What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2026-07-30 compared with 2026-04-30 · 147 added, 140 removed, 307 unchanged (48% of the section changed)

63 unchanged sentences

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 CBP administrative process went live on April 20, 2026.

The Company has filed refund claims for tariffs previously paid and expects to recognize such refunds as they are received.

A portion of refund payments have already been recovered, but the timing and amount of overall recovery remain subject to the applicable administrative process and the outcome of the refund claims.

The impact on financial statements cannot be accurately estimated at this time.

The Company continues to evaluate its rights and remedies and is monitoring the status of its refund claims.

The United States-Iran Conflict

6 unchanged sentences

If such impacts occur, we expect the significant impacts to us would likely begin in fiscal year 2027.

The Company has not identified information indicating a decline in airline traffic during the first nine months of fiscal year 2026.

China Wind-Down

2 unchanged sentences

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.

In connection with this action, we have incurred restructuring charges of $14,206 in the nine months ended June 30, 2026 and do not expect to incur any additional significant charges in the remainder of fiscal year 2026, as the wind-down is expected to be substantially completed by the end of fiscal year 2026.

Operational Highlights

1 unchanged sentence

Three Months Ended

Six Months Ended

Nine Months Ended

Aerospace segment

22 unchanged sentences

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.

Net cash provided by operating activities for the first nine months of fiscal year 2026 was $351,937, compared to $237,976 for the first nine months of fiscal year 2025.

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

For the first nine months of fiscal year 2026, free cash flow was $195,600, compared to $159,439 for the first nine months 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.

The increase in free cash flow for the first nine months of fiscal year 2026 as compared to the same period of fiscal year 2025 was primarily attributable to increased earnings, partially offset by increases in working capital and higher capital expenditures.

The increase in working capital was driven by higher inventory levels to support demand and higher than expected accounts receivable balances due to the timing of collections.

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.

The new site is a strategic investment for us, and it has required, and will continue to 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 remainder 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 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.

At June 30, 2026, we held $474,851 in cash and cash equivalents and had total outstanding debt of $1,341,935.

We have additional borrowing availability of $399,610, net of outstanding letters of credit, under our revolving credit

At June 30, 2026, we also had additional borrowing capacity of $25,556 under various foreign lines of credit and foreign overdraft facilities.

RESULTS OF OPERATIONS

1 unchanged sentence

Three Months Ended

Six Months Ended

March 31, 2026

Nine Months Ended

June 30, 2026

% of Net Sales

March 31, 2025

June 30, 2025

% of Net Sales

March 31, 2026

June 30, 2026

% of Net Sales

March 31, 2025

June 30, 2025

% of Net Sales

11 unchanged sentences

Other select financial data:

March 31, 2026

June 30, 2026

September 30, 2025

1 unchanged sentence

Total stockholders' equity

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.

Consolidated net sales for the third quarter of fiscal year 2026 increased by $194,259, or 21.2%, compared to the same period of fiscal year 2025.

Consolidated net sales for the first nine months of fiscal year 2026 increased by $624,927, or 24.3%, 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

Nine-Month Period

Consolidated net sales for the period ended June 30, 2025

Aerospace volume

2 unchanged sentences

Effects of changes in foreign currency rates

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.

Consolidated net sales for the period ended June 30, 2026

The increases in Aerospace segment net sales in the third quarter and first nine months of fiscal year 2026 as compared to the same periods of fiscal year 2025 were primarily attributable to higher sales volumes and price realization.

We currently expect continued demand growth in Aerospace across our markets, and we are investing in capacity and automated processes to support this anticipated growth.

The increases in Industrial segment net sales in the third quarter and first nine months of fiscal year 2026 as compared to the same periods of fiscal year 2025 were primarily attributable to higher sales volumes and price realization.

Industrial net sales for the first nine months of fiscal year 2026 also benefited from 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.

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 .

Cost of goods sold increased by $93,512 to $759,799 for the third quarter of fiscal year 2026, from $666,287 for the third quarter of fiscal year 2025.

Cost of goods sold decreased to 68.5% of net sales for the third quarter of fiscal year 2026, compared to 72.8% of net sales for the third quarter of fiscal year 2025.

Cost of goods sold increased by $345,844 to $2,238,752 for the first nine months of fiscal year 2026, from $1,892,908 for the first nine months of fiscal year 2025.

Cost of goods sold decreased to 70.0% of net sales for the first nine months of fiscal year 2026, compared to 73.6% of net sales for the first nine months of fiscal year 2025.

