 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 29.3% for the first quarter of fiscal year 2026, compared to 24.5% for the first quarter of fiscal year 2025.

The increase in gross margin for the first quarter of fiscal year 2026 as compared to the same period of fiscal year 2025 is primarily attributable to higher sales volumes and price realization.

Selling, general, and administrative expenses increased by $25,289, or 36.3%, to $94,985 for the first quarter of fiscal year 2026, compared to $69,696 for the first quarter of fiscal year 2025.

Selling, general, and administrative expenses as a percentage of net sales increased to 9.5% for the first quarter of fiscal year 2026, compared to 9.0% for the first quarter of fiscal year 2025.

The increase in selling, general, and administrative expenses for the first quarter of fiscal year 2026 as compared to the same period of fiscal year 2025 is primarily due to higher project-related costs and labor costs.

Research and development costs were $37,756, or 3.8% of net sales, for the first quarter of fiscal year 2026, as compared to $30,207, or 3.9% of net sales, for the first quarter of fiscal year 2025.

Our research and development activities extend across almost all of our customer base, and we anticipate ongoing variability in research and development costs due to the timing of customer business needs on current and future programs.

Interest expense decreased by $1,997, or 16.2%, to $10,344 for the first quarter of fiscal year 2026, compared to $12,341 for the first quarter of fiscal year 2025.

Interest expense as a percentage of net sales was 1.0% for the first quarter of fiscal year 2026, compared to 1.6% for the first quarter of fiscal year 2025.

The decrease is 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 $3,713 to $19,374 for the first quarter of fiscal year 2026, compared to $23,087 for the first quarter of fiscal year 2025.

The decrease in other income for the first quarter of fiscal year 2026 as compared to the same period of fiscal year 2025 is primarily attributable to a one-time gain related to product rationalization activities that were recognized in the prior year first quarter that did not occur in the current year first quarter, partially offset by an increase in earnings of the JV.

Income taxes were provided at an effective rate of 20.9% on earnings before income taxes for the first quarter of fiscal year 2026, compared to 14.5% for the first quarter of fiscal year 2025.

The increase in the effective tax rate for the first quarter of fiscal year 2026, compared to the same period of fiscal year 2025 was primarily attributable to higher current quarter earnings relative to the tax benefit of stock-based compensation, unfavorable state tax law changes, the current year elimination of the U.S.

intangible income tax benefit due to the one-time reversal of research costs previously capitalized, and a reduction to the U.S.

Federal Research and Development Credit.

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.

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.

Segment Results

The following table presents sales by segment:

Three Months Ended December 31,

Three Months Ended March 31,

Six Months Ended March 31,

Consolidated net sales

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

Three Months Ended December 31,

Three Months Ended March 31,

Six Months Ended March 31,

Nonsegment expenses

4 unchanged sentences

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

Three Months Ended December 31,

Aerospace segment net sales increased by $141,015, or 28.6%, to $634,897 for the first quarter of fiscal year 2026, compared to $493,882 for the first quarter of fiscal year 2025.

The increase in Aerospace segment net sales in the first quarter of fiscal year 2026 as compared to the same period of fiscal year 2025 were primarily attributable to increased sales volumes and price realization.

Commercial OEM sales increased in the first quarter of fiscal year 2026 as compared to the same period of fiscal year 2025, primarily due to a tapering of destocking efforts by airframers and increased airframer production rates.

Commercial services sales increased in the first quarter of fiscal year 2026 as compared to the same period of fiscal year 2025, primarily due to higher volume supported by sustained high aircraft utilization of legacy aircraft, increased Leading Edge Aviation Propulsion ("LEAP") and Pratt & Whitney’s Geared Turbo Fan ("GTF") activity, and price realization.

Defense OEM sales increased in the first quarter of fiscal year 2026 as compared to the same period of fiscal year 2025, primarily driven by new increased Joint Direct Attack Munition ("JDAM") pricing, which took effect during the fourth quarter of fiscal year 2025.

Defense services sales were generally flat in the first quarter of fiscal year 2026 as compared to the same period of fiscal year 2025 due to timing of sales.

