WWD 10-K & 10-Q changes, risk factors and insider trading

We face intense competition from a number of established competitors in the United States and abroad, some of which are larger in size or are divisions of large, diversified companies with substantially greater financial resources. In addition, global competition continues to increase. Changes in competitive conditions, including the availability of new technologies, products and services, the introduction of new channels of distribution, changes in OEM and aftermarketservices pricing, and further consolidation of companies in our industries, could impact our relationships with our customers and may adversely affect future sales and margins, which could have a material adverse effect on our business, financial condition, results of operations, and cash flows.

A significant portion of our revenue is concentrated among a relatively small number of customers. We have fewer customers than many companies with similar sales volumes. For the fiscal year ended September 30, 2024,2025, sales to our largest 5five customers represented approximately 35%36% of our consolidated net sales and approximately 31%34% of our accounts receivable. If any of our significant customers were to change suppliers, in-source production, institute significant restructuring or cost-cutting measures, or experience financial distress, these significant customers may substantially reduce, or otherwise be unable to pay for, purchases from us. Accordingly, our consolidated net sales could decrease significantly, or we may experience difficulty collecting, or be unable to collect, amounts due and payable, which could have a material adverse effect on our business, financial condition, results of operations, and cash flows.

Our products and services are technologically complex and require significant capital commitments. Prospective customers generally must commit significant resources to test and evaluate our products and to install and integrate them into larger systems. Accordingly, customers often require a significant number of product presentations and demonstrations before reaching a sufficient level of confidence in the product’s performance and compatibility to commit to an order. In addition, orders expected in one quarter may shiftshift, and from time to time have shifted, to another quarter or be cancelled with little advance notice as a result of customers’ budgetary constraints, internal acceptance reviews, and other factors affecting the timing of customers’ purchase decisions. The difficulty in forecasting demand increases the challenge in anticipating sales cycles and our inventory requirements, which may cause us to over-produce finished goods and could result in inventory write-offs, or could cause us to under-produce finished goods. Any such over-production or under-production could have a material adverse effect on our business, financial condition, results of operations, and cash flows.

In January 2016, Woodward and GE,GE (now GE Aerospace), consummated the formation of a strategic joint venture (the “JV”) and since April 2024, GE has been acting through GE Aerospace.. The JV agreement does not restrict Woodward from entering into any market; however, consolidation in the aircraft engine market is increasingly prevalent, resulting in fewer engine manufacturers, and thus it may become more difficult for Woodward to secure new business with GE Aerospace competitors on similar product applications both within and outside the specific markets the JV operates. Additionally, if GE Aerospace fails to win new content in the market space covered by the JV, Woodward may be prevented from expanding content on future commercial aircraft engines in those markets.

We are dependent upon suppliers for parts and raw materials used in the manufacture of products that we sell to our customers, and our raw material costs are subject to commodity market fluctuations and have been impacted by the current inflationary environment. We have experienced shortages of certain parts and raw materials due to challenges in our supply chain,chain. although we have madeOur strategic investments to simplify and strengthen our supply chain.chain Wemay not be successful, and we may continue to experience shortages of parts or raw materials for the same or other reasons, such as the loss of a significant supplier, global supply chain constraints, high overall demand creating shortages in parts and supplies we use, financial distress, work stoppages, natural disasters, fluctuations in commodity prices, the imposition of tariffs or other duties, or production or distribution difficulties that may affect one or more of our suppliers. In some instances, we depend upon a single source of supply, manufacturing, or logistics support or participate in commodity markets that may be subject to allocations of limited supplies by suppliers. Some of our suppliers have experienced, and others may similarly experience, financial difficulties, inflationary pressures, production quality issues, labor instability, delivery delays or other performance problems, and, as a result, we have from time to time been, and may in the future be, unable to meet commitments to our customers and/or incur additional costs. Our customers rely on us to provide on-time delivery and have certain rights if our delivery standards are not maintained. A significant increase in our supply costs, including for raw materials that are subject to commodity price fluctuations, inflationary pressures, and/or the imposition of tariffs, or a protracted interruption of supplies for any reason, could result in the delay of one or more of our customer contracts, increase our costs, result in lost revenue or could damage our reputation and relationships with customers. In addition, quality and sourcing issues that our suppliers may experience can also adversely affect the quality and effectiveness of our products and services and may result in liability or reputational harm to us. Our customers rely on us to provide on-time delivery and have certain rights if our delivery standards are not maintained. Significant increases in our supply costs, including for raw materials that are subject to commodity price fluctuations, inflationary pressures, the imposition of tariffs, or a protracted interruption of supplies for any reason, have resulted in, and could result in further production and shipment delays, increased costs, and in lost revenue. Significant issues could damage our reputation and relationships with customers. Any of these events could have a material adverse effect on our business, financial condition, results of operations, and cash flows.

Some of our expenses are relatively fixed in relation to changes in sales volume and are difficult to adjust in the short term. Expenses driven by business activity other than sales level and other long-term expenditures, such as fixed manufacturing costs, capital expenditures, and research and development expenses may be difficult to reduce in a timely manner in response to a reduction in sales. In periods of rapid sales increases it may be difficult to quickly increase our production of finished goods because of our long manufacturing lead times. If a sudden, unanticipated need for raw materials, components and labor arises, we could experience difficulties in sourcing these items at a favorable cost, in sufficient quantities or at all. These factors could result in delays in fulfilling customer sales contracts, lost revenue, damage to our reputation and relationships with our customers, and an inability to meet market demand, which in turn could prevent us from taking advantage of business opportunities or responding to competitive pressures and could result in an increase in costs leading to a decrease in net earnings or even net losses. In addition, we sell products that have varying profit margins, and fluctuations in the mix of sales of our various products mayhave affectimpacted our overall profitability.profitability, and may do so in the future.

Sales made directly to U.S. Government agencies and entities, or indirectly through third partythird-party manufacturers, such as tier-one prime contractors,contractors utilizing our parts and subassemblies, accounted for approximately 17%20% of total sales in bothfiscal year 2025 and 17% in fiscal year 2024 and fiscal year 2023.2024.

Defense budgets tend to rise when perceived threats to national security increase the level of concern over the country’s safety, but we can provide no assurance that an increase in defense spending will be allocated to programs that would benefit our business. Decreases in U.S. Government defense spending, changes in the spending allocation, and phase-outs or terminations of certain aerospace and defense programs on which we have content could have a material adverse effect on our sales unless they are offset by other aerospace and defense programs and opportunities. If the priorities of the U.S. Government change and/or defense spending is reduced or delayed for any of the reasons discussed above, our business, financial condition, results of operations, and cash flows may be adversely affected.