The increases in cost of goods sold on an absolute basis in the third quarter and first nine months 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 31.5% for the third quarter of fiscal year 2026, compared to 27.2% for the third quarter of fiscal year 2025.

Gross margin was 30.0% for the first nine months of fiscal year 2026, compared to 26.4% for the first nine months of fiscal year 2025.

The increases in gross margin for the third quarter and first nine months 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 $17,762, or 20.0%, to $106,465 for the third quarter of fiscal year 2026, compared to $88,703 for the third quarter of fiscal year 2025.

Selling, general, and administrative expenses as a percentage of net sales decreased to 9.6% for the third quarter of fiscal year 2026, compared to 9.7% for the third quarter of fiscal year 2025.

The increase in selling, general, and administrative expenses on an absolute basis for the third quarter of fiscal year 2026 as compared to the same period of fiscal year 2025 was primarily due to increased expenses relating to headcount and increased variable annual incentive compensation costs.

Selling, general, and administrative expenses increased by $61,494, or 25.4%, to $303,735 for the first nine months of fiscal year 2026, compared to $242,241 for the first nine months of fiscal year 2025.

Selling, general, and administrative expenses as a percentage of net sales increased to 9.5% for the first nine months of fiscal year 2026, compared to 9.4% for the first nine months of fiscal year 2025.

The increase in selling, general, and administrative expenses for the first nine months of fiscal year 2026 as compared to the same period of fiscal year 2025 was primarily due to higher labor costs, increased variable annual incentive compensation costs, a reserve for a product performance claim in our Industrial segment, and higher project-related costs.

Research and development ("R&D") costs were $49,316, or 4.4% of net sales, for the third quarter of fiscal year 2026, compared to $41,088, or 4.5% of net sales, for the third quarter of fiscal year 2025.

R&D costs were $133,191, or 4.2% of net sales, for the first nine months of fiscal year 2026, as compared to $108,525, or 4.2% of net sales, for the first nine months of fiscal year 2025.

R&D costs increased in the third quarter and first nine months 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.

Interest expense increased by $3,593, or 32.0%, to $14,827 for the third quarter of fiscal year 2026, compared to $11,234 for the third quarter of fiscal year 2025.

Interest expense as a percentage of net sales was 1.3% for the third quarter of fiscal year 2026, compared to 1.2% for the third quarter of fiscal year 2025.

The increase in interest expense was primarily attributable to increased daily borrowings on the revolving credit facility during the third quarter of fiscal year 2026.

Interest expense increased by $1,742, or 4.9%, to $37,206 for the first nine months of fiscal year 2026, compared to $35,464 for the first nine months of fiscal year 2025.

Interest expense as a percentage of net sales was 1.2% for the first nine months of fiscal year 2026, compared to 1.4% for the first nine months 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, partially offset by a lower long-term debt balance, as we paid the entire principal balance of $75,000 on the Series I and L Notes on November 17, 2025.

Other income, net increased by $5,003 to $22,867 for the third quarter of fiscal year 2026, compared to $17,864 for the third quarter of fiscal year 2025.

The increase in other income, net was primarily attributable to an increase in earnings of the JV.

Other income, net decreased by $5,456 to $60,299 for the first nine months of fiscal year 2026, compared to $65,755 for the first nine months of fiscal year 2025.

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

Income taxes were provided at an effective rate of 24.2% on earnings before income taxes for the third quarter of fiscal year 2026, compared to 14.5% for the third quarter of fiscal year 2025.

Income taxes were provided at an effective rate of 21.8% on earnings before income taxes for the first nine months of fiscal year 2026, compared to 15.8% for the first nine months of fiscal year 2025.

The increases in the effective tax rates for the third quarter and first nine months of fiscal year 2026, compared to the same periods of fiscal year 2025, were primarily attributable to the elimination of the U.S.

intangible income tax benefit in the current year due to the one-time reversal of research costs previously capitalized, an increase in U.S.

taxes on foreign earnings, a decrease in the tax benefit from stock-based compensation, 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.

Segment Results

The following table presents sales by segment:

Three Months Ended March 31,

Six Months Ended March 31,

Three Months Ended June 30,

Nine Months Ended June 30,

Consolidated net sales

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,

Three Months Ended June 30,

Nine Months Ended June 30,

Nonsegment expenses

4 unchanged sentences

The following table presents segment earnings as a percent of segment net 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.

Three Months Ended June 30,

Nine Months Ended June 30,

Aerospace segment net sales increased by $112,683, or 18.9%, to $708,673 for the third quarter of fiscal year 2026, compared to $595,990 for the third quarter of fiscal year 2025.