Three Months Ended March 31,

Six Months Ended March 31,

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 $53,670, or 56.7%, to $148,395 for the first quarter of fiscal year 2026, compared to $94,725 for the first quarter of fiscal year 2025.

The increase in segment earnings was a result of price realization, favorable mix, and higher sales volume, partially offset by strategic investments in manufacturing capabilities and inflation.

The increase in Aerospace segment earnings was due to the following:

Three-Month Period

Earnings for the three months ended December 31, 2024

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.

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

Sales volume and mix

1 unchanged sentence

Manufacturing expenses

Earnings for the three months ended December 31, 2025

Aerospace segment earnings as a percentage of segment net sales were 23.4% for the first quarter of fiscal year 2026, compared to 19.2% for the first quarter of fiscal year 2025.

Industrial segment net sales increased by $82,714, or 29.7%, to $361,557 for the first quarter of fiscal year 2026, compared to $278,843 for the first quarter of fiscal year 2025.

The increase in Industrial segment net sales in the first quarter of fiscal year 2026 as compared to the same period of fiscal year 2025 was primarily attributable to higher sales volumes and price realization.

Industrial segment earnings increased by $26,797, or 66.7%, to $66,994 for the first quarter of fiscal year 2026, compared to $40,197 for the first quarter of fiscal year 2025.

The increase in Industrial earnings was primarily attributable to higher sales volume, including increased output and other efficiency gains, price realization, and favorable mix, partially offset by inflation.

Annual variable incentive compensation expenses

Research and development expenses

Earnings for the period ended fiscal year 2026

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 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.

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

Earnings for the three months ended December 31, 2024

Six-Month Period

Earnings for the period ended March 31, 2025

Sales volume and mix

Price, inflation, and productivity

Earnings for the three months ended December 31, 2025

Industrial segment earnings as a percentage of segment net sales were 18.5% for the first quarter of fiscal year 2026, compared to 14.4% for the first quarter of fiscal year 2025.

Nonsegment expenses increased by $14,491 to $36,595 for the first quarter of fiscal year 2026, compared to $22,104 for the first quarter of fiscal year 2025.

The significant items that impacted nonsegment expenses in the prior fiscal year period but did not reoccur in the current fiscal year period were as follows:

Three Months Ended December 31,

Annual variable incentive compensation expenses

Earnings for the period ended March 31, 2026

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.

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,

Nonsegment expenses

Restructuring charges

Product rationalization

1 unchanged sentence

Nonsegment expenses excluding infrequent significant items

Excluding these items, nonsegment expenses increased $8,648 in the first quarter of fiscal year 2026 as compared to the same period of fiscal year 2025.

These increases were primarily attributable to higher project-related costs.

Excluding these items, nonsegment expenses increased $4,112 in the second quarter of fiscal year 2026 as compared to the same period of fiscal year 2025 and increased $12,759 in the first half of fiscal year 2026 as compared to the same period of fiscal year 2025.

The increases in nonsegment expenses for the second quarter and first half of fiscal year 2026 were primarily attributable to higher project-related costs and increased labor costs.

LIQUIDITY AND CA PITAL RESOURCES

5 unchanged sentences

We use borrowings under these foreign credit facilities to finance certain local operations on a periodic basis.

For further discussion of our revolving credit facility and our other credit facilities, see Note 15, Credit facilities, short-term borrowings, and long-term debt in the Notes to the Condensed Consolidated Financial Statements included in Part I, Item I of this Form 10-Q.

At December 31, 2025, we had total outstanding debt of $888,038, consisting of outstanding balances on our revolving credit facility, various series of unsecured notes due between 2026 and 2033, and obligations under our finance leases.

At December 31, 2025, we had $383,000 outstanding on our revolving credit facility, all of which is classified as short-term borrowings based on our intent and ability to repay this amount in the next 12 months.

Revolving credit facility and short-term borrowing activity during the three months ended December 31, 2025 were as follows:

At March 31, 2026, we had total outstanding debt of $1,123,278, consisting of outstanding balances on our revolving credit facility, various series of unsecured notes due between 2026 and 2033, and obligations under our finance leases.

At March 31, 2026, we had $623,000 outstanding on our revolving credit facility, all of which is classified as short-term borrowings based on our intent and ability to repay this amount in the next 12 months.