As of September 30, 2024,2025, our total debt was $872,470,$702,202, including $475,000$390,000 in unsecured notes denominated in U.S. dollars issued in private placements and $178,624$187,613 of unsecured notes denominated in Euros issued in private placements. We are obligated to make interest and scheduled principal payments under the agreements governing our long-term debt, which requires us to dedicate a portion of our net cash flowprovided fromby operationsoperating activities to payments on our indebtedness, and which may reduce the availability of our cash flow for other purposes, including business development efforts and mergers and acquisitions. These debt obligations could make us more vulnerable to general adverse economic and industry conditions and could limit our flexibility in planning for, or reacting to, changes in our business and the industries in which we operate, thereby placing us at a disadvantage to our competitors that have less indebtedness. Further, we may require additional capital to repay our debt obligations when they mature, and such capital may not be available on terms acceptable to us or at all.

Our existing revolving credit facility and note purchase agreements impose financial covenants on us and our subsidiaries that require us to maintain certain leverage ratios and minimum levels of consolidated netinterest worth.coverage. Certain of these agreements require us to repay outstanding borrowings with portions of the proceeds we receive from certain sales of property or assets and specified future debt offerings.

AdditionalUnforeseen additional tax expense or additional tax exposures could impact our future profitability.

changes in management’s intentions regarding the amount of earnings reinvested offshore; and the results of audits and examinations of previously filed tax returns and continuing assessments of our tax exposures.

political, social and economic conditions, instability and disruptions;

Also, a material disruption to the financial institutions with whom we transact business could have a material adverse effect on our international operations or on our business, financial condition, results of operations, and cash flows. We could be adversely affected if the financial institutions providing our capital refuse to honor their contractual commitments, cease lending, or declare bankruptcy.

Changes in the estimates of fair value of reporting units or of long-lived assets, particularly goodwill, may result in future impairment charges, which could have a material adverse effect on our business, financial condition, and results of operation.operations.

Due to the specialized nature of our business, competition for technical personnel is intense and our future performance is highly dependent on our ability to hire, train, assimilate, and retain a qualified workforce. Additionally, it is important we hire and retain personnel with relevant experience in local laws, regulations, customs, traditions, and business practices to support our international operations. Achieving this objective may be difficult due to many factors, including fluctuations in global economic and industry conditions, management changes, increasing local and global competition for talent, the availability of qualified employees,members, challenges associated with retaining qualified employees,members, restructuring and alignment activities, and the attractiveness of our compensation and benefit programs.

Our financial and operating performance depends on continued access to a stable workforce and on favorable labor relations with our employees.members.

We rely on a highly trained workforce due to the specialized nature of our business. Further, approximately 13% of our workforce in the United States is unionized, and certain of our operations in the United States and internationally involve different employee/employer relationships and the existence of works’ councils. We periodically need to renegotiate our collective bargaining agreements, and any failure to negotiate new agreements or extensions in a timely manner could result in work stoppages or slowdowns. Any significant increases in labor costs, deterioration of employeemember relations, including any conflicts with works’ councils or unions, or slowdowns or work stoppages at any of our locations, whether due to employeemember turnover, changes in availability of qualified technical personnel, failure to have a collaborative and effective relationship with our employees, including our union employees, or an effective collective bargaining agreement in place with our union employees,members, or otherwise, could impair our ability to supply products or fulfill orders, and could otherwise have a material adverse effect on our business, our relationships with customers, and our financial condition, results of operations, and cash flows. Further increases in labor costs could significantly reduce our profit margins if we are unable to flow such costs through to our customers.

Failure to develop, obtain, enforce, and protect intellectual property rights or third partiesparties' claims that we are infringing their intellectual property could harm our business.

Third parties may in the future assert,assert that we have infringed, misappropriated, or otherwise violated their intellectual property rights. We cannot assure you that our current or future technologies are not,not infringing or violating intellectual property rights of third parties, or will not do so in the future. In the event we face claims of infringement or misappropriation, we may face expensive litigation or indemnification obligations, be required to enter into licenses, and may be prevented from selling existing products and pursuing product development or commercialization. Even if such claims are without merit, we may be required to expend significant time and resources on the defense of such claims. If we are unable to sufficiently protect our patent and other proprietary rights or if we infringe on or misappropriate proprietary rights of others, our business, financial condition, results of operations, and cash flows could be materially adversely affected. The theft or unauthorized use or publication of our intellectual property and/or technological know‑how that is either not patentable or intentionally unpatented, including trade secrets, could adversely affect our competitive position and the value of certain of our investments in research and development.

We are subject to legal proceedings, investigations, claims and/or regulatory proceedings whichthat could have a significant impact on our business and operations.

We are currently involved or may become involved in legal, regulatory, and other proceedings. These proceedings may include, without limitation, product liability matters, intellectual property matters, contract disputes or claims, pending or threatened litigation, and governmental investigations, as well as employment, tax, environmental, or other matters. These proceedings could lead to enforcement actions, adverse changes to our business practices, fines and penalties, business remedies, or the assertion of private litigation claims and/or damages that could be material, and of which could have a material adverse effect on our business, financial condition, results of operations, and cash flows. Even if the legal proceedings we face are decided in our favor, or are unfounded, we may incur material expenses and such matters may require significant management attention, and may harm our reputation with customers, employeesmembers or investors. We accrue for known individual matters if we believe it is probable that the matter will result in a loss when ultimately resolved using estimates of the most likely amount of loss. However, estimating possible losses involves significant judgment and outcomes are unpredictable, therefore, actual losses may exceed our estimates.

We depend heavily on the confidentiality, integrity, and availability of our IT and computerized systems to communicate and operate effectively. We store sensitive data, including proprietary business information, intellectual property, classified information, customer information, supplier information, and confidential employee or other personal data on our servers and databases. Also, due to political uncertainty and hostile military actions, we may beare subject to heightened risks of cybersecurity incidents and security breaches initiated by nation-state or affiliated actors.