Aerospace segment net sales increased by $395,290, or 23.9%, to $2,046,891 for the first nine months of fiscal year 2026, compared to $1,651,601 for the first nine months of fiscal year 2025.

The increases in Aerospace segment net sales in the third quarter and first nine months 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.

We currently expect continued demand growth in Aerospace across our markets, and we are investing in capacity and automated processes to support this anticipated growth.

Commercial OEM sales increased in the third 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 nine months 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.

Commercial services sales increased in the third quarter and first nine months 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, increased Leading Edge Aviation Propulsion ("LEAP") and Pratt & Whitney’s Geared Turbo Fan ("GTF") activity, and solid service demand across widebody and regional platforms.

We also experienced strong spare line replacement unit (“LRU”) sales in the first nine months of fiscal year 2026 as compared to the same period of fiscal year 2025.

Spare LRU sales were generally consistent with what we experienced during the last three sequential quarters.

Defense OEM sales decreased in the third quarter of fiscal year 2026 as compared to the same period of fiscal year 2025, primarily driven by a one-time revenue recognition adjustment.

Defense OEM sales increased in the first nine months of fiscal year 2026 as compared to the same period 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 third quarter and first nine months 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.

Aerospace segment earnings increased by $44,280, or 35.2%, to $170,020 for the third quarter of fiscal year 2026, compared to $125,740 for the third quarter of fiscal year 2025.

Aerospace segment earnings increased by $131,409, or 38.1%, to $476,490 for the first nine months of fiscal year 2026, compared to $345,081 for the first nine months 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

Three-Month Period

Nine-Month Period

Earnings for the period ended June 30, 2025

Sales volume and mix

3 unchanged sentences

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.

Earnings for the period ended June 30, 2026

Aerospace segment earnings as a percentage of segment net sales were 24.0% for the third quarter of fiscal year 2026, compared to 21.1% for the third quarter of fiscal year 2025.

The increase in Aerospace segment earnings in the third quarter of fiscal year 2026 as compared to the same period of fiscal year 2025 was the result of price realization and increased leverage from higher sales volumes, partially offset by inflation and unfavorable mix.

The price realization impact in the quarter included a one-time retroactive pricing adjustment.

Aerospace segment earnings as a percentage of segment net sales were 23.3% for the first nine months of fiscal year 2026, compared to 20.9% for the first nine months of fiscal year 2025.

The increase in Aerospace segment earnings in the first nine months of fiscal year 2026 as compared to the same period of fiscal year 2025 was the result of price realization and higher sales volumes, partially offset by strategic investments in manufacturing capabilities, inflation, and unfavorable mix.

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.

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 for the remainder of fiscal year 2026 and fiscal year 2027.

Industrial segment net sales increased by $81,576, or 25.5%, to $401,032 for the third quarter of fiscal year 2026, compared to $319,456 for the third quarter of fiscal year 2025.

Industrial segment net sales increased by $229,637, or 25.0%, to $1,149,836 for the first nine months of fiscal year 2026, compared to $920,199 for the first nine months of fiscal year 2025.

Industrial net sales for the first nine months of fiscal year 2026 also benefited from favorable foreign currency impacts.

Power generation sales increased in the third quarter and first nine months of fiscal year 2026 as compared to the same periods of fiscal year 2025, primarily due to higher data center demand for both base and backup power.

We recently expanded capacity to support anticipated continued demand growth for power generation applications.

Transportation sales increased in the third quarter and first nine months of fiscal year 2026 as compared to the same periods of fiscal year 2025, primarily due strong marine transportation sales reflecting higher shipyard output as well as increases in sales relating to our on-highway natural gas truck business in China.

We do not expect significant China on-highway sales in the fourth quarter as we complete the wind-down of this business.

Oil and gas sales increased in the third quarter and first nine months of fiscal year 2026 as compared to the same periods of fiscal year 2025, primarily due to higher liquified natural gas infrastructure related volume.

Industrial segment earnings increased by $40,862, or 85.8%, to $88,484 for the third quarter of fiscal year 2026, compared to $47,622 for the third quarter of fiscal year 2025.

Industrial segment earnings increased by $87,413, or 65.3%, to $221,199 for the first nine months of fiscal year 2026, compared to $133,786 for the first nine months 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

Nine-Month Period

Earnings for the period ended June 30, 2025

Sales volume and mix

1 unchanged sentence

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.

Earnings for the period ended June 30, 2026

Industrial segment earnings as a percentage of segment net sales were 22.1% for the third quarter of fiscal year 2026, compared to 14.9% for the third quarter of fiscal year 2025.

Industrial segment earnings as a percentage of segment net sales were 19.2% for the first nine months of fiscal year 2026, compared to 14.5% for the first nine months of fiscal year 2025.

The increases in Industrial segment earnings in the third quarter and first nine months of fiscal year 2026 as compared to the same periods of fiscal year 2025 were primarily driven by increased leverage from higher sales volume and price realization, partially offset by inflation.

Nonsegment expenses increased by $14,646 to $50,776 for the third quarter of fiscal year 2026, compared to $36,130 for the third quarter of fiscal year 2025.

Nonsegment expenses increased by $47,434 to $132,420 for the first nine months of fiscal year 2026, compared to $84,986 for the first nine months of fiscal year 2025.

The significant items that impacted nonsegment expenses were as follows:

Three Months Ended March 31,

Six Months Ended March 31,

Three Months Ended June 30,

Nine Months Ended June 30,

Nonsegment expenses

3 unchanged sentences

Nonsegment expenses excluding infrequent significant items

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.

Excluding these items, nonsegment expenses increased $5,382 in the third quarter of fiscal year 2026 as compared to the same period of fiscal year 2025 and increased $18,141 in the first nine months of fiscal year 2026 as compared to the same period of fiscal year 2025.

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

LIQUIDITY AND CA PITAL RESOURCES

6 unchanged sentences

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 1 of this Form 10-Q.

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:

At June 30, 2026, we had total outstanding debt of $1,341,935, 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 June 30, 2026, we had $592,496 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 nine months ended June 30, 2026 were as follows:

Maximum daily balance during the period

1 unchanged sentence

Weighted average interest rate on average daily balance

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.

At June 30, 2026, we had additional borrowing availability of $399,610 under our revolving credit facility, net of outstanding letters of credit, and additional borrowing availability of $25,556 under various foreign credit facilities.

We were compliant with all our debt covenants as of June 30, 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 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 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.

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.

1 unchanged sentence

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.

Six Months Ended March 31,

Nine Months Ended June 30,

Net cash provided by operating activities

3 unchanged sentences

Net change in cash and cash equivalents

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.

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 nine months of fiscal year 2026 was $351,937, compared to $237,976 for the same period of fiscal year 2025.

The increase in net cash provided by operating activities in the first nine months 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 nine months of fiscal year 2026 was $286,795, compared to $27,518 for the same period of fiscal year 2025.

The increase in net cash used in investing activities in the first nine months 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 payments for acquisitions in the current fiscal year, partially offset by 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 nine months of fiscal year 2026 was $88,769, compared to net cash used in financing activities of $26,126 for the same period of fiscal year 2025.

The increase in net cash provided by financing activities for the first nine months 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 nine months of fiscal year 2026, we had net debt borrowings in the amount of $644,622, compared to net debt borrowings of $50,281 in the first nine months of fiscal year 2025.

During the first nine months of fiscal year 2026, we repurchased $553,031 of our common stock, whereas in the first nine months of fiscal year 2025, we repurchased $124,276.

GAAP Financial Measures

13 unchanged sentences

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

Three Months Ended March 31,

Three Months Ended June 30,

Earnings Per Share

3 unchanged sentences

Restructuring charges

Product rationalization 1

Business development activities 2

Tax effect of Non-U.S.

2 unchanged sentences

Adjusted net earnings (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.

Six Months Ended March 31,

Nine Months Ended June 30,

Earnings Per Share

13 unchanged sentences

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 March 31,

Six Months Ended March 31,

Three Months Ended June 30,

Nine Months Ended June 30,

Income tax expense (U.S.

13 unchanged sentences

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

Three Months Ended March 31,

Six Months Ended March 31,

Three Months Ended June 30,

Nine Months Ended June 30,

Net earnings (U.S.

13 unchanged sentences

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

Three Months Ended March 31,

Six Months Ended March 31,

Three Months Ended June 30,

Nine Months Ended June 30,

Net earnings (U.S.

22 unchanged sentences

Management uses free cash flow, which is defined by the Company as net cash provided by operating activities less payments for property, plant, and equipment, in reviewing the financial performance of and cash generation by Woodward’s various business groups and evaluating cash levels.

We believe free cash flow is a useful measure for investors because it portrays our ability to grow organically and generate cash from our businesses for purposes such as paying interest on our indebtedness, repaying maturing debt, funding business acquisitions, repurchasing our common stock, paying dividends, and investing in additional research and development.

paying dividends, and investing in additional research and development.

In addition, securities analysts, investors, and others frequently use free cash flow in their evaluation of companies.

4 unchanged sentences

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

Six Months Ended March 31,

Nine Months Ended June 30,

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