Revolving credit facility and short-term borrowing activity during the six months ended March 31, 2026 were as follows:

Maximum daily balance during the period

1 unchanged sentence

Weighted average interest rate on average daily balance

At December 31, 2025, we had additional borrowing availability of $609,131 under our revolving credit facility, net of outstanding letters of credit, and additional borrowing availability of $25,315 under various foreign credit facilities.

We were compliant with all our debt covenants as of December 31, 2025.

At March 31, 2026, we had additional borrowing availability of $369,125 under our revolving credit facility, net of outstanding letters of credit, and additional borrowing availability of $25,526 under various foreign credit facilities.

We were compliant with all our debt covenants as of March 31, 2026.

See Note 15, Credit facilities, short-term borrowings, and long-term debt in the Notes to the Consolidated Financial Statements included in Part II, Item 8 of our Annual Report on Form 10-K for fiscal year 2025, for more information about our covenants.

In addition to utilizing our cash resources to fund the working capital needs of our business, we evaluate, and from time to time, use cash for additional strategic uses, including the repurchase of our common stock under our authorized stock repurchase program, payment of dividends, significant capital expenditures, strategic acquisitions, and other potential uses of cash.

Our ability to service our long-term debt, to remain compliant with the various restrictions and covenants contained in our debt agreements, and to fund working capital, capital expenditures and product development efforts will depend on our ability to generate cash from operating activities, which in turn is subject to, among other things, future operating performance as well as general economic, financial, competitive, legislative, regulatory, and other conditions, some of which may be beyond our control.

our ability to generate cash from operating activities, which in turn is subject to, among other things, future operating performance as well as general economic, financial, competitive, legislative, regulatory, and other conditions, some of which may be beyond our control.

We believe that cash flows from operations, along with our contractually committed borrowings and other borrowing capability, will continue to be sufficient to fund anticipated capital spending requirements and our operations for the foreseeable future.

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We believe the lending institutions participating in our credit arrangements are financially stable and do not currently foresee adverse impacts to financial institutions supporting our capital requirements.

Three Months Ended December 31,

Six Months Ended March 31,

Net cash provided by operating activities

Net cash used in investing activities

Net cash provided by financing activities

Net cash provided by (used in) financing activities

Effect of exchange rate changes on cash and cash equivalents

Net change in cash and cash equivalents

Cash and cash equivalents at beginning of year

Cash and cash equivalents at end of period

Net cash provided by operating activities for the first three months of fiscal year 2026 were $114,437, compared to $34,516 for the same period of fiscal year 2025.

The increase in net cash provided by operating activities in the first quarter of fiscal year 2026 as compared to the same period of fiscal year 2025 was primarily attributable to increased earnings and the timing of certain tax payments.

Net cash used in investing activities for the first three months of fiscal year 2026 were $48,329, compared to $32,100 for the same period of fiscal year 2025.

The increase in net cash used in investing activities in the first quarter of fiscal year

2026 as compared to the same period of fiscal year 2025 was primarily due to higher capital expenditures and a payment for a business acquisition.

Net cash provided by financing activities for the first three months of fiscal year 2026 were $60,156, compared to $19,386 for the same period of fiscal year 2025.

The increase in net cash provided by financing activities for the first quarter of fiscal year 2026 as compared to the same period of fiscal year 2025 was primarily attributable to an increase in net debt borrowings, partially offset by increased repurchases of common stock.

During the first quarter of fiscal year 2026, we had net debt borrowings in the amount of $185,448, compared to net debt borrowings of $40,764 in the first quarter of fiscal year 2025.

During the first quarter of fiscal year 2026, we repurchased $129,387 of our common stock, whereas in the first quarter of fiscal year 2025, we repurchased $35,473.

Cash and cash equivalents, including restricted cash, at beginning of year

Cash and cash equivalents, including restricted cash, at end of period

Net cash provided by operating activities for the first half of fiscal year 2026 was $205,264, compared to $112,341 for the same period of fiscal year 2025.

The increase in net cash provided by operating activities in the first half of fiscal year 2026 as compared to the same period of fiscal year 2025 was primarily attributable to increased earnings.