FromWe timeand tocertain time,of weour third-party providers have experienced cyberattacks on our IT infrastructure and systems. WeGiven mayour becomeindustry, thewe targetexpect continued targeting of cyber-attacks by third parties,cyberattacks, either directly against us or indirectly via our supply chain or third-party vendors, seeking unauthorized access to our data or our customers’ data or to disrupt our operations or our ability to provide services. ThereWe isface alsomany aongoing dangercybersecurity ofthreats, such as the loss, misuse, theft, unavailability, or unauthorized disclosure or other processing of information or assets (including source code), or damage to or other compromise of systems, components, and other IT assets, including the introduction of malicious code or other vulnerabilities by people who obtain unauthorized access to our facilities, systems, or information. There are many different techniques used to obtain unauthorized access to systems and data, and such techniques continue to evolve and become more sophisticated, including the increasing use by threat actors of artificial intelligence, and the adversaries are becoming more advanced, including nation statesnation-states and actors sponsored by or affiliated with nation states,nation-states, which target us and other defense contractors because we protecthave national security information,information in our possession, and other actors with substantial financial and technological resources. These techniques include, but are not limited to, the use of malicious software, destructive malware, ransomware, denial of servicedenial-of-service attacks, phishing and other means of social engineering, and other means of causing system or network disruptions, obtaining unauthorized access to data or systems, or causing other cybersecurity breaches and incidents. Additionally, we are exposed to system and service disruptions, and cybersecurity breaches or incidents,incidents may resultresulting from employee or contractor error, negligence, or malfeasance. Further, therewe haveexpect been and may continue to becontinued cyberattacks on,directed andat other attempts to compromise the security of, theour supply chain. We mayface experiencecontinued securitycybersecurity breaches or incidentsthreats resulting from tools, services, or other third-party components and security vulnerabilities within, or introduced by, such tools, services, or components. Due to the rapidly evolving threat environment and other factors, we maycannot notguarantee be successful in defendingprotection against all such attacks. Further, due to the evolving nature of these security threats and the national security aspects of much of the data wein protect,our possession, the full impact of any future security breach or incident cannot be predicted. In addition, because certain of our products and services are integrated with our customers’ systems and processes, the circumvention or failure of our cybersecurity measures may compromise the confidentiality, integrity, and availability of our customers’ systems or data. We have acquired and continue to acquire companies with vulnerabilities or unsophisticated security measures, which exposes us to cybersecurity risks.

If any of our IT infrastructure or systems are damaged, disrupted, or are otherwise impacted by security breaches or incidents, whether from cybersecurity attacks or other causes, or if we suffer any security breach or incident involving unauthorized access to, misuse, acquisition, disclosure, loss, alteration, or destruction of our data or other data we maintain or otherwise process, we could experience significant operational stoppages, disruptions, delays, and/or other detrimental impacts on our operations or investment in research, and may face increased costs, including increased costs of implementing new data protection and security measures, policies, and procedures, and costs associated with remediating and otherwise responding to the security breach or incident. Any such security breach or incident or the perception that it has occurred, also may result in reputational damage and increased operational costs, regulatory investigations, proceedings, and orders, litigation or other demands, indemnity obligations, damages for contract breach, fines or penalties relating to actual or alleged violation of applicable laws, regulations, or contractual obligations, incentives offered to customers or other business partners in an effort to maintain business relationships, and other costs and liabilities. Such impacts could result in diminished competitive advantages and could have a material adverse effect on our business, financial condition, results of operations, and cash flows. Further, any unauthorized disclosuredisclosure, or useuse, or acquisition of our intellectual property and/or confidential business information could harm our competitive position, result in a loss of intellectual property protection, and otherwise reduce the value of our investment in research and development and other strategic initiatives or otherwise adversely affect our business.

We collect, store, and otherwise process certain confidential or sensitive data, including personal data and other information that is subject to laws, regulations, customer-imposed controls, or other actual or asserted obligations. The laws, regulations, standards, and other actual and asserted obligations relating to privacy, data protection, and cybersecurity to which we may be subject, in the U.S. and globally, are evolving. For example, as a contractor to the Department of Defense, we are contractually required to protect controlled unclassified information and comply with certain cybersecurity regulations, including controls specified in the National Institute of Standards and Technology Special Publication 800-171 (“NIST SP 800-171”). The Cybersecurity Maturity Model Certification program was also recently finalized, which will result in various compliance and contractual obligations in relation to our Department of Defense and related customers. In addition, in the European Union, the General Data Protection Regulation imposes stringent requirements applicable to processing personal data and provides for substantial penalties for noncompliance, and in the U.S., California and numerous other states have adopted comprehensive privacy laws, with other states considering such laws. Many jurisdictions around the world have passed or are considering laws and regulations relating to privacy, data protection, and cybersecurity, including laws that impose cross-border data transfer restrictions and require certain personal data to be maintained on local servers.

Many of our Industrial segment OEM and aftermarketservices customers and our Aerospace segment rotorcraft product lines’ customers provide goods and services that support various industrial extraction activities, including mining, oil and gas exploration and extraction, and transportation of raw materials from extraction sites to refineries and/or processing facilities. Long-term lower prices for commodities such as oil, natural gas, gold, tin, and various other minerals could reduce exploration activities and place downward pressure on demand for our goods and services that support exploration and extraction activities.

Our product development activities may not be successful, may be more costly than anticipated, or we may not be able to produce newly developed products at a cost that meets the anticipated product cost structure.

Our business involves a significant level of product development activities,activities generallyand inresearch connection with our customers’and development activities. Industry standards, customer expectations, or other products may emerge that could render one or more of our products or services less desirable or obsolete. Additionally, our competitors may develop new technology, or more efficient ways to produce their existing products that could cause our existing products or services to become less desirable or obsolete.costs. Maintaining our market position requires continued investment in research and development. During an economic downturn or a subsequent recovery, we may need to maintain our investment in research and development, which may limit our ability to reduce these expenses in proportion to a sales shortfall.

Difficulties in the integration of the acquired business may include consolidating the operations, processes, and systems of the acquired business, retaining and motivating key management and employees,members, and integrating existing business relationships with suppliers and customers. Even if integration is successful, the financial and operational results may differ materially from our assumptions and forecasts due to unforeseen expenses, delays, conditions, and liabilities. Evolving regulations such as changes in tax, trade, environmental, labor, safety, payroll, or pension policies could increase the expected costs of acquisitions, and fluctuations in foreign currency exchange rates may impact the agreed upon purchase price. In addition, we may incur unanticipated costs or expenses following an acquisition, including post-closing asset impairment charges, expenses associated with eliminating duplicate facilities, and other liabilities.

Our restructuring activities may reduce our profitability,profitability and may not have the intended effects.

Restructuring and/or alignment activities can also create unanticipated consequences, such as instability or distraction among our workforce, and we cannot be sure that any restructuring or alignment efforts that we undertake will be successful. A variety of risks could cause us not to realize expected cost savings, including, among others, higher than expected severance costs related to staff reductions, higher than expected costs of closing plants, higher costs to hire new employeesmembers or delays or difficulty hiring the employeesmembers needed, higher than expected operating costs associated with moving production lines, delays in the anticipated timing of activities related to our cost-saving plan, and other unexpected costs associated with operating the business.

If we are unable to structure our operations in the light of evolving market conditions, it could have a material adverse effect on our business, financial condition, results of operations, and cash flows.

This Management’s Discussion and Analysis should be read together with the Consolidated Financial Statements and Notes included in this report. Dollar and number of share amounts contained in this discussion and elsewhere in this Annual Report on Form 10-K are in thousands, except per share amounts. For a discussion of the 20232024 Results of Operations, including a discussion of the financial results for the fiscal year ended September 30, 20232024 compared to the fiscal year ended September 30, 2022,2023, refer to Part I, Item 7 of our Annual Report on Form 10-K filed with the SEC on November 17,26, 2023.2024.

We enhance the global quality of life and sustainability by optimizing energy use through improved efficiency and lower emissions. We are an independent designer, manufacturer, and serviceservices provider of control solutions for the aerospace and industrial markets. We design, produce, and service reliable, efficient, low-emission, and high-performance energy control products for diverse applications in challenging environments. We have production and assembly facilities primarily in the United States, Europe, and Asia, and promote our products and services through our worldwide locations.

Our strategic focus is providing energy control and optimization solutions for the aerospace and industrial markets. The precise and efficient control of energy, including motion, fluid, combustion, and electrical energy, is a growing requirement in the markets we serve, and we have developed and are executing on strategies to leverage the macro trends of reducing greenhouse gases, commercializing space, and accelerating the digital age. To facilitate a cleaner world, we are partnering with our customers to enable their equipment to be more efficient, capable of utilizing clean burning fuels, advancing fuel cells, and the integration of renewable power in both commercial and defense operations. Our core technologies can be leveraged across our markets and customer applications, enabling us to develop and integrate cost-effective and state-of-the-art fuel, combustion, fluid, actuation, and electronic systems. We focus primarily on serving OEMs and equipment packagers, partnering with them to bring superior component and system solutions to their demanding applications. We also provide aftermarketservice repair, maintenance, replacement, and other service support for our installed products.

Commercial and Civil Aircraft – The commercial aerospace markets experienced robust demand inIn fiscal year 20242026, aswe aexpect result of continuedsteady global air traffic growth. In response, aircraft operators are taking delivery of the newest generation aircraft models to meet the growing demand, replace aging aircraft, and achieve greater fuel efficiency, and lower emissions. The delivery of the newest generation of aircraft is expected to favor our product offerings because we have more content on those aircraft. We expect production levels to continue to grow due to strong OEM order backlogs for the new aircraft models and continued demand supply imbalance. Demand in the widebody aviation market improved in fiscal year 20242025 compared to recent years due to recovering international travel, which has led to increasing production rates on the A350, A330neo, and Boeing 787,787. andFurther, 777.we Wealso expect narrowbody deliveries to improve due to backlog associated with single aisle programs and planned production ramps in fiscal year 20252026 as compared to fiscal year 2024.2025.

We have content on the Airbus A220, A320neo, A330neo, Bell 429, Boeing 737 MAX, 777, 787, and Comac C919. We have been awarded content on the Boeing 777-9 and Airbus A350 as well as content on a variety of business jet platforms, among others.

Defense – In recent years, the defense industry has been strong as budgetary allocations have generally increased since 2016. Ongoing global conflicts and preparation for near-peer threats are leading to higher global defense budgets. The U.S. National Defense Authorization Act ("NDAA") for fiscal year 20242025 resulted in higher levels of funding for procurement, research and development, and maintenance, which supported our growth for fiscal year 2024.2025. We expect defense research and development, procurement, and maintenance to increase in future years, which would be beneficial for us for future opportunities in defense markets. Our involvement with a wide variety of defense programs in fixed-wing aircraft, rotorcraft, and weapons systems has provided relative stability for our defense market sales, as some newer programs increase (e.g., F-35 Lightning II and T-7A Trainer), and some legacy programs decrease (e.g., F/A-18 E/F Super Hornet and V-22 Osprey). Other programs are relatively steady (e.g., KC-46A Tanker, UH-60 Black Hawk, and A-64 Apache helicopter programs) and some legacy programs, such as the F-15, should maintain or potentially increase production. Smart defense programs for which we have sales include the Joint Direct Attack Munition (“JDAM”), Small Diameter Bomb (“SDB”), and AIM-9X smart defense systems. During fiscal year 2024,2025, we experienced significant growth in smart defense programs following multiple years of decline.programs. We expect overall demand to increase in the near term for these weapons programs.

AftermarketServices – Our commercial aftermarketservices business increased significantly in fiscal year 2024,2025, as global air traffic continued to grow and initial provisioning sales have increased. In addition, our products have been selected for new aerospace platformsplatforms, and our content has increased across existing platforms, which drives increased aftermarketservices sales. With the entry into service of single aisle aircraft (Boeing 737 MAX and Airbus A320neo), we have seen a significant increase in initial provisioning sales to the operators of these new aircraft. The increasing utilization of LEAP and GTF engines, on which we have significant content, should further contribute to the anticipated future growth in the commercial services business. As aircraft production levels increase to accommodate rising passenger demand and to mitigate higher operating costs driven largely by higher fuel costs on older and less fuel-efficient aircraft, we expect airlines will retire older generation aircraft as they reach certain age thresholds (typically between twenty20 and twenty-five25 years). However, in the past few years, aircraft retirements have lagged historical levels because passenger demand has outpaced deliveries of the newest generation aircraft, forcing airlines to keep older generation legacy aircraft in service longer than anticipated. This has led to increased demand for repairs and spare parts for older engine programs remaining in service, consistent with air traffic growth. This dynamic applies to commercial aftermarketservices related to repairs and spare parts for mature legacy programs with large in-service fleets, such as the Airbus A320 and the Boeing 777. In fiscal year 2026, we anticipate the commercial services growth rate to moderate as compared to fiscal year 2025 due to high levels of certain products in fiscal year 2025 and because we received advanced purchases from certain customers in the second half of fiscal year 2025 that we believe were made to take advantage of a window of trade stability.

Our defense aftermarketservices sales alsodeclined increased significantlyslightly during fiscal year 20242025 due to increasedunfavorable defensemix. Defense budgets resultingcontinue into support training missions and operations and maintenance upgrades. Global conflicts and growing international demand for various other military programs continue to drive demand for operationsutilization of defense aircraft, including fighter jets, transports and both utility and attack rotorcraft, which are all supported by our products and systems. Although we expect variability, which is generally attributable to the cycling of various maintenance and upgrade programs, as well as actual usage, our outlook for the defense aftermarketservices is strong. This is due primarily to growing fleets, the service lives of existing military programs being extended, and increased demand for repairs and spare parts for older military aircraft programs remaining in service.

Transportation – Our key markets for transportation include compressed natural gas and liquefied natural gas trucks in Asia, mining, and commercial and defense marine markets. WhileIn fullfiscal year sales2025, we experienced a material decline in demand for our on-highwayon‑highway natural gas truck business in China increased significantly as compared to fiscal year 2023,2024. we saw aThis material decline in this business from the first half of fiscal year 2024 to the second halfwas due to the deteriorating Chinese economy, a narrower natural gas to diesel price spread, and elevated customer inventory levels. In fiscal year 2025, we expect a decline in demand in our on-highway natural gas trucks business in China as compared to fiscal year 2024, andlevels; future demand remains uncertain due to the volatility of this business. In global marine markets, demand in fiscal year 20242025 increased due to increasedsustained ship build rates and higherthe shipfavorable utilization,mix drivingof currentships and future aftermarket activity.produced. Both commercial and defense marine customers continue to launch additional projects to support new programs or modernize fleets, including incorporating alternative fuels capability, which should drive expanded OEM and service opportunities,opportunities asbecause multi-fuel engines contain more of our content.

Adjusted net earnings, adjusted earnings per share, adjusted effective tax rate, EBIT, adjusted EBIT, EBITDA, and adjusted EBITDA, and free cash flow, are non-U.S. GAAP financial measures. A description of these measuresmeasures, as well as a reconciliation of these non-U.S. GAAP financial measures to the closestmost directly comparable U.S. GAAP financial measuresmeasures, can be found under the caption “Non-U.S. GAAP Financial Measures” in this Item 7 – Management’s Discussion and Analysis of Financial ConditionsCondition and Results of Operations.

Net cash provided by operating activities for fiscal year 20242025 was $439,089,$471,294, compared to $308,543$439,089 for fiscal year 2023.2024. The increase in net cash provided by operating activities in fiscal year 20242025 compared to fiscal year 20232024 iswas primarily attributable to increased earnings and improvedthe timing of certain tax payments, partially offset by working capital.capital increases.

For fiscal year 2024,2025, free cash flow was $342,809,$340,366, compared to $232,043$342,809 for fiscal year 2023.2024. We define free cash flow as net cash flowsprovided fromby operating activities less payments for property, plant, and equipment. The increasedecrease in free cash flow for fiscal year 20242025 as compared to the prior fiscal year was primarily due to increasedhigher earningscapital and improved working capital,expenditures, partially offset by higher capitalearnings. expenditures.Free cash flow is a non-U.S. GAAP financial measure. A description of this measure as well as a reconciliation of this non-U.S. GAAP financial measure to the most directly comparable U.S. GAAP financial measure can be found under the caption “Non-U.S. GAAP Financial Measures” in this Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations.

At September 30, 2024,2025, we held $282,270$327,431 in cash and cash equivalents and had total outstanding debt of $872,470$702,202 with additional borrowing availability of $775,136,$869,828, net of outstanding letters of credit, under our revolving credit agreement. At September 30, 2024,2025, we also had additional borrowing capacity of $19,771$24,176 under various foreign lines of credit and foreign overdraft facilities.

In the Aerospace segment, the increase in net sales for fiscal year 20242025 as compared to fiscal year 20232024 was primarily attributable to price realization, as well as increases in both commercialrealization and defense aftermarket due to higher aircraftsales utilization.volumes.

In the Industrial segment, the increasedecrease in net sales for fiscal year 20242025 as compared to fiscal year 20232024 was primarily attributable to growthlower insales transportation,volume particularlyand inunfavorable themix, both related to reduced China on-highway natural gas truck business in China, price realization, and strong sales in power generation,demand, partially offset by aprice decrease in oil and gas sales.realization.

Cost of goods sold increased by $210,787$163,002 to $2,610,772 for fiscal year 2025, from $2,447,770 for fiscal year 2024,2024. fromCost $2,236,983of goods sold as a percentage of net sales declined slightly to 73.2% for fiscal year 2023.2025, compared to 73.6% for fiscal year 2024. The increase in cost of goods sold on an absolute basis in fiscal year 20242025 compared to the prior fiscal year was2024 is primarily due to higher sales volume 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 26.8% for fiscal year 2025, compared to 26.4% for fiscal year 2024,2024. comparedGross tomargin 23.2%increased slightly for fiscal year 2023.2025 Theas increasecompared in gross margin forto fiscal year 2024 is2024, primarily attributabledue to price realization and higher sales volume,realization, partially offset by netunfavorable inflationary impacts on material and labor.mix.

Selling, general and administrative expenses increased by $37,807,$22,324, or 14.0%,7.3%, to $329,823 for fiscal year 2025, compared to $307,499 for fiscal year 2024, compared to $269,692 for fiscal year 2023.2024. Selling, general,general and administrative expenses as a percentage of net sales were flat9.2% atfor fiscal year 2025 and 9.3% for fiscal year 2024 and fiscal year 2023.2024. The increase in selling, general,general and administrative expenses on an absolute basis for fiscal year 20242025 as compared to the prior fiscal year is primarily due to increased members, increased annual variable incentive compensation costs, and increased expenses relating to business development activities.activities and higher project-related costs.

Research and development costs increased by $8,581,$6,892, or 6.5%,4.9%, to $147,568 for fiscal year 2025, as compared to $140,676 for fiscal year 2024, as compared to $132,095 for fiscal year 2023.2024. The increase in research and development costs on an absolute basis for fiscal year 20242025 as compared to the prior fiscal year is primarily due to variability in the timing of projects and expenses. Research and development costs as a percentage of net sales decreaseddeclined slightly to 4.1% for fiscal year 2025, as compared to 4.2% for fiscal year 2024, as compared to 4.5% for fiscal year 2023. The decrease in research and development costs as a percentage of net sales for fiscal year 2024 as compared to the prior fiscal year is primarily due to net sales increases in fiscal year 2024 compared to fiscal year 2023.2024. Our research and development activities extend across both our operating segments and almost all of our customer base, and we anticipate ongoing variability in research and development costs due to the timing of customer business needs on current and future programs.

Other income, net was $84,010 for fiscal year 2025, compared to $67,168 for fiscal year 2024, compared to $50,291 for fiscal year 2023.2024. The increase in other income in fiscal year 20242025 compared to fiscal year 20232024 was primarily attributable to increased earnings of the JV and a non-recurringone-time gain related to aproduct previousrationalization acquisitionactivities that was recognized duringin the current fiscal year that did not occur in the prior fiscal year.

Aerospace segment net sales increased by $260,515,$284,188, or 14.7%14.0% to $2,312,806 for fiscal year 2025, compared to $2,028,618 for fiscal year 2024, compared to $1,768,103 for fiscal year 2023.2024. Segment net sales increased for fiscal year 20242025 as compared to fiscal year 20232024 primarily due to price realization and increases in both commercial and defense aftermarket volumes due to higher aircraftsales utilization.volumes.

Industrial segment earnings increaseddecreased by $68,235,$47,333, or 42.2%,20.6%, to $182,524 for fiscal year 2025, compared to $229,857 for fiscal year 2024, compared to $161,622 for fiscal year 2023.2024.

The net increasedecrease in Industrial segment earnings for fiscal year 20242025 was due to the following:

We expecthave experienced significant sales and earnings decreases in our China on-highway natural gas truck business in fiscal year 2025 as compared to fiscal year 2024 due to the deteriorating local Chinese economy, a narrower natural gas to diesel spread, and elevated customer inventory levels.2024. Future demand remains uncertain due to the volatility of this business. We also continue to monitor the evolving trade policy between the U.S. and China.

The significant costsitems that impacted nonsegment expenseexpenses arein the current fiscal year as followscompared to the prior fiscal year were:

Excluding these charges in the above table, nonsegment expenses increased $15,667$21,302 in fiscal year 20242025 as compared to the prior fiscal year, primarily due to increased annualheadcount variableand incentivehigher compensationproject-related costs.

Historically, we have satisfied ourmet working capital needs, as well ascapital, capital expenditures,expenditure, product developmentdevelopment, and other liquidity requirementsneeds associatedthrough with our operations, withnet cash flow provided by operating activities and borrowings under our credit facilities. We have alsosupplemented issuedliquidity by issuing debt as needed to supplementfund ouracquisitions, cashrefinance needs,obligations, or repay our other indebtedness, or finance our acquisitions.indebtedness. We expect that cash generated from our operating activities, together with borrowings under our revolving credit facility and other borrowing capacity, will be sufficient to fund our continuing operating needs for the next 12 months and the foreseeable future. However, we could be adversely affected if the financial institutions providing our capital refuse to honor their contractual commitments, cease lending, or declare bankruptcy. We believe the lending institutions participating in our credit arrangements are financially stable.

Our total cash and cash equivalents were $327,431 at September 30, 2025 and $282,270 at September 30, 2024 and $137,447 at September 30, 2023,2024, and our working capital was $977,025 at September 30, 2025 and $820,101 at September 30, 2024 and $852,256 at September 30, 2023.2024. Of the cash and cash equivalents held at September 30, 2024,2025, $279,070$324,617 was held by our foreign locations. We are not presently aware of any significant restrictions on the repatriation of these funds, although a portion is considered indefinitely reinvested in certain foreign subsidiaries. If these funds were needed to fund our operations or satisfy obligations in the United States, then they could be repatriatedrepatriated, and their repatriation into the United States may cause us to incur additional U.S. income taxes or foreign withholding taxes. Any additional U.S. taxes could be offset, in part or in whole, by foreign tax credits. The amount of such taxes and application of tax credits would be dependent on the income tax laws and other circumstances at the time these amounts are repatriated. Based on these variables, it is impractical to determine the income tax liability that might be incurred if these funds were to be repatriated.

Our revolving credit facility, as amended, provides a borrowing capacity of up to $1,000,000 with the option to increase total available borrowings to up to $1,500,000, subject to lenders’ participation. We can borrow against our revolving credit facility as long as we are in compliance with all of our debt covenants. We believe we were in compliance with all our debt covenants as of September 30, 2024.2025. See Note 15, Credit facilities, short-term borrowings, and long-term debt in the Notes to the Consolidated Financial Statements in “Item 8 – Financial Statements and Supplemental Data,” for more information about our covenants. Borrowings under the revolving credit facility can be made in U.S. dollars or in foreign currencies other than the U.S. dollardollar, provided that the U.S. dollar equivalent of any foreign currency borrowings and U.S. dollar borrowings does not, in total, exceed the borrowing capacity of the revolving credit facility. Historically, we have used borrowings under our revolving credit facilities to meet certain short-term working capital needs, as well as for strategic uses, including repurchases of our common stock, payments of dividends, acquisitions, and facility expansions.

At September 30, 2024,2025, we had total outstanding debt of $872,470$702,202 consisting of various series of unsecured notes due between 2025 and 2033, and amounts borrowed under our revolving credit facility, and our finance leases. On November 17, 2025, Woodward paid the entire principal balance of $75,000 on the Series I and L Notes using proceeds from borrowings under its existing revolving credit facility.

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, whichprocess went live on April 20, 2026. However,The significantCompany uncertaintyhas remainsfiled 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 effectiveness,applicable timing,administrative process and processthe foroutcome tariffof recovery.the refund claims. The impact on financial statements cannot be accurately estimated at this time. The Company is evaluating the ruling and potential actions availablecontinues to it, including actions that may be taken to preserve or protectevaluate its rights and remedies.remedies In addition, Woodwardand is not able to accurately estimatemonitoring the financial effectsstatus of anyits tariffrefund 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.claims.

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;countries. ifIf 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.

In connection with this action, we have incurred $6,815restructuring charges of $14,206 in the threenine months ended MarchJune 31,30, 2026 and do not expect to incur pre-taxany additional significant charges of approximately $13,000 forin the remainder of fiscal year 2026. The majority of these charges are expected to be recognized in the third quarter of fiscal year 2026, andas the wind-down is expected to be substantially completed by the end of fiscal year 2026.

Net cash provided by operating activities for the first halfnine months of fiscal year 2026 was $205,264,$351,937, compared to $112,341$237,976 for the first halfnine months of fiscal year 2025. The increase in net cash provided by operating activities for the first halfnine months of fiscal year 2026 as compared to the same period of fiscal year 2025 was primarily attributable to increased earnings.

For the first halfnine months of fiscal year 2026, free cash flow was $108,544,$195,600, compared to $60,351$159,439 for the first halfnine 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 halfnine 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. 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 working capital expenditureswas overdriven theby secondhigher halfinventory oflevels fiscalto yearsupport 2026demand relatedand higher than expected accounts receivable balances due to the constructiontiming of this facility. Free cash flow is a non-U.S. GAAP financial measure. A description of this measure as well as a reconciliation of this non-U.S. GAAP financial measure to the most directly comparable U.S. GAAP financial measure can be found under the caption “Non-U.S. GAAP Financial Measures” in this Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations.collections.

At MarchJune 31,30, 2026, we held $501,169$474,851 in cash and cash equivalents and had total outstanding debt of $1,123,278.$1,341,935. We have additional borrowing availability of $369,125,$399,610, net of outstanding letters of credit, under our revolving credit agreement. At MarchJune 31,30, 2026, we also had additional borrowing capacity of $25,526$25,556 under various foreign lines of credit and foreign overdraft facilities.

Consolidated net sales for the secondthird quarter of fiscal year 2026 increased by $206,939,$194,259, or 23.4%,21.2%, compared to the same period of fiscal year 2025. Consolidated net sales for the first halfnine months of fiscal year 2026 increased by $430,668,$624,927, or 26.0%,24.3%, compared to the same period of fiscal year 2025.

The increases in Aerospace segment net sales in the secondthird quarter and first halfnine 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 secondthird quarter and first halfnine months of fiscal year 2026 as compared to the same periods of fiscal year 2025 were primarily attributable to higher sales volumes,volumes and price realization,realization. andIndustrial net sales for the first nine months of fiscal year 2026 also benefited from favorable foreign currency impacts.

Cost of goods sold increased by $131,130$93,512 to $774,660$759,799 for the secondthird quarter of fiscal year 2026, from $643,530$666,287 for the secondthird quarter of fiscal year 2025. Cost of goods sold decreased to 71.0%68.5% of net sales for the secondthird quarter of fiscal year 2026, compared to 72.8% of net sales for the secondthird quarter of fiscal year 2025.

Cost of goods sold increased by $252,332$345,844 to $1,478,953$2,238,752 for the first halfnine months of fiscal year 2026, from $1,226,621$1,892,908 for the first halfnine months of fiscal year 2025. Cost of goods sold decreased to 70.9%70.0% of net sales for the first halfnine months of fiscal year 2026, compared to 74.1%73.6% of net sales for the first halfnine months of fiscal year 2025.

The increases in cost of goods sold on an absolute basis in the secondthird quarter and first halfnine 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 29.0%31.5% for the secondthird quarter of fiscal year 2026, compared to 27.2% for the secondthird quarter of fiscal year 2025. Gross margin was 29.1%30.0% for the first halfnine months of fiscal year 2026, compared to 25.9%26.4% for the first halfnine months of fiscal year 2025. The increases in gross margin for the secondthird quarter and first halfnine 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 $18,443,$17,762, or 22.0%,20.0%, to $102,285$106,465 for the secondthird quarter of fiscal year 2026, compared to $83,842$88,703 for the secondthird quarter of fiscal year 2025. Selling, general, and administrative expenses as a percentage of net sales decreased to 9.4%9.6% for the secondthird quarter of fiscal year 2026, compared to 9.5%9.7% for the secondthird quarter of fiscal year 2025. The increase in selling, general, and administrative expenses on an absolute basis for the secondthird 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,headcount and increased variable annual incentive compensation costs.

Selling, general, and administrative expenses increased by $43,732,$61,494, or 28.5%,25.4%, to $197,270$303,735 for the first halfnine months of fiscal year 2026, compared to $153,538$242,241 for the first halfnine months of fiscal year 2025. Selling, general, and administrative expenses as a percentage of net sales increased to 9.5% for the first halfnine months of fiscal year 2026, compared to 9.3%9.4% for the first halfnine months of fiscal year 2025. The increase in selling, general, and administrative expenses for the first halfnine 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, higher labor costs, and increased variable annual incentive compensation costs.

Research and development ("R&D") costs were $46,119,$49,316, or 4.2%4.4% of net sales, for the secondthird quarter of fiscal year 2026, as compared to $37,230,$41,088, or 4.2%4.5% of net sales, for the secondthird quarter of fiscal year 2025. R&D costs were $83,875,$133,191, or 4.0%4.2% of net sales, for the first halfnine months of fiscal year 2026, as compared to $67,437,$108,525, or 4.1%4.2% of net sales, for the first halfnine months of fiscal year 2025. R&D costs increased in the secondthird quarter and first halfnine 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,$3,593, or 1.2%,32.0%, to $12,035$14,827 for the secondthird quarter of fiscal year 2026, compared to $11,889$11,234 for the secondthird quarter of fiscal year 2025. Interest expense as a percentage of net sales was 1.1%1.3% for the secondthird quarter of fiscal year 2026, compared to 1.3%1.2% for the secondthird 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 secondthird quarter of fiscal year 2026.

Interest expense decreasedincreased by $1,851,$1,742, or 7.6%,4.9%, to $22,379$37,206 for the first halfnine months of fiscal year 2026, compared to $24,230$35,464 for the first halfnine months of fiscal year 2025. Interest expense as a percentage of net sales was 1.1%1.2% for the first halfnine months of fiscal year 2026, compared to 1.5%1.4% for the first halfnine months of fiscal year 2025. The decreaseincrease 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 on November 17, 2025, we paid the entire principal balance of $75,000 on the Series I and L Notes.Notes on November 17, 2025.

Other income, net decreased by $6,746$5,456 to $18,058$60,299 for the secondfirst quarternine months 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$65,755 for the first halfnine of fiscal year 2026, compared to $47,891 for the first halfmonths of fiscal year 2025. The decreasesdecrease in other incomeincome, net for the second quarter and first halfnine months of fiscal year 2026 as compared to the same periodsperiod of fiscal 2025 werewas 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,year, partially offset by an increase in earnings of the JV.

Income taxes were provided at an effective rate of 20.0%24.2% on earnings before income taxes for the secondthird quarter of fiscal year 2026, compared to 18.1%14.5% for the secondthird quarter of fiscal year 2025. Income taxes were provided at an effective rate of 20.5%21.8% on earnings before income taxes for the first halfnine months of fiscal year 2026, compared to 16.5%15.8% for the first halfnine months of fiscal year 2025. The increases in the effective tax rates for the secondthird quarter and first halfnine months of fiscal year 2026, compared to the same periods of fiscal year 20252025, were primarily attributable to remeasurement to tax reserves, the current year 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 into 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.

Aerospace segment net sales increased by $141,592,$112,683, or 25.2%,18.9%, to $703,321$708,673 for the secondthird quarter of fiscal year 2026, compared to $561,729$595,990 for the secondthird quarter of fiscal year 2025. Aerospace segment net sales increased by $282,607,$395,290, or 26.8%,23.9%, to $1,338,218$2,046,891 for the first halfnine months of fiscal year 2026, compared to $1,055,611$1,651,601 for the first halfnine months of fiscal year 2025.

The increases in Aerospace segment net sales in the secondthird quarter and first halfnine 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 secondthird 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 halfnine 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 secondthird quarter and first halfnine 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, as well as increased Leading Edge Aviation Propulsion ("LEAP") and Pratt & Whitney’s Geared Turbo Fan ("GTF") activity.activity, and solid service demand across widebody and regional platforms. We also experienced strong spare line replacement unit (“LRU”) sales in the second quarter and first halfnine months of fiscal year 2026 as compared to the same periodsperiod of fiscal year 2025. Spare LRU sales were generally consistent with what we experienced during the fourthlast quarterthree ofsequential fiscal year 2025 and the first quarter of fiscal year 2026.quarters.

Defense OEM sales increaseddecreased in the secondthird quarter and first half of fiscal year 2026 as compared to the same periodsperiod 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 secondthird quarter and first halfnine 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,$44,280, or 26.8%,35.2%, to $158,075$170,020 for the secondthird quarter of fiscal year 2026, compared to $124,616$125,740 for the secondthird quarter of fiscal year 2025. Aerospace segment earnings increased by $87,129,$131,409, or 39.7%,38.1%, to $306,470$476,490 for the first halfnine months of fiscal year 2026, compared to $219,341$345,081 for the first halfnine months of fiscal year 2025.

Aerospace segment earnings as a percentage of segment net sales were 22.5%23.3% for the secondfirst quarternine months 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%20.9% for the first halfnine of fiscal year 2026, compared to 20.8% for the first halfmonths of fiscal year 2025. The increasesincrease in Aerospace segment earnings as a percentage of segment sales forin the second quarter and first halfnine months of fiscal year 2026 wereas primarilycompared attributableto strengththe insame commercialperiod services,of fiscal year 2025 was the result of price realization and higher commercial OEMsales volumes, and solid price realization, partially offset by ongoing inflationary pressures and planned strategic investments toin supportmanufacturing futurecapabilities, growth.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 companyCompany for sustained long-term growth, and we expect these investments to continue infor the remainder of fiscal year 2026 and fiscal year 2027.

Industrial segment net sales increased by $65,347,$81,576, or 20.3%,25.5%, to $387,247$401,032 for the secondthird quarter of fiscal year 2026, compared to $321,900$319,456 for the secondthird quarter of fiscal year 2025. Industrial segment net sales increased by $148,061,$229,637, or 24.6%,25.0%, to $748,804$1,149,836 for the first halfnine months of fiscal year 2026, compared to $600,743$920,199 for the first halfnine months of fiscal year 2025.

The increases in Industrial segment net sales in the secondthird quarter and first halfnine months of fiscal year 2026 as compared to the same periods of fiscal year 2025 were primarily attributable to higher sales volumes,volumes and price realization,realization. andIndustrial net sales for the first nine months of fiscal year 2026 also benefited from favorable foreign currency impacts.

Industrial segment earnings increased by $19,754,$40,862, or 43.0%,85.8%, to $65,721$88,484 for the secondthird quarter of fiscal year 2026, compared to $45,967$47,622 for the secondthird quarter of fiscal year 2025. Industrial segment earnings increased by $46,551,$87,413, or 54.0%,65.3%, to $132,715$221,199 for the first halfnine months of fiscal year 2026, compared to $86,164$133,786 for the first halfnine months of fiscal year 2025.

Industrial segment earnings as a percentage of segment net sales were 17.0%22.1% for the secondthird quarter of fiscal year 2026, compared to 14.3%14.9% for the secondthird quarter of fiscal year 2025. Industrial segment earnings as a percentage of segment net sales were 17.7%19.2% for the first halfnine months of fiscal year 2026, compared to 14.3%14.5% for the first halfnine 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 $18,297$14,646 to $45,049$50,776 for the secondthird quarter of fiscal year 2026, compared to $26,752$36,130 for the secondthird quarter of fiscal year 2025. Nonsegment expenses increased by $32,788$47,434 to $81,644$132,420 for the first halfnine months of fiscal year 2026, compared to $48,856$84,986 for the first halfnine months of fiscal year 2025.

Excluding these items, nonsegment expenses increased $4,112$5,382 in the secondthird quarter of fiscal year 2026 as compared to the same period of fiscal year 2025 and increased $12,759$18,141 in the first halfnine months of fiscal year 2026 as compared to the same period of fiscal year 2025. The increases in nonsegment expenses for the secondthird quarter and first halfnine months of fiscal year 2026 were primarily attributable to higher project-related costs and increased labor costs.

At MarchJune 31,30, 2026, we had total outstanding debt of $1,123,278,$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 MarchJune 31,30, 2026, we had $623,000$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 sixnine months ended MarchJune 31,30, 2026 were as follows:

At MarchJune 31,30, 2026, we had additional borrowing availability of $369,125$399,610 under our revolving credit facility, net of outstanding letters of credit, and additional borrowing availability of $25,526$25,556 under various foreign credit facilities.

We were compliant with all our debt covenants as of MarchJune 31,30, 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.

Net cash provided by operating activities for the first halfnine months of fiscal year 2026 was $205,264,$351,937, compared to $112,341$237,976 for the same period of fiscal year 2025. The increase in net cash provided by operating activities in the first halfnine 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 halfnine months of fiscal year 2026 was $99,463,$286,795, compared to $4,138$27,518 for the same period of fiscal year 2025. The increase in net cash used in investing activities in the first halfnine 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 halfnine months of fiscal year 2026 was $74,431,$88,769, compared to net cash used in financing activities of $17,602$26,126 for the same period of fiscal year 2025. The increase in net cash provided by financing activities for the first halfnine 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 halfnine months of fiscal year 2026, we had net debt borrowings in the amount of $425,193,$644,622, compared to net debt borrowings of $43,627$50,281 in the first halfnine months of fiscal year 2025. During the first halfnine months of fiscal year 2026, we repurchased $354,890$553,031 of our common stock, whereas in the first halfnine months of fiscal year 2025, we repurchased $79,493.$124,276.

Presented in the line item "Selling,Other generalincome, and administrative expensesnet" in Woodward's Condensed Consolidated Statement of Earnings.