Net cash used in investing activities for the first half of fiscal year 2026 was $99,463, compared to $4,138 for the same period of fiscal year 2025.

The increase in net cash used in investing activities in the first half of fiscal year 2026 as compared to the same period of fiscal year 2025 was primarily due to higher capital expenditures in the current fiscal year and proceeds received from certain business divestitures as part of product rationalization efforts in the prior fiscal year.

Net cash provided by financing activities for the first half of fiscal year 2026 was $74,431, compared to net cash used in financing activities of $17,602 for the same period of fiscal year 2025.

The increase in net cash provided by financing activities for the first half of fiscal year 2026 as compared to the same period of fiscal year 2025 was primarily attributable to an increase in net debt borrowings, partially offset by increased repurchases of common stock.

During the first half of fiscal year 2026, we had net debt borrowings in the amount of $425,193, compared to net debt borrowings of $43,627 in the first half of fiscal year 2025.

During the first half of fiscal year 2026, we repurchased $354,890 of our common stock, whereas in the first half of fiscal year 2025, we repurchased $79,493.

GAAP Financial Measures

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GAAP financial measures

Adjusted net earnings is defined by the Company as net earnings excluding, as applicable, (i) product rationalization and (ii) costs related to business development activities.

Adjusted net earnings is defined by the Company as net earnings excluding, as applicable, (i) product rationalization, (ii) costs related to business development activities, and (iii) restructuring charges.

The product rationalization adjustment pertains to the elimination and divestiture of certain product lines.

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Management defines adjusted earnings per share as adjusted net earnings, as defined above, divided by the weighted‐average number of diluted shares of common stock outstanding for the period.

Adjusted income tax expense is defined by the Company as income tax expense excluding, as applicable, (i) product rationalization and (ii) costs related to business development activities.

Adjusted income tax expense is defined by the Company as income tax expense excluding, as applicable, (i) product rationalization, (ii) costs related to business development activities, and (iii) restructuring charges.

The product rationalization adjustment pertains to the elimination and divestiture of certain product lines.

1 unchanged sentence

The reconciliation of net earnings and earnings per share to adjusted net earnings and adjusted earnings per share, respectively, is shown in the tables below:

Three Months Ended December 31,

Three Months Ended March 31,

Earnings Per Share

2 unchanged sentences

GAAP adjustments:

Restructuring charges

Product rationalization 1

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

Six Months Ended March 31,

Earnings Per Share

Earnings per share (U.S.

GAAP adjustments, net of tax:

Restructuring charges

Product rationalization 1

Business development activities 2

Tax effect of Non-U.S.

GAAP net earnings adjustments

Total non-U.S.

GAAP adjustments

Adjusted earnings per share (Non-U.S.

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

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

The reconciliation of income tax expense to adjusted income tax expense and the adjusted effective tax rate, is shown in the tables below:

Three Months Ended December 31,

Three Months Ended March 31,

Six Months Ended March 31,

Income tax expense (U.S.

9 unchanged sentences

Adjusted EBIT and adjusted EBITDA represent further non-U.S.

GAAP adjustments to EBIT and EBITDA, in each case adjusted to exclude, as applicable, (i) product rationalization and (ii) costs related to business development activities.

GAAP adjustments to EBIT and EBITDA, in each case adjusted to exclude, as applicable, (i) product rationalization, (ii) costs related to business development activities, and (iii) restructuring charges.

The product rationalization adjustment pertains to the elimination and divestiture of certain product lines.

1 unchanged sentence

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

Three Months Ended December 31,

Three Months Ended March 31,

Six Months Ended March 31,

Net earnings (U.S.

4 unchanged sentences

GAAP adjustments:

Restructuring charges

Product rationalization 1

6 unchanged sentences

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

Three Months Ended December 31,

Three Months Ended March 31,

Six Months Ended March 31,

Net earnings (U.S.

6 unchanged sentences

GAAP adjustments:

Restructuring charges

Product rationalization 1

20 unchanged sentences

Free cash flow reconciled to net cash provided by operating activities was as follows:

Three Months Ended December 31,

Six Months Ended March 31,

Net cash provided by operating activities (U.S.

13 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis