Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer ☒ Accelerated Filer ☐ Non-accelerated Filer ☐ Smaller Reporting Company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

As of ~~August 6, 2020, 62,383,699~~April 30, 2021, 63,525,499 shares of the registrant’s common stock with a par value of $0.001455 per share were outstanding.

	Three-Months Ended						Nine-Months Ended						Three-Months Ended						Six-Months Ended
	June 30,						June 30,						March 31,						March 31,
	2020			2019			2020			2019			2021			2020			2021			2020
Net sales	$	523,826		$	752,005		$	1,964,401		$	2,163,660		$	581,321		$	720,220		$	1,118,940		$	1,440,575
Costs and expenses:
Cost of goods sold		395,511			562,516			1,447,942			1,621,531			434,243			517,514			835,883			1,052,431
Selling, general and administrative expenses		57,361			52,980			177,035			159,764			44,329			57,629			100,440			119,674
Research and development costs		34,522			40,661			106,029			123,359			27,627			34,661			59,623			71,507
Impairment of assets sold (Note 10)		—			—			37,902			—
Restructuring charges (Note 16)		19,040			—			19,040			—
Gain on cross-currency interest rate swaps, net (Note 8)		(30,481	)		—			(30,481	)		—
Impairment of assets sold														—			—			—			37,902
Interest expense		8,737			10,798			26,502			34,156			8,249			8,756			17,155			17,765
Interest income		(377	)		(348	)		(1,340	)		(1,013	)		(283	)		(476	)		(778	)		(963	)
Other (income) expense, net (Note 18)		(5,503	)		(6,916	)		(31,991	)		(18,134	)
Other (income) expense, net														(11,331	)		(5,063	)		(19,454	)		(26,488	)
Total costs and expenses		478,810			659,691			1,750,638			1,919,663			502,834			613,021			992,869			1,271,828
Earnings before income taxes		45,016			92,314			213,763			243,997			78,487			107,199			126,071			168,747
Income tax expense		6,551			26,207			30,607			51,191			10,174			15,881			16,188			24,056
Net earnings	$	38,465		$	66,107		$	183,156		$	192,806		$	68,313		$	91,318		$	109,883		$	144,691

Earnings per share (Note 4):
Earnings per share:
Basic earnings per share	$	0.62		$	1.07		$	2.95		$	3.11		$	1.08		$	1.47		$	1.74		$	2.33
Diluted earnings per share	$	0.61		$	1.02		$	2.85		$	2.99		$	1.04		$	1.41		$	1.68		$	2.24

Weighted Average Common Shares Outstanding (Note 4):
Weighted Average Common Shares Outstanding:
Basic		62,309			61,941			62,188			61,977			63,278			62,266			63,043			62,128
Diluted		63,427			64,633			64,273			64,437			65,654			64,564			65,274			64,622

	Three-Months Ended						Nine-Months Ended						Three-Months Ended						Six-Months Ended
	June 30,						June 30,						March 31,						March 31,
	2020			2019			2020			2019			2021			2020			2021			2020
Net earnings	$	38,465		$	66,107		$	183,156		$	192,806		$	68,313		$	91,318		$	109,883		$	144,691

Other comprehensive earnings:
Foreign currency translation adjustments		11,067			819			8,865			(592	)		(8,789	)		(13,355	)		8,539			(2,202	)
Net gain (loss) on foreign currency transactions designated as hedges of net investments in foreign subsidiaries (Note 8)		(792	)		(598	)		(1,187	)		976
Net (loss)/gain on foreign currency transactions designated as hedges of net investments in foreign subsidiaries														(2,329	)		650			(102	)		(395	)
Taxes on changes in foreign currency translation adjustments		(213	)		324			(423	)		427			(2,555	)		130			(871	)		(210	)
Foreign currency translation and transactions adjustments, net of tax		10,062			545			7,255			811			(13,673	)		(12,575	)		7,566			(2,807	)

Unrealized (loss) gain on fair value adjustment of derivative instruments (Note 8)		(26,011	)		(7,305	)		7,993			20,867
Reclassification of net realized (gain) loss on derivatives to earnings (Note 8)		(22,649	)		6,890			(18,255	)		(11,831	)
Unrealized (loss)/gain on fair value adjustment of derivative instruments														8,892			45,298			(21,766	)		34,004
Reclassification of net realized (gain)/loss on derivatives to earnings														(20,683	)		(7,262	)		277			4,394
Taxes on changes in derivative transactions		1,025			14			253			(162	)		1,543			(790	)		203			(772	)
Derivative adjustments, net of tax		(47,635	)		(401	)		(10,009	)		8,874			(10,248	)		37,246			(21,286	)		37,626

Amortization of pension and other postretirement plan:
Net prior service cost		240			176			721			528			250			240			498			481
Net loss		627			238			1,886			719			377			628			747			1,259
Foreign currency exchange rate changes on pension and other postretirement benefit plan liabilities		(101	)		279			(378	)		281			453			1,225			(1,244	)		(277	)
Taxes on changes in pension and other postretirement benefit plan liability adjustments, net of foreign currency exchange rate changes		(192	)		(203	)		(544	)		(406	)		(284	)		(592	)		72			(352	)
Pension and other postretirement benefit plan adjustments, net of tax		574			490			1,685			1,122			796			1,501			73			1,111
Total comprehensive earnings	$	1,466		$	66,741		$	182,087		$	203,613		$	45,188		$	117,490		$	96,236		$	180,621

	June 30,			September 30,			March 31,			September 30,
	2020			2019			2021			2020
ASSETS
Current assets:
Cash and cash equivalents, including restricted cash of $2,880 and $1,500, respectively	$	101,363		$	99,073
Accounts receivable, less allowance for uncollectible amounts of $7,180 and $7,908, respectively		537,515			591,529
Cash and cash equivalents, including restricted cash of $1,908 and $3,497, respectively							$	287,595		$	153,270
Accounts receivable, less allowance for uncollectible amounts of $7,522 and $8,359, respectively								588,064			537,987
Inventories		505,943			516,836			422,321			437,943
Income taxes receivable		34,685			8,099			30,459			28,879
Other current assets		57,441			55,691			39,723			52,786
Total current assets		1,236,947			1,271,228			1,368,162			1,210,865
Property, plant and equipment, net		1,008,259			1,058,775			965,205			997,415
Goodwill		796,372			797,853			807,974			808,252
Intangible assets, net		595,158			611,992			584,948			606,711
Deferred income tax assets		18,315			18,161			14,873			14,658
Other assets		251,618			198,517			279,610			265,435
Total assets	$	3,906,669		$	3,956,526		$	4,020,772		$	3,903,336
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings	$	98,639		$	220,000
Current portion of long-term debt		101,643			—		$	1,398		$	101,634
Accounts payable		160,887			240,460			162,715			134,242
Income taxes payable		12,164			18,849			12,945			4,662
Accrued liabilities		162,295			228,127			164,350			151,794
Total current liabilities		535,628			707,436			341,408			392,332
Long-term debt, less current portion		729,165			864,899			736,095			736,849
Deferred income tax liabilities		156,583			151,362			164,068			163,573
Other liabilities		575,527			506,088			645,900			617,905
Total liabilities		1,996,903			2,229,785			1,887,471			1,910,659
Commitments and contingencies (Note 22)
Stockholders' equity:
Preferred stock, par value $0.003 per share, 10,000 shares authorized, 0 shares issued		—			—			—			—
Common stock, par value $0.001455 per share, 150,000 shares authorized, 72,960 shares issued		106			106			106			106
Additional paid-in capital		233,294			207,120			257,006			231,936
Accumulated other comprehensive losses		(104,375	)		(103,306	)		(103,441	)		(89,794	)
Deferred compensation		9,760			9,382			9,103			9,222
Retained earnings		2,372,733			2,224,919			2,522,384			2,427,905
		2,511,518			2,338,221			2,685,158			2,579,375
Treasury stock at cost, 10,610 shares and 11,040 shares, respectively		(591,992	)		(602,098	)
Treasury stock held for deferred compensation, at cost, 211 shares, respectively		(9,760	)		(9,382	)
Treasury stock at cost, 9,454 shares and 10,277 shares, respectively								(542,754	)		(577,476	)
Treasury stock held for deferred compensation, at cost, 192 shares and 199 shares, respectively								(9,103	)		(9,222	)
Total stockholders' equity		1,909,766			1,726,741			2,133,301			1,992,677
Total liabilities and stockholders' equity	$	3,906,669		$	3,956,526		$	4,020,772		$	3,903,336

	Nine-Months Ended June 30,						Six-Months Ended March 31,
	2020			2019			2021			2020
Cash flows from operating activities:
Net earnings	$	183,156		$	192,806		$	109,883		$	144,691
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization		97,582			108,468			65,556			65,476
Impairment of assets sold		37,902			—			—			37,902
Net (gain) loss on sales of assets and businesses		(11,012	)		880
Net (gain) on cross-currency interest rate swaps		(30,481	)		—
Net gain on sales of assets and businesses								(1,942	)		(13,557	)
Stock-based compensation		20,088			15,634			16,438			13,475
Deferred income taxes		(1,756	)		(8,628	)		1,622			135
Changes in operating assets and liabilities:
Trade accounts receivable		63,253			(31,240	)		(10,565	)		(521	)
Unbilled receivables (contract assets)		(53,851	)		(52,315	)		(32,565	)		(50,624	)
Costs to fulfill a contract		(18,044	)		(13,010	)		(9,226	)		(15,064	)
Inventories		(6,402	)		(57,884	)		16,877			(28,982	)
Accounts payable and accrued liabilities		(124,231	)		31,307			53,555			(78,878	)
Contract liabilities		21,491			23,045			14,370			13,673
Income taxes		(33,085	)		(3,862	)		4,700			(30,331	)
Retirement benefit obligations		(3,249	)		(2,989	)		(3,450	)		(2,152	)
Other		71,055			16,990			(6,256	)		(3,064	)
Net cash provided by operating activities		212,416			219,202			218,997			52,179

Cash flows from investing activities:
Payments for purchase of property, plant, and equipment		(39,072	)		(77,905	)		(13,313	)		(29,361	)
Proceeds from sale of assets		18,844			809			86			18,831
Proceeds from business divestiture		10,443			—
Proceeds from sales of short-term investments		12,700			10,259			16,566			12,684
Payments for purchases of short-term investments		(13,109	)		(12,989	)		(2,750	)		(23	)
Net cash (used in) investing activities		(10,194	)		(79,826	)
Net cash provided by investing activities								589			2,131

Cash flows from financing activities:
Cash dividends paid		(32,587	)		(28,985	)		(15,404	)		(27,525	)
Proceeds from sales of treasury stock		14,790			33,715			28,454			12,726
Payments for repurchases of common stock		(13,346	)		(110,311	)		—			(13,346	)
Borrowings on revolving lines of credit and short-term borrowings		1,027,342			1,286,258			74,400			788,306
Payments on revolving lines of credit and short-term borrowings		(1,191,319	)		(1,194,045	)		(74,400	)		(807,869	)
Payments of long-term debt and finance lease obligations		(1,187	)		(143,402	)		(100,835	)		(754	)
Payments for debt financing costs		—			(2,238	)
Net cash (used in) financing activities		(196,307	)		(159,008	)		(87,785	)		(48,462	)
Effect of exchange rate changes on cash and cash equivalents		(3,625	)		(660	)		2,524			(2,072	)
Net change in cash and cash equivalents		2,290			(20,292	)		134,325			3,776
Cash and cash equivalents, including restricted cash, at beginning of year		99,073			83,594			153,270			99,073
Cash and cash equivalents, including restricted cash, at end of period	$	101,363		$	63,302		$	287,595		$	102,849

Number of shares

Stockholders' equity

Accumulated other comprehensive (loss) earnings

Common
stock

Treasury
stock

Treasury
stock held for
deferred
compensation

Common
stock

Additional
paid-in
capital

Foreign
currency
translation
adjustments

Unrealized
derivative
gains
(losses)

Minimum
retirement
benefit
liability
adjustments

Total
accumulated
other
comprehensive
(loss) earnings

Deferred
compensation

Retained
earnings

Treasury
stock at
cost

Treasury
stock held for
deferred
compensation

Total
stockholders'
equity

Balances as of April 1, 2019

72,960

(10,757
)

(206
)

$
106

$
204,892

$
(39,573
)

$
(11,667
)

$
(13,574
)

$
(64,815
)

$
8,876

$
2,112,168

$
(549,686
)

$
(8,876
)

$
1,702,665

Net earnings

—

—

—

—

—

—

—

—

—

—

66,107

—

—

66,107

Other comprehensive earnings (loss), net of tax

—

—

—

—

—

545

(401
)

490

635

—

—

—

—

635

Cash dividends paid ($0.1625 per share)

—

—

—

—

—

—

—

—

—

—

(10,071
)

—

—

(10,071
)
Purchases of treasury stock

—

(645
)

—

—

—

—

—

—

—

—

—

(67,058
)

—

(67,058
)
Sales of treasury stock

—

279

—

—

(1,656
)

—

—

—

—

—

—

11,221

—

9,565

Stock-based compensation

—

—

—

—

2,468

—

—

—

—

—

—

—

—

2,468

Purchases and transfers of stock by/to deferred compensation plan

—

—

(3
)

—

—

—

—

—

—

284

—

—

(284
)

—

Distribution of stock from deferred compensation plan

—

—

—

—

—

—

—

—

—

(42
)

—

—

42

—

Balances as of June 30, 2019

72,960

(11,123
)

(209
)

$
106

$
205,704

$
(39,028
)

$
(12,068
)

$
(13,084
)

$
(64,180
)

$
9,118

$
2,168,204

$
(605,523
)

$
(9,118
)

$
1,704,311

Balances as of April 1, 2020

72,960

(10,677
)

(216
)

$
106

$
227,494

$
(56,042
)

$
32,671

$
(44,005
)

$
(67,376
)

$
9,963

$
2,342,340

$
(594,870
)

$
(9,963
)

$
1,907,694

Net earnings

—

—

—

—

—

—

—

—

—

—

38,465

—

—

38,465

Other comprehensive earnings (loss), net of tax

—

—

—

—

—

10,062

(47,635
)

574

(36,999
)

—

—

—

—

(36,999
)
Cash dividends paid ($0.08125 per share)

—

—

—

—

—

—

—

—

—

—

(5,062
)

—

—

(5,062
)
Sales of treasury stock

—

67

—

—

(813
)

—

—

—

—

—

—

2,878

—

2,065

Stock-based compensation

—

—

—

—

6,613

—

—

—

—

—

—

—

—

6,613

Purchases and transfers of stock by/to deferred compensation plan

—

—

—

—

—

—

—

—

—

27

—

—

(27
)

—

Distribution of stock from deferred compensation plan

—

—

5

—

—

—

—

—

—

(230
)

—

—

230

—

Business divestitures

—

—

—

—

—

—

—

—

—

—

(3,010
)

—

—

(3,010
)
Balances as of June 30, 2020

72,960

(10,610
)

(211
)

$
106

$
233,294

$
(45,980
)

$
(14,964
)

$
(43,431
)

$
(104,375
)

$
9,760

$
2,372,733

$
(591,992
)

$
(9,760
)

$
1,909,766

	Number of shares								Stockholders' equity																																Number of shares								Stockholders' equity
														Accumulated other comprehensive (loss) earnings																																								Accumulated other comprehensive (loss) earnings
	Common stock		Treasury stock			Treasury stock held for deferred compensation			Common stock		Additional paid-in capital			Foreign currency translation adjustments			Unrealized derivative gains (losses)			Minimum retirement benefit liability adjustments			Total accumulated other comprehensive (loss) earnings			Deferred compensation			Retained earnings			Treasury stock at cost			Treasury stock held for deferred compensation			Total stockholders' equity			Common stock		Treasury stock			Treasury stock held for deferred compensation			Common stock		Additional paid-in capital			Foreign currency translation adjustments			Unrealized derivative gains (losses)			Minimum retirement benefit liability adjustments			Total accumulated other comprehensive (loss) earnings			Deferred compensation			Retained earnings			Treasury stock at cost			Treasury stock held for deferred compensation			Total stockholders' equity

Balances as of September 30, 2018		72,960		(11,203	)		(202	)	$	106	$	185,705		$	(39,794	)	$	(20,942	)	$	(14,206	)	$	(74,942	)	$	8,431		$	1,966,643		$	(539,408	)	$	(8,431	)	$	1,538,104
Cumulative effect from adoption of ASC 606		—		—			—			—		—			(45	)		—			—			(45	)		—			38,745			—			—			38,700
Cumulative effect from adoption of ASU 2016-16		—		—			—			—		—			—			—			—			—			—			(1,005	)		—			—			(1,005	)
Balances as of January 1, 2020																																										72,960		(10,814	)		(215	)	$	106	$	216,158		$	(43,467	)	$	(4,575	)	$	(45,506	)	$	(93,548	)	$	9,911		$	2,268,483		$	(592,596	)	$	(9,911	)	$	1,798,603
Net earnings		—		—			—			—		—			—			—			—			—			—			192,806			—			—			192,806			—		—			—			—		—			—			—			—			—			—			91,318			—			—			91,318
Other comprehensive earnings (loss), net of tax		—		—			—			—		—			811			8,874			1,122			10,807			—			—			—			—			10,807			—		—			—			—		—			(12,575	)		37,246			1,501			26,172			—			—			—			—			26,172
Cash dividends paid ($0.4675 per share)		—		—			—			—		—			—			—			—			—			—			(28,985	)		—			—			(28,985	)
Cash dividends paid ($0.2800 per share)																																										—		—			—			—		—			—			—			—			—			—			(17,461	)		—			—			(17,461	)
Purchases of treasury stock		—		(1,102	)		—			—		—			—			—			—			—			—			—			(110,311	)		—			(110,311	)		—		(124	)		—			—		—			—			—			—			—			—			—			(13,346	)		—			(13,346	)
Sales of treasury stock		—		1,024			—			—		(4,808	)		—			—			—			—			—			—			38,523			—			33,715			—		137			—			—		(577	)		—			—			—			—			—			—			5,744			—			5,167
Common shares issued from treasury stock for benefit plans		—		158			—			—		9,173			—			—			—			—			—			—			5,673			—			14,846			—		124			—			—		9,420			—			—			—			—			—			—			5,328			—			14,748
Stock-based compensation		—		—			—			—		15,634			—			—			—			—			—			—			—			—			15,634			—		—			—			—		2,493			—			—			—			—			—			—			—			—			2,493
Purchases and transfers of stock by/to deferred compensation plan		—		—			(11	)		—		—			—			—			—			—			909			—			—			(909	)		—
Purchases/transfers of stock by/to deferred compensation plan																																										—		—			(1	)		—		—			—			—			—			—			81			—			—			(81	)		—
Distribution of stock from deferred compensation plan		—		—			4			—		—			—			—			—			—			(222	)		—			—			222			—			—		—			—			—		—			—			—			—			—			(29	)		—			—			29			—
Balances as of June 30, 2019		72,960		(11,123	)		(209	)	$	106	$	205,704		$	(39,028	)	$	(12,068	)	$	(13,084	)	$	(64,180	)	$	9,118		$	2,168,204		$	(605,523	)	$	(9,118	)	$	1,704,311
Balances as of March 31, 2020																																										72,960		(10,677	)		(216	)	$	106	$	227,494		$	(56,042	)	$	32,671		$	(44,005	)	$	(67,376	)	$	9,963		$	2,342,340		$	(594,870	)	$	(9,963	)	$	1,907,694

Balances as of September 30, 2019		72,960		(11,040	)		(211	)	$	106	$	207,120		$	(53,235	)	$	(4,955	)	$	(45,116	)	$	(103,306	)	$	9,382		$	2,224,919		$	(602,098	)	$	(9,382	)	$	1,726,741
Cumulative effect from adoption of ASC 842 (Note 5)		—		—			—			—		—			—			—			—			—			—			255			—			—			255
Balances as of January 1, 2021																																										72,960		(9,992	)		(201	)	$	106	$	244,394		$	(19,452	)	$	(31,495	)	$	(29,369	)	$	(80,316	)	$	9,485		$	2,464,373		$	(565,095	)	$	(9,485	)	$	2,063,462
Net earnings		—		—			—			—		—			—			—			—			—			—			183,156			—			—			183,156			—		—			—			—		—			—			—			—			—			—			68,313			—			—			68,313
Other comprehensive earnings (loss), net of tax		—		—			—			—		—			7,255			(10,009	)		1,685			(1,069	)		—			—			—			—			(1,069	)		—		—			—			—		—			(13,673	)		(10,248	)		796			(23,125	)		—			—			—			—			(23,125	)
Cash dividends paid ($0.52375 per share)		—		—			—			—		—			—			—			—			—			—			(32,587	)		—			—			(32,587	)
Purchases of treasury stock		—		(124	)		—			—		—			—			—			—			—			—			—			(13,346	)		—			(13,346	)
Cash dividends paid ($0.1625 per share)																																										—		—			—			—		—			—			—			—			—			—			(10,302	)		—			—			(10,302	)
Sales of treasury stock		—		430			—			—		(3,334	)		—			—			—			—			—			—			18,124			—			14,790			—		410			—			—		101			—			—			—			—			—			—			16,983			—			17,084
Common shares issued from treasury stock for benefit plans		—		124			—			—		9,420			—			—			—			—			—			—			5,328			—			14,748			—		128			—			—		9,542			—			—			—			—			—			—			5,358			—			14,900
Stock-based compensation		—		—			—			—		20,088			—			—			—			—			—			—			—			—			20,088			—		—			—			—		2,969			—			—			—			—			—			—			—			—			2,969
Purchases and transfers of stock by/to deferred compensation plan		—		—			(6	)		—		—			—			—			—			—			651			—			—			(651	)		—
Purchases/transfers of stock by/to deferred compensation plan																																										—		—			—			—		—			—			—			—			—			41			—			—			(41	)		—
Distribution of stock from deferred compensation plan		—		—			6			—		—			—			—			—			—			(273	)		—			—			273			—			—		—			9			—		—			—			—			—			—			(423	)		—			—			423			—
Business divestitures		—		—			—			—		—			—			—			—			—			—			(3,010	)		—			—			(3,010	)
Balances as of June 30, 2020		72,960		(10,610	)		(211	)	$	106	$	233,294		$	(45,980	)	$	(14,964	)	$	(43,431	)	$	(104,375	)	$	9,760		$	2,372,733		$	(591,992	)	$	(9,760	)	$	1,909,766
Balances as of March 31, 2021																																										72,960		(9,454	)		(192	)	$	106	$	257,006		$	(33,125	)	$	(41,743	)	$	(28,573	)	$	(103,441	)	$	9,103		$	2,522,384		$	(542,754	)	$	(9,103	)	$	2,133,301

	Number of shares									Stockholders' equity
															Accumulated other comprehensive (loss) earnings
	Common stock		Treasury stock			Treasury stock held for deferred compensation				Common stock		Additional paid-in capital			Foreign currency translation adjustments			Unrealized derivative gains (losses)			Minimum retirement benefit liability adjustments			Total accumulated other comprehensive (loss) earnings			Deferred compensation			Retained earnings			Treasury stock at cost			Treasury stock held for deferred compensation			Total stockholders' equity
									��
Balances as of September 30, 2019		72,960		(11,040	)		(211	)		$	106	$	207,120		$	(53,235	)	$	(4,955	)	$	(45,116	)	$	(103,306	)	$	9,382		$	2,224,919		$	(602,098	)	$	(9,382	)	$	1,726,741
Cumulative effect from adoption of ASC 842		—		—			—				—		—			—			—			—			—			—			255			—			—			255
Net earnings		—		—			—				—		—			—			—			—			—			—			144,691			—			—			144,691
Other comprehensive earnings (loss), net of tax		—		—			—				—		—			(2,807	)		37,626			1,111			35,930			—			—			—			—			35,930
Cash dividends paid ($0.4425 per share)		—		—			—				—		—			—			—			—			—			—			(27,525	)		—			—			(27,525	)
Purchases of treasury stock		—		(124	)		—				—		—			—			—			—			—			—			—			(13,346	)		—			(13,346	)
Sales of treasury stock		—		363			—				—		(2,521	)		—			—			—			—			—			—			15,246			—			12,725
Common shares issued from treasury stock for benefit plans		—		124			—				—		9,420			—			—			—			—			—			—			5,328			—			14,748
Stock-based compensation		—		—			—				—		13,475			—			—			—			—			—			—			—			—			13,475
Purchases and transfers of stock by/to deferred compensation plan		—		—			(6	)			—		—			—			—			—			—			624			—			—			(624	)		—
Distribution of stock from deferred compensation plan		—		—			1				—		—			—			—			—			—			(43	)		—			—			43			—
Balances as of March 31, 2020		72,960		(10,677	)		(216	)		$	106	$	227,494		$	(56,042	)	$	32,671		$	(44,005	)	$	(67,376	)	$	9,963		$	2,342,340		$	(594,870	)	$	(9,963	)	$	1,907,694

Balances as of September 30, 2020		72,960		(10,277	)		(199	)		$	106	$	231,936		$	(40,691	)	$	(20,457	)	$	(28,646	)	$	(89,794	)	$	9,222		$	2,427,905		$	(577,476	)	$	(9,222	)	$	1,992,677
Net earnings		—		—			—				—		—			—			—			—			—			—			109,883			—			—			109,883
Other comprehensive earnings (loss), net of tax		—		—			—				—		—			7,566			(21,286	)		73			(13,647	)		—			—			—			—			(13,647	)
Cash dividends paid ($0.2438 per share)		—		—			—				—		—			—			—			—			—			—			(15,404	)		—			—			(15,404	)
Sales of treasury stock		—		695			—				—		(910	)		—			—			—			—			—			—			29,364			—			28,454
Common shares issued from treasury stock for benefit plans		—		128			—				—		9,542			—			—			—			—			—			—			5,358			—			14,900
Stock-based compensation		—		—			—				—		16,438			—			—			—			—			—			—			—			—			16,438
Purchases and transfers of stock by/to deferred compensation plan		—		—			(3	)			—		—			—			—			—			—			317			—			—			(317	)		—
Distribution of stock from deferred compensation plan		—		—			10				—		—			—			—			—			—			(436	)		—			—			436			—
Balances as of March 31, 2021		72,960		(9,454	)		(192	)		$	106	$	257,006		$	(33,125	)	$	(41,743	)	$	(28,573	)	$	(103,441	)	$	9,103		$	2,522,384		$	(542,754	)	$	(9,103	)	$	2,133,301

The Condensed Consolidated Financial Statements of Woodward, Inc. (“Woodward” or the “Company”) as of ~~June 30, 2020~~March 31, 2021 and for the three and ~~nine-months~~six-months ended ~~June 30,~~March 31, 2021 and 2020, ~~and 2019,~~ included herein, have not been audited by an independent registered public accounting firm. These unaudited Condensed Consolidated Financial Statements reflect all normal recurring adjustments that, in the opinion of management, are necessary to present fairly Woodward’s financial position as of ~~June 30, 2020,~~March 31, 2021, and the statements of earnings, comprehensive earnings, cash flows, and changes in stockholders’ equity for the periods presented herein. The results of operations for the three and ~~nine-months~~six-months ended ~~June 30,~~March 31, 2021 and 2020 ~~and 2019~~ are not necessarily indicative of the operating results to be expected for other interim periods or for the full fiscal year. Dollar and share amounts contained in these unaudited Condensed Consolidated Financial Statements are in thousands, except per share amounts, unless otherwise noted.

The unaudited Condensed Consolidated Financial Statements included herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim reporting. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been condensed or omitted pursuant to such rules and regulations.

~~These~~ Accordingly, these unaudited Condensed Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and Notes thereto included in Woodward’s most recent Annual Report on Form 10-K filed with the SEC and other financial information filed with the SEC.

Management is required to use estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements, the reported revenues and expenses recognized during the reporting period, and certain financial statement disclosures, in the preparation of the unaudited Condensed Consolidated Financial Statements included herein. Significant estimates in these unaudited Condensed Consolidated Financial Statements include allowances for ~~uncollectible amounts;~~credit losses; net realizable value of inventories; variable consideration including customer rebates earned and payable and early payment discounts; warranty reserves; useful lives of property and identifiable intangible assets; the evaluation of impairments of property, intangible assets, and goodwill; the provision for income tax and related valuation reserves; the valuation of derivative instruments; assumptions used in the determination of the funded status and annual expense of pension and postretirement employee benefit plans; the valuation of stock compensation instruments granted to employees, board members and any other eligible recipients; estimates of incremental borrowing rates used when estimating the present value of future lease payments; assumptions used when including renewal options or non-exercise of termination options in lease terms; estimates of total lifetime sales used in the recognition of revenue of deferred material rights and balance sheet classification of the related contract liability; estimates of total sales contract costs when recognizing revenue under the cost-to-cost method; and contingencies. Actual results could vary from Woodward’s estimates.

~~In March 2020, the World Health Organization (“WHO”) declared the novel coronavirus ("COVID-19") outbreak a global pandemic.~~ COVID-19 Pandemic

When combined with the various measures enacted by governments and private organizations to contain COVID-19 or slow its spread, the pandemic has adversely impacted global activity and contributed to significant declines and volatility in financial ~~markets.~~markets; and the Company has likewise been significantly impacted by the global COVID-19 pandemic. The COVID-19 pandemic could continue to have a material adverse impact on economic and market conditions and trigger an extended period of global economic slowdown. Although the Company has already been impacted by the global emergence of the COVID-19 pandemic, the full extent of its impact on the Company’s future business is currently unknown. The rapid development and fluidity of this situation precludes any prediction as to the ultimate material adverse impact of the COVID-19 pandemic, including impacts to estimates and assumptions used by management for the reported amounts of assets and liabilities. The pandemic presents uncertainty and risk with respect to the Company and its performance and financial ~~results. See Note 16,~~ ~~Accrued liabilities~~,results, including estimates and assumptions used by management for ~~specific restructuring actions taken by~~ the ~~Company related to the COVID-19 pandemic.~~reported amount of assets and liabilities.

From time to time, the Financial Accounting Standards Board (“FASB”) or other standards setting bodies issue new accounting pronouncements. Updates to the FASB Accounting Standards Codification (“ASC”) are communicated through issuance of an Accounting Standards Update (“ASU”).

In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” The purpose of ASU 2020-04 is to provide optional guidance for a limited time to ease the potential burden in accounting for, or recognizing the effects of, reference rate reform on financial reporting. In response to concerns about structural risks of interbank offered rates, and, in particular, the risk of cessation of the London Interbank Offered Rate (LIBOR), reference rate reform refers to a global initiative to identify alternative reference rates that are more observable or transaction-based and less susceptible to manipulation.

ASU 2020-04 is effective for all entities reporting as of March 12, 2020 through December 31, 2022. An entity may elect to apply the amendments in ASU 2020-04 for contract modifications by topic or industry subtopic as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020, or prospectively from a date within an interim period that includes or is subsequent to March 12, 2020, up to the date that the financial statements are available to be issued. Once elected for a topic or an industry subtopic, the amendments in ASU 2020-04 must be applied prospectively for all eligible contract modifications for that topic or industry subtopic.

An entity may elect to apply the amendments in ASU 2020-04 to eligible hedging relationships existing as of the beginning of the interim period that includes March 12, 2020 and to new eligible hedging relationships entered into after the beginning of the interim period that includes March 12, 2020. If an entity elects to apply any of the amendments for an eligible hedging relationship existing as of the beginning of the interim period that includes March 12, 2020, any adjustments as a result of those elections must be reflected as of the beginning of that interim period and recognized in accordance with the guidance in reference rate reform subtopics 848-30, 848-40, and 848-50 (as applicable). If an entity elects to apply any of the amendments for a new hedging relationship entered into between the beginning of the interim period that includes March 12, 2020, any adjustments as a result of those elections must be reflected as of the beginning of the hedging relationship and recognized in accordance with the guidance in reference rate reform subtopics 848-30, 848-40, and 848-50 (as applicable).

Woodward is currently assessing the accounting and financial impact of reference rate reform, particularly the impact it may have on its hedging relationships, and will consider applying the optional guidance of ASU 2020-04 accordingly.

In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes.” ASU 2019-12 amends ASC 740 to simplify the accounting for income taxes by removing certain exceptions for investments, intraperiod allocations and interim calculations, and adding guidance to reduce complexity in the accounting standard under the FASB’s simplification initiative. ASU 2019-12 is effective for public entities for fiscal years beginning after December 15, 2020 (fiscal year 2022 for Woodward). Upon adoption, the amendments in ASU 2019-12 should be applied on a retrospective, modified retrospective, or prospective basis to all periods ~~presented. Early~~presented (as applicable), and early adoption is permitted. Woodward ~~is currently assessing the impact of the adoption of the new guidance. Woodward expects~~elected to early adopt the new guidance ~~under ASU 2019-12 in fiscal year 2022.~~

In August 2018, the FASB issued ASU 2018-14, “Compensation – Retirement Benefits – Defined Benefit Plans – General (Topic 715-20): Disclosure Framework – Changes to the Disclosure Requirements for Defined Benefit Plans.” ASU 2018-14 amends ASC 715 to add, remove, and modify disclosure requirements related to defined benefit pension and other postretirement plans. The ASU’s changes to disclosures aim to improve the effectiveness of ASC 715’s disclosure requirements under the FASB’s disclosure framework project. ASU 2018-14 is effective ~~for public entities for fiscal years beginning after December 15, 2020 (fiscal year 2022 for Woodward). ASU 2018-14 does~~January 1, 2021, which did not ~~impact the interim disclosure requirements of ASC 715. Upon adoption, the amendments in ASU 2018-14 should be applied on~~have a ~~retrospective basis to all periods presented. Early adoption is permitted. Woodward expects to adopt the new and modified disclosures requirements of this new guidance in fiscal year 2022.~~

In June 2016, the FASB issued ASU 2016-13, “Measurement of Credit Losses on Financial Instruments.” ASU 2016-13 adds a current expected credit loss (“CECL”) impairment model to U.S. GAAP that is based on expected losses rather than incurred losses. Modified retrospective adoption is required with any cumulative-effect adjustment recorded to retained earnings as of the beginning of the period of adoption. ASU 2016-13 is effective for fiscal years beginning after December 15, 2019 (fiscal year 2021 for Woodward), including interim periods within the year of adoption. Early adoption is permitted for fiscal years beginning after December 15, 2018 (fiscal year 2020 for Woodward), including interim periods within those fiscal years. Woodward expects to adopt ASU 2016-13 in fiscal year 2021. Woodward is currently assessing the impact of the application of the CECL impairment model on Woodward’s allowance for uncollectible amounts for accounts receivable and notes receivable from municipalities and unbilled receivables.

In May 2019, the FASB issued ASU 2019-05, “Financial Instruments – Credit Losses (Topic 326): Targeted Transition Relief,” which provides transition relief for entities adopting ASU 2016-13. Specifically, ASU 2019-05 amends ASU 2016-13 to allow companies to irrevocably elect, upon adoption of ASU 2016-13, the fair value option for financial instruments. For entities that have adopted ASU 2016-13, the amendments in ASU 2019-05 are effective for fiscal years beginning after December 15, 2019, including interim periods therein. Woodward expects to adopt ASU 2019-05 in fiscal year 2021. Woodward does not expect to elect the fair value option for its financial instruments upon the adoption of both ASU 2016-13 and ASU 2019-05.

In February 2018, the FASB issued ASU 2018-02, “Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.” ASU 2018-02 allows a reclassification from accumulated other comprehensive income (“OCI”) to retained earnings for stranded tax effects resulting from the enactment of tax reform under H.R.1, “An Act to Provide for Reconciliation Pursuant to Titles II and V of the Concurrent Resolution on the Budget for Fiscal Year 2018” (the “Tax Act”) (also known as “The Tax Cuts and Jobs Act”), and provides guidance on the disclosure requirements regarding the stranded tax effects. Woodward adopted ASU 2018-02 on October 1, 2019 and has elected not to reclassify the income tax effects of the Tax Act from accumulated OCI to retained earnings.

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842)” and has subsequently issued supplemental and/or clarifying ASUs (collectively “ASC 842”). The purpose of ASC 842 is to increase transparency and comparability among organizations by recognizing lease right-of-use (“ROU”) assets and lease liabilities for substantially all leases on the balance sheet, and provide additional disclosure information about leasing arrangements. ASC 842 modifies the definition of a lease to clarify that an arrangement contains a lease when such arrangement conveys the right to control the use of an identified asset.

~~Woodward adopted ASC 842 on October 1, 2019 using the modified retrospective transition method under which prior periods were not restated and the cumulative~~material effect of initial adoption was recognized in retained earnings on the date of initial application, October 1, 2019. Consequently, financial information will not be updated and the disclosures required under ASC 842 will not be provided for dates and periods before October 1, 2019.

The new guidance under ASC 842 provides a number of optional practical expedients in transition. Woodward elected the "package of practical expedients," which allowed Woodward not to reassess under the new guidance our prior conclusions about lease identification, lease classification and initial direct costs. Accordingly, Woodward carried forward its existing conclusions on lease classification for leases existing as of the adoption date. Additionally, embedded lease arrangements were assessed under the prior guidance of ASC 840 lease framework for transition on October 1, 2019 in accordance with the leases policy outlined below. The new lease accounting guidance under ASC 842 has been applied for all arrangements commencing or modified on or after October 1, 2019.

Woodward also elected as a practical expedient to not record qualifying short-term leases with a term of twelve months or less (inclusive of reasonably certain renewals and termination options) at the inception of the contract on the balance sheet and instead recognizes those lease payments in the Condensed Consolidated Statements of Comprehensive Earnings on a straight-line basis over the lease term. This practical expedient may not be applied to short-term leases that contain a purchase option that is reasonably certain of exercise.

Woodward has also elected the practical expedient to not separate lease and non-lease components for its lease arrangements when it is the lessee. The application of this practical expedient is discussed at Note 5, ~~Leases~~.

~~The adoption of ASC 842 resulted in recognition of additional operating ROU assets and operating lease liabilities~~ on the Condensed Consolidated ~~Balance Sheet as of October 1, 2019 of $18,894 and $18,851, respectively.~~

~~See Note 5,~~ ~~Leases, for disclosures and further information related to implementation and adoption of ASC 842.~~Financial Statements.

Revenue from manufactured products and from maintenance, repair and overhaul (“MRO”) represented 86% and 12%, respectively, of Woodward’s net sales for the three-months ended June 30, 2020, compared to 84% and 13%, respectively, for the three-months ended June 30, 2019. Revenue from manufactured products and from MRO represented 86% and 12%, respectively, of Woodward’s net sales for both the nine-months ended June 30, 2020 and June 30, 2019.

	Three-Months Ended June 30, 2020						Three-Months Ended June 30, 2019						Three-Months Ended March 31, 2021						Three-Months Ended March 31, 2020
	Aerospace		Industrial		Consolidated		Aerospace		Industrial		Consolidated		Aerospace		Industrial		Consolidated		Aerospace		Industrial		Consolidated
Point in time	$	98,228	$	138,504	$	236,732	$	191,516	$	147,194	$	338,710	$	114,563	$	131,242	$	245,805	$	178,325	$	157,052	$	335,377
Over time		208,266		78,828		287,094		307,259		106,036		413,295		250,143		85,373		335,516		295,911		88,932		384,843
Total net sales	$	306,494	$	217,332	$	523,826	$	498,775	$	253,230	$	752,005	$	364,706	$	216,615	$	581,321	$	474,236	$	245,984	$	720,220

	Nine-Months Ended June 30, 2020						Nine-Months Ended June 30, 2019						Six-Months Ended March 31, 2021						Six-Months Ended March 31, 2020
	Aerospace		Industrial		Consolidated		Aerospace		Industrial		Consolidated		Aerospace		Industrial		Consolidated		Aerospace		Industrial		Consolidated
Point in time	$	464,068	$	463,498	$	927,566	$	563,713	$	482,979	$	1,046,692	$	221,530	$	285,437	$	506,967	$	365,840	$	324,994	$	690,834
Over time		790,587		246,248		1,036,835		810,903		306,065		1,116,968		464,843		147,130		611,973		582,321		167,420		749,741
Total net sales	$	1,254,655	$	709,746	$	1,964,401	$	1,374,616	$	789,044	$	2,163,660	$	686,373	$	432,567	$	1,118,940	$	948,161	$	492,414	$	1,440,575

Customer receivables include amounts billed and currently due from customers as well as unbilled amounts (contract assets) and are included in “Accounts receivable” in Woodward’s Condensed Consolidated Balance Sheets. Amounts are billed in accordance with contractual terms, which are generally tied to shipment of the products to the customer, or as work progresses in accordance with contractual terms. Billed accounts receivable are typically due within 60 days.

Unbilled amounts arise when the timing of billing differs from the timing of revenue recognized, such as when contract provisions require revenue to be recognized over time rather than at a point in time. Unbilled amounts primarily relate to performance obligations satisfied over time when the cost-to-cost method is utilized and the revenue recognized exceeds the amount billed to the customer as there is not yet a right to payment in accordance with contractual terms. Unbilled amounts are recorded as a contract asset when the revenue associated with the contract is recognized prior to billing and derecognized when billed in accordance with the terms of the contract.

~~Woodward’s contracts with customers generally have no financing components.~~Accounts Receivable

	June 30, 2020			September 30, 2019			March 31, 2021			September 30, 2020
Billed receivables
Trade accounts receivable	$	294,113		$	381,942		$	304,682		$	307,914
Other (Chinese financial institutions)		47,863			42,171			73,298			56,640
Total billed receivables								377,980			364,554
Current unbilled receivables (contract assets)								217,606			181,792
Total accounts receivable								595,586			546,346
Less: Allowance for uncollectible amounts		(7,180	)		(7,908	)		(7,522	)		(8,359	)
Net billed receivables		334,796			416,205
Current unbilled receivables (contract assets), net		202,719			175,324
Total accounts receivable, net	$	537,515		$	591,529		$	588,064		$	537,987

As of ~~June 30, 2020,~~March 31, 2021, “Other assets” on the Condensed Consolidated Balance Sheets includes ~~$28,278~~$12,925 of unbilled receivables not expected to be invoiced and collected within a period of twelve months, compared to ~~$1,573~~$16,751 as of September 30, ~~2019.~~2020. Unbilled receivables not expected to be invoiced and collected within a period of twelve months are primarily attributable to customer delays for deliveries on firm orders in the Aerospace segment due to the impacts of the COVID-19 pandemic.

~~In coordination~~Accounts receivable in Woodward’s Condensed Consolidated Financial Statements represent the net amount expected to be collected, and an allowance for uncollectible amounts related to credit losses is established based on expected losses in accordance with its customers and when terms are considered favorable, Woodward transfers ownership to collect amounts due for outstanding accounts receivable to third parties in exchange for cash. When the transfer of accounts receivable meets the criteria of FASB ASC Topic ~~860-10, “Transfers~~326, “Financial Instruments – Credit Losses”. Expected losses are estimated by reviewing specific customer accounts, taking into consideration aging, credit risk of the customers, and ~~Servicing”,~~historical payment history, as well as current and ~~are without recourse, the transaction is recognized as a sale~~forecasted economic conditions, and ~~the~~other relevant factors.

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

	June 30, 2020				September 30, 2019				March 31, 2021				September 30, 2020
	Current		Noncurrent		Current		Noncurrent		Current		Noncurrent		Current		Noncurrent
Deferred revenue from material rights from GE joint venture formation	$	3,866	$	235,602	$	8,317	$	230,588	$	4,419	$	236,610	$	4,066	$	234,240
Deferred revenue from advanced invoicing and/or prepayments from customers		6,869		106		4,554		141		3,922		716		3,239		85
Liability related to customer supplied inventory		17,799		—		13,396		—		15,790		—		14,955		—
Deferred revenue from material rights related to engineering and development funding		1,688		120,467		1,624		106,436		4,629		139,480		2,360		132,317
Net contract liabilities	$	30,222	$	356,175	$	27,891	$	337,165	$	28,760	$	376,806	$	24,620	$	366,642

Woodward recognized revenue of ~~$8,356~~$7,146 in the three-months ~~ended June 30, 2020~~ and ~~$28,288~~$13,674 in the ~~nine-months~~six-months ended ~~June 30,~~March 31, 2021 from contract liabilities balances recorded as of October 1, 2020, compared to $15,962 in the three-months and $19,932 in the six-months ended March 31, 2020 from contract liabilities balances recorded as of October 1, ~~2019, compared to $6,147 in the three-months ended June 30, 2019 and $26,459 in the nine-months ended June 30, 2019 from contract liabilities balances recorded as of October 1, 2018.~~2019.

Remaining performance obligations related to the aggregate amount of the total contract transaction price of firm orders for which the performance obligation has not yet been recognized in revenue as of ~~June 30, 2020~~March 31, 2021 was ~~$1,587,816,~~$1,395,436, compared to ~~$1,527,437~~$1,454,406 as of September 30, ~~2019,~~2020, the majority of which ~~in both periods~~ relate to Woodward’s Aerospace ~~segment.~~segment in both periods. Woodward expects to recognize almost all of these remaining performance obligations within two years after ~~June 30, 2020.~~March 31, 2021.

Remaining performance obligations related to material rights that have not yet been recognized in revenue as of ~~June~~March 31, 2021 was $469,143, compared to $465,668 as of September 30, 2020, ~~was $454,585,~~ of which ~~$1,049~~$7,348 is expected to be recognized in the remainder of fiscal year ~~2020, $7,307~~2021, $11,027 is expected to be recognized in fiscal year ~~2021,~~2022, and the balance is expected to be recognized thereafter. Woodward expects to recognize revenue from performance obligations related to material rights over the life of the underlying programs, which may be as long as forty years.

Woodward designs, produces and services reliable, efficient, low-emission, and high-performance energy control products for diverse applications in markets throughout the world. Woodward reports financial results for each of its Aerospace and Industrial reportable segments. Woodward further disaggregates its revenue from contracts with customers by primary market ~~and by geographical area~~ as Woodward believes this best depicts how the nature, amount, timing and uncertainty of its revenue and cash flows are affected by economic factors.

	Three-Months Ended June 30,				Nine-Months Ended June 30,				Three-Months Ended March 31,				Six-Months Ended March 31,
	2020		2019		2020		2019		2021		2020		2021		2020
Commercial OEM	$	63,804	$	174,077	$	367,080	$	488,928	$	101,907	$	144,610	$	177,988	$	303,276
Commercial aftermarket		68,332		124,863		328,302		375,919		77,579		134,042		143,094		259,970
Defense OEM		111,667		147,696		392,494		372,538		135,630		139,901		266,893		280,827
Defense aftermarket		62,691		52,139		166,779		137,231		49,590		55,683		98,398		104,088
Total Aerospace segment net sales	$	306,494	$	498,775	$	1,254,655	$	1,374,616	$	364,706	$	474,236	$	686,373	$	948,161

	Three-Months Ended June 30,				Nine-Months Ended June 30,				Three-Months Ended March 31,				Six-Months Ended March 31,
	2020		2019		2020		2019		2021		2020		2021		2020
Reciprocating engines	$	158,804	$	185,523	$	497,012	$	590,910	$	163,034	$	163,555	$	327,956	$	338,208
Industrial turbines		53,486		53,740		164,663		155,439		53,581		59,678		104,611		111,177
Renewables¹		5,042		13,967		48,071		42,695		—		22,751		—		43,029
Total Industrial segment net sales	$	217,332	$	253,230	$	709,746	$	789,044	$	216,615	$	245,984	$	432,567	$	492,414

The customers who each account for approximately 10% or more of net sales of each of Woodward’s reportable segments for the three and ~~nine-months~~six-months ended ~~June 30, 2020~~March 31, 2021 are as follows:

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

Basic earnings per share is computed by dividing net earnings available to common stockholders by the weighted-average number of shares of common stock outstanding for the period.

Diluted earnings per share reflects the weighted-average number of shares outstanding after consideration of the dilutive effect of stock options and restricted stock.

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

	Three-Months Ended June 30,				Nine-Months Ended June 30,				Three-Months Ended March 31,				Six-Months Ended March 31,
	2020		2019		2020		2019		2021		2020		2021		2020
Numerator:
Net earnings	$	38,465	$	66,107	$	183,156	$	192,806	$	68,313	$	91,318	$	109,883	$	144,691
Denominator:
Basic shares outstanding		62,309		61,941		62,188		61,977		63,278		62,266		63,043		62,128
Dilutive effect of stock options and restricted stock		1,118		2,692		2,085		2,460		2,376		2,298		2,231		2,494
Diluted shares outstanding		63,427		64,633		64,273		64,437		65,654		64,564		65,274		64,622
Income per common share:
Basic earnings per share	$	0.62	$	1.07	$	2.95	$	3.11	$	1.08	$	1.47	$	1.74	$	2.33
Diluted earnings per share	$	0.61	$	1.02	$	2.85	$	2.99	$	1.04	$	1.41	$	1.68	$	2.24

The following stock option grants were outstanding but were excluded from the computation of diluted earnings per share because their inclusion would have been anti-dilutive.

	Three-Months Ended June 30,				Nine-Months Ended June 30,				Three-Months Ended March 31,				Six-Months Ended March 31,
	2020		2019		2020		2019		2021		2020		2021		2020
Options		2,357		39		670		19		41		686		602		686
Weighted-average option price	$	83.75	$	97.13	$	104.48	$	97.13	$	117.39	$	104.51	$	104.85	$	104.47

The weighted-average shares of common stock outstanding for basic and diluted earnings per share included the weighted-average treasury stock shares held for deferred compensation obligations of the following:

Woodward adopted ASC 842 on October 1, 2019 using the modified retrospective transition method under which prior periods were not restated and the cumulative effect of initial adoption was recognized in retained earnings on the date of initial application, October 1, 2019.

~~Woodward is primarily a lessee in lease arrangements but has some embedded lessor arrangements.~~

Woodward has entered into operating leases for certain facilities and equipment with terms in excess of one year under agreements that expire at various dates. Some leases require the payment of property taxes, insurance, maintenance costs, or other similar costs in addition to rental payments. Woodward has also entered into finance leases for equipment with terms in excess of one year under agreements that expire at various dates.

Woodward determines if an arrangement for the use of property, plant and equipment is a lease at inception. Under ASC 842, an arrangement contains a lease if the arrangement conveys the right to control the use of plant, property or equipment (identified asset) for a period of time in exchange for consideration. For arrangements determined to be a lease under this criteria, Woodward assesses lease classification as either an operating or finance lease whenever the new lease is executed or an existing lease requires reclassification based on changes in the lease’s terms and conditions. Lease classification impacts the treatment of the lease on the income statement and amortization of the lease ROU asset. In determining lease classification, Woodward considers both qualitative and quantitative factors when performing the following classification tests: (i) transfer of ownership at the end of the lease term, (ii) existence of a bargain purchase option, (iii) the lease term, (iv) minimum lease payments, and (v) whether the leased asset is so customized to Woodward’s needs as to effectively have utility only to Woodward.

Woodward applies the following thresholds when performing the classification tests: (i) 75% or greater is considered to be the majority of the asset’s remaining economic life, (ii) the exercise of the renewal option or the non-exercise of a termination option is reasonably certain if it has at least a 75% likelihood of occurring (in arriving at the percentage likelihood, Woodward considers its plans as to whether to renew the lease and the economic factors that may impact the decision to renew and Woodward will include a renewal option or non-exercise of a termination option in the lease term only if the Company has an economic incentive to extend the lease), (iii) the present value of the future minimum lease payments is considered to exceed substantially all of the fair value of the underlying asset if the payments exceed 90% of the asset’s fair value. Woodward considers the exercise of the option to purchase a leased asset as reasonably certain if it has at least a 75% likelihood of being exercised or, among other things, a significant economic incentive exists for exercising the option.

Lease components are elements of an arrangement that provide the customer with the right to use an identified asset. The right to use an underlying asset is a separate lease component if: (i) the lessee can benefit from the right to use the underlying asset either on its own or together with other resources that are readily available, and (ii) the right to use the underlying asset is neither highly dependent on nor highly interrelated with other rights to use other underlying assets in the arrangement. Woodward may enter into lessee arrangements that contain a lease component but also contain other non-lease components. When the non-lease component in an arrangement relates to inventory, as inventory is outside the scope of ASC 842, the payment Woodward makes for inventory is accounted for and expensed separately and apart from lease expense, rather than as a lease component. For all other classes of underlying assets in lessee arrangements, Woodward has elected to combine lease and non-lease components and to account for them as lease expense.

ROU assets represent Woodward’s right to use an underlying asset for the lease term, and lease liabilities represent Woodward’s obligation to make lease payments arising from the lease. ROU assets include any initial direct costs (incremental costs of a lease that would not have been incurred had the lease not been executed) and lease prepayments made, and are reduced by any lease incentives received. Leases with an initial term of 12 months or less and leases with only variable lease payments are not recorded on the balance sheet.

ROU assets and lease liabilities are recognized at the lease commencement date based on the estimated present value of the remaining fixed lease payments over the lease term. In determining the estimated present value of lease payments, Woodward discounts the fixed lease payments using the rate implicit in the agreement or, if the implicit rate is not known, using the incremental borrowing rate. As of June 30, 2020, none of Woodward’s leases have been discounted using the implicit rate as it could not be readily determined. Woodward’s incremental borrowing rate is based on the information available at the lease commencement date, with consideration given to Woodward’s recent debt issuances as well as publicly available data for instruments with similar characteristics.

When measuring lease liabilities, Woodward only uses lease payments remaining throughout the remainder of the lease term and only includes the amount that is probable of being owed under significant residual value guarantees, if any. Lease liabilities are subject to the same considerations as Woodward’s debt instruments in classifying them as current or noncurrent in the Condensed Consolidated Balance Sheets.

For operating leases, lease expense is recognized over the expected lease term and classified as a cost of goods sold or selling, general and administrative expense based on the nature of the underlying leased asset. For finance leases, the ROU asset is recognized over the shorter of the useful life of the asset, consistent with Woodward’s normal depreciation policy, or the lease term, and is classified as a cost of goods sold, selling, general and administrative expense, or research and development expense, based on the nature and use of the underlying leased asset. Interest expense is recorded in connection with the finance lease liability using the effective interest rate method and is classified as interest expense.

Certain of Woodward’s operating lease agreements include variable payments that are passed through by the landlord, such as insurance, taxes, and common area maintenance, payments based on the usage of the asset, and rental payments adjusted periodically for inflation. Pass-through charges, payments due to changes in usage of the asset, and payments due to changes in indexation are included within variable rent expense and are recognized in the period in which the variable obligation for the payments was incurred.

None of Woodward’s lease agreements contain significant residual value guarantees, restrictions, or covenants. As of June 30, 2020, Woodward has not entered into any lease arrangements that have not yet commenced but would create significant rights and obligations. Woodward does not have any lease transactions between related parties.

	Classification on the Condensed Consolidated Balance Sheets	June 30, 2020		Classification on the Condensed Consolidated Balance Sheets	March 31, 2021		September 30, 2020
Assets:
Operating lease assets	Other assets	$	19,687	Other assets	$	21,935	$	18,918
Finance lease assets	Property, plant and equipment, net		1,338	Property, plant and equipment, net		970		1,201
Total lease assets			21,025			22,905		20,119

Current liabilities:
Operating lease liabilities	Accrued liabilities		4,648	Accrued liabilities		5,280		4,925
Finance lease liabilities	Current portion of long-term debt		1,643	Current portion of long-term debt		1,398		1,634
Noncurrent liabilities:
Operating lease liabilities	Other liabilities		15,143	Other liabilities		17,178		14,569
Finance lease liabilities	Long-term debt, less current portion		1,575	Long-term debt, less current portion		620		1,173
Total lease liabilities		$	23,009		$	24,476	$	22,301

InDuring the first quarter of fiscal year 2020, Woodward determined that the approved plan to divest of the renewable power systems ~~portfolio~~business and other related businesses (as described more fully in Note 10, Sale of businesses, and defined therein as the “disposal group”) represented a triggering event requiring that the long-lived assets attributable to the disposal group be assessed for impairment. Given the facts and circumstances at that time, Woodward determined that the remaining value of the ~~ROU~~right-of-use (“ROU”) assets of the disposal group were not recoverable and a $639 non-cash impairment charge was recorded during ~~the nine-months ended June 30,~~fiscal year 2020.

Lease-related expenses ~~for the three and nine-months ended June 30, 2020~~ were as follows:

	Three-Months Ended			Nine-Months Ended			Three-Months Ended March 31,						Six-Months Ended March 31,
	June 30, 2020			June 30, 2020			2021			2020			2021			2020
Operating lease expense	$	1,511		$	4,562		$	1,615		$	1,532		$	3,168		$	3,051
Amortization of financing lease assets		110			358
Interest on financing lease liabilities		25			65
Amortization of finance lease assets								94			101			220			248
Interest on finance lease liabilities								17			20			35			40
Variable lease expense		192			787			496			288			818			595
Short-term lease expense		63			400			76			162			158			337
Sublease income¹		(236	)		(561	)		(214	)		(200	)		(382	)		(325	)
Total lease expense	$	1,665		$	5,611		$	2,084		$	1,903		$	4,017		$	3,946

Lease-related supplemental cash flow information ~~for the nine-months ended June 30, 2020~~was as follows:

	Nine-Months Ended
	June 30, 2020		Six-Months Ended March 31, 2021		Six-Months Ended March 31, 2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases	$	3,622	$	2,671	$	2,701
Operating cash flows for finance leases		65		35		40
Financing cash flows for finance leases		1,187		835		787
Right-of-use assets obtained in exchange for recorded lease obligations:
Operating leases		4,825		5,070		5,345
Finance leases		1,243		12		1,244

~~Comparable future minimum rental payment~~ ~~under~~ ~~operating and finance leases that have initial or remaining non-cancelable lease terms in excess of one year as previously disclosed under ASC 840 as of September 30, 2019 follows:~~

~~In the three and nine-months ended June 30, 2019, total rental payments charged to expense for operating leases under ASC 840 were $2,148 and $6,968, respectively.~~

Woodward enters into various customer supply agreements, customer sales agreements, and/or product development agreements (collectively, “manufacturing contracts”) with customers to provide highly specialized products. In certain of these manufacturing contracts, the property, plant and equipment used to manufacture the products is used only for the benefit of one customer. This is primarily driven by the demand for customer products, which can be so great that it is economically beneficial to dedicate the plant and equipment to just one customer. Additionally, this can be driven by the set-up of the property, plant and equipment required to produce specified product and/or the specialized nature of the property, plant and equipment such that it is not economically feasible to use the plant, property and equipment to manufacture other products.

Woodward has assessed its manufacturing contracts and concluded that certain of the contracts for the manufacture of customer products met the criteria to be considered a leasing arrangement (“embedded leases”) with Woodward as the lessor. The specific manufacturing contracts that met the criteria were those that utilized Woodward property, plant and equipment and which is substantially (more than 90%) dedicated to the manufacturing of the product(s) for a single customer. Woodward has dedicated manufacturing lines with three of its customers representing embedded leases, all of which qualified as operating leases with undefined quantities of future customer purchase commitments. Woodward’s customers for which embedded lessor arrangements have been identified do not have contractual long-term commitments to purchase specified quantities of related products or services from Woodward, although Woodward expects to continue selling to such customers into the future and is presently unaware of any economic penalties, or other factors, which would further define a lease term on such arrangements. Although Woodward expects to allocate some portion of future net sales to these customers to embedded lessor arrangements, it cannot provide expected future undiscounted lease payments from property, plant and equipment leased to customers as of ~~June 30, 2020.~~March 31, 2021. If, in the future, customers reduce purchases of related products from Woodward, the Company believes it will derive additional value from the underlying equipment by repurposing its use to support other customer arrangements. ~~Woodward will continue to assess its future manufacturing contracts and monitor its current manufacturing contracts for changes which may trigger additional embedded leases under ASC 842.~~

A manufacturing contract with a customer that contains an embedded lease will generally include lease components, such as the equipment, and non-lease components, such as other inputs used in the manufacture of the customer’s product. In evaluating its embedded leases, Woodward first identified and separated its lease and non-lease components. Woodward has determined that for its current embedded leases, the property, plant and equipment used by Woodward represents lease components and all other inputs that Woodward uses to develop, manufacture and sell the customer product represents non-lease components. Woodward allocates revenue from contracts with customers between lease and non-lease components by imputing a reasonable rate of return based on the estimated fair value of the dedicated property, plant and equipment.

Under ASC 842, consistent with the previous guidance, Woodward will continue to recognize property, plant and equipment in embedded lessor arrangements on its Condensed Consolidated Balance Sheets in property, plant and equipment, net. The property, plant and equipment will continue to be depreciated as normal.

Woodward recognizes revenue from the embedded lessor arrangements based on the value of the underlying dedicated property, plant, and equipment. There are no fixed payments that the customers under the embedded lessor arrangements are obligated to pay. Therefore, all the customer payments under the embedded lessor arrangements are considered variable with the associated leasing revenue recognized when the revenue from underlying product sale related to variable lease payment is recognized. Revenue from contracts with customers that included embedded operating leases, which is included in “Net sales” atin the Condensed Consolidated Statements of Earnings, was ~~$1,638~~$1,511 for the three-months ~~ended June 30, 2020~~ and ~~$4,763~~$3,309 for the ~~nine-months~~six-months ended ~~June 30, 2020.~~

Other than the embedded leases identified, Woodward is not the lessor in any other leasing arrangements. None of the embedded leases identified by Woodward qualify as a sales-type or direct finance lease. None of the operating leases for which Woodward is the lessor include optionsMarch 31, 2021, compared to $1,561 for the ~~lessee to purchase~~three-months and $3,125 for the ~~underlying asset at the end of the lease term or residual value guarantees, nor are any such operating leases with related parties.~~six-months ended March 31, 2020.

The carrying amount of property, plant and equipment leased to others through embedded leasing arrangements, included in “Property, plant and equipment, net” aton the Condensed Consolidated Balance Sheets, follows:

	June 30, 2020		March 31, 2021			September 30, 2020
Property, plant and equipment leased to others through embedded leasing arrangements	$	69,957	$	76,995		$	76,655
Less accumulated depreciation		27,917		(32,716	)		(29,819	)
Property, plant and equipment leased to others through embedded leasing arrangements, net	$	42,040	$	44,279		$	46,836

~~On January 4,~~In fiscal year 2016, Woodward and General Electric Company (“GE”), acting through its GE Aviation business unit, consummated the formation of a strategic joint venture between Woodward and GE (the “JV”) to develop, manufacture and support fuel systems for specified existing and all future GE commercial aircraft engines that produce thrust in excess of fifty thousand pounds.

Unamortized deferred revenue from material rights in connection with the JV formation included:

	June 30, 2020		September 30, 2019		March 31, 2021		September 30, 2020
Accrued liabilities	$	3,866	$	8,317	$	4,419	$	4,066
Other liabilities		235,602		230,588		236,610		234,240

Amortization of the deferred revenue (material right) recognized as an increase to sales was ~~$802~~$989 for the three-months and ~~$4,331~~$2,171 for the ~~nine-months~~six-months ended ~~June 30, 2020,~~March 31, 2021, and ~~$2,013~~$1,821 for the three-months and ~~$5,712~~$3,529 for the ~~nine-months~~six-months ended ~~June 30, 2019.~~March 31, 2020.

~~Woodward and GE jointly manage the JV and any significant decisions and/or actions~~As part of the JV ~~require the mutual consent of both parties. Neither Woodward nor~~formation, GE has a controlling financial interest in the JV, but both Woodward and GE do have the ability to significantly influence the operating and financial decisions of the JV. Therefore, Woodward is accounting for its 50% ownership interest in the JV using the equity method of accounting. The JV is a related party to Woodward. In addition, GE will continue to paypays contingent consideration to Woodward consisting of fifteen annual payments of $4,894 per year, which began ~~on January 4,~~in the second quarter of fiscal year 2017, subject to certain claw-back conditions. Woodward received its ~~third and fourth~~ annual payments of $4,894 during the three-months ended March 31, ~~2019~~2021 and ~~March 31,~~ 2020, ~~respectively,~~ which were recorded as deferred income and included in ~~Net~~“Net cash provided by operating ~~activities~~activities” on the Condensed Consolidated Statements of Cash Flows. ~~Neither Woodward nor GE contributed any tangible assets to the JV.~~

Other income related to Woodward’s equity interest in the earnings of the JV was as follows:

Cash distributions to Woodward from the JV, recognized in ~~Net~~“Net cash provided by operating ~~activities~~activities” on the Condensed Consolidated Statements of Cash Flows, ~~from the JV include:~~were as follows:

The Condensed Consolidated Balance Sheets include “Accounts receivable” related to amounts the JV owed Woodward, “Accounts payable” related to amounts Woodward owed the JV, and “Other assets” related to Woodward’s net investment in the JV, as follows:

	June 30, 2020		September 30, 2019		March 31, 2021		September 30, 2020
Accounts receivable	$	4,354	$	5,906	$	3,526	$	3,062
Accounts payable		1,240		4,270		4,534		1,502
Other assets		9,367		7,543		8,288		9,123

Woodward records in “Other liabilities” amounts invoiced to the JV for support of the JV’s engineering and development projects as an increase to contract liabilities, and records in “Other assets” related incurred expenditures as costs to fulfill a contract. Woodward’s contract liabilities classified as “Other liabilities” included amounts invoiced to the JV as of June 30, 2020 of $68,735 compared to $69,079 as of fiscal year ended September 30, 2019. Woodward’s costs to fulfill a contract included in “Other assets” related to JV activities were $68,735 as of June 30, 2020 and $69,079 as of fiscal year ended September 30, 2019. In the three and nine-months ended June 30, 2020, Woodward recognized a $6,207 reduction in both the contract liability in “Other liabilities” and costs to fulfill and contract in “Other assets” related to the termination of a JV engineering and development project previously recognized as a material right, compared to $2,774 in the three and nine-months ended June 30, 2019.

Financial assets and liabilities recorded at fair value in the Condensed Consolidated Balance Sheets are categorized based upon a fair value hierarchy established by U.S. GAAP, which prioritizes the inputs used to measure fair value into the following levels:

~~Level 1: Inputs based on quoted market prices in active markets for identical assets or liabilities at the measurement date.~~

Level 2: Quoted prices included in Level 1, such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable and can be corroborated by observable market data.

Level 3: Inputs that reflect management’s best estimates and assumptions of what market participants would use in pricing the asset or liability at the measurement date. The inputs are unobservable in the market and are significant to the valuation of the instruments.

The table below presents information about Woodward’s financial assets and liabilities that are measured at fair value on a recurring basis and indicates the fair value hierarchy of the valuation techniques Woodward utilized to determine such fair ~~value.~~value as defined by the U.S. GAAP fair value hierarchy.

	At June 30, 2020								At September 30, 2019								At March 31, 2021								At September 30, 2020
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Financial assets:
Cash	$	52,577	$	—	$	—	$	52,577	$	52,971	$	—	$	—	$	52,971
Investments in reverse repurchase agreements		—		—		—		—		886		—		—		886
Investments in term deposits with foreign banks		48,786		—		—		48,786		45,216		—		—		45,216	$	3,051	$	—	$	—	$	3,051	$	40,453	$	—	$	—	$	40,453
Equity securities		23,939		—		—		23,939		20,504		—		—		20,504		28,836		—		—		28,836		25,381		—		—		25,381
Cross-currency interest rate swaps		—		—		—		—		—		24,758		—		24,758
Total financial assets	$	125,302	$	—	$	—	$	125,302	$	119,577	$	24,758	$	—	$	144,335	$	31,887	$	—	$	—	$	31,887	$	65,834	$	—	$	—	$	65,834

Financial liabilities:
Cross-currency interest rate swaps	$	—	$	25,440	$	—	$	25,440	$	—	$	—	$	—	$	—	$	—	$	71,421	$	—	$	71,421	$	—	$	51,387	$	—	$	51,387
Total financial liabilities	$	—	$	25,440	$	—	$	25,440	$	—	$	—	$	—	$	—	$	—	$	71,421	$	—	$	71,421	$	—	$	51,387	$	—	$	51,387

~~Investments in reverse repurchase agreements:~~ Woodward sometimes invests excess cash in reverse repurchase agreements. Under the terms of Woodward’s reverse repurchase agreements, Woodward purchases an interest in a pool of securities and is granted a security interest in those securities by the counterparty to the reverse repurchase agreement. At an agreed upon date, generally the next business day, the counterparty repurchases Woodward’s interest in the pool of securities at a price equal to what Woodward paid to the counterparty plus a rate of return determined daily per the terms of the reverse repurchase agreement. Woodward believes that the investments in these reverse repurchase agreements are with creditworthy financial institutions and that the funds invested are highly liquid. The investments in reverse repurchase agreements are reported at fair value, with realized gains from interest income recognized in earnings, and are included in “Cash and cash equivalents” in the Condensed Consolidated Balance Sheets. Since the investments are generally overnight, the carrying value is considered to be equal to the fair value as the amount is deemed to be a cash deposit with no risk of change in value as of the end of each fiscal quarter. During the second quarter of fiscal year 2020, the Company terminated its existing investments in reverse repurchase agreements.

Investments in term deposits with foreign banks: Woodward’s foreign subsidiaries sometimes invest excess cash in various highly liquid financial instruments that Woodward believes are with creditworthy financial institutions. Such investments are reported in “Cash and cash equivalents” at fair value, with realized gains from interest income recognized in earnings. The carrying value of Woodward’s investments in term deposits with foreign banks are considered equal to the fair value given the highly liquid nature of the investments.

Equity securities: Woodward holds marketable equity securities, through investments in various mutual funds, related to its deferred compensation program. Based on Woodward’s intentions regarding these instruments, marketable equity securities are classified as trading securities. The trading securities are reported at fair value, with realized gains and losses recognized in “Other (income) expense, net” on the Condensed Consolidated Statements of Earnings. The trading securities are included in “Other assets” in the Condensed Consolidated Balance Sheets. The fair values of Woodward’s trading securities are based on the quoted market prices for the net asset value of the various mutual funds.

Cross-currency interest rate swaps: Woodward holds cross-currency interest rate swaps, which are accounted for at fair value. In the Condensed Consolidated Balance Sheets, the swaps in an asset position are included in “Other assets,” and swaps in a liability position are included in “Other liabilities”. The fair values of Woodward’s cross-currency interest rate swaps are determined using a market approach that is based on observable inputs other than quoted market prices, including contract terms, interest rates, currency rates, and other market factors. As of June 30, 2020, swaps in a liability position in the amount of $25,440 were included in “Other liabilities”, while swaps in an asset position of $24,758 were included in “Other assets” as of September 30, 2019.

~~Trade~~Cash, trade accounts receivable, accounts payable, and short-term borrowings are not remeasured to fair value, as the carrying cost of each approximates its respective fair value. The estimated fair values and carrying costs of other financial instruments that are not required to be remeasured at fair value in the Condensed Consolidated Balance Sheets were as follows:

		At June 30, 2020				At September 30, 2019					At March 31, 2021				At September 30, 2020
	Fair Value Hierarchy Level	Estimated Fair Value		Carrying Cost		Estimated Fair Value		Carrying Cost		Fair Value Hierarchy Level	Estimated Fair Value		Carrying Cost		Estimated Fair Value		Carrying Cost
Assets:
Notes receivable from municipalities	2	$	13,291	$	12,238	$	13,100	$	12,346	2	$	13,323	$	11,039	$	13,413	$	11,846
Note receivable from sale of disposal group	2		6,317		6,015		—		—	2		6,172		6,150		6,341		6,061
Investments in short-term time deposits	2		13,275		13,316		13,468		13,509	2		70		69		13,678		13,671
Liabilities:
Long-term debt	2	$	923,159	$	833,036	$	928,618	$	867,377	2	$	801,655	$	739,489	$	935,610	$	840,654

In connection with certain economic incentives related to Woodward’s development of a second campus in the greater-Rockford, Illinois area for its Aerospace segment and Woodward’s development of a new campus at its corporate headquarters in Fort Collins, Colorado, Woodward received long-term notes from municipalities within the states of Illinois and Colorado. The fair value of the long-term notes was estimated based on a model that discounted future principal and interest payments received at an interest rate available to Woodward at the end of the period for similarly rated municipal notes of similar maturity, which is a level 2 input as defined by the U.S. GAAP fair value hierarchy. The interest rates used to estimate the fair value of the long-term notes were ~~1.2%~~1.3% at ~~June 30, 2020~~March 31, 2021 and ~~1.7%~~1.2% at September 30, ~~2019.~~2020.

In connection with the sale of the ~~disposal group (See~~renewable power systems business and other related businesses (as described more fully in Note 10, Sale of businesses, and defined therein as the “disposal group”), Woodward received a long-term promissory note from the buyer for deferral of a portion of the purchase price. The fair value of the long-term note was estimated based on a model that discounted future principal and interest payments received at an interest rate available to Woodward at the end of the period for similarly rated promissory notes of similar maturity, which is a level 2 input as defined by the U.S. GAAP fair value hierarchy. The interest rate used to estimate the fair value of the long-term note was ~~3.1%~~2.0% at ~~June~~March 31, 2021 and 2.3% at September 30, 2020.

From time to time, certain of Woodward’s foreign subsidiaries will invest excess cash in short-term time deposits with a fixed maturity date of longer than three months but less than one year from the date of the deposit. Woodward believes that the investments are with creditworthy financial institutions. The fair value of the investments in short-term time deposits was estimated based on a model that discounted future principal and interest payments to be received at an interest rate available to the foreign subsidiary entering into the investment for similar short-term time deposits of similar maturity. This was determined to be a level 2 input as defined by the U.S. GAAP fair value hierarchy. The interest rates used to estimate the fair value of the short-term time deposits ~~were~~was 4.4% at ~~June 30, 2020~~both March 31, 2021 and ~~5.7% at~~ September 30, ~~2019.~~2020.

The fair value of long-term debt was estimated based on a model that discounted future principal and interest payments at interest rates available to the Woodward at the end of the period for similar debt of the same maturity, which is a level 2 input as defined by the U.S. GAAP fair value hierarchy. The weighted-average interest rate used to estimate the fair value of long-term debt was 1.7% at ~~June 30, 2020~~March 31, 2021 and ~~2.5%~~1.5% at September 30, ~~2019.~~2020.

Woodward does not have expected credit losses related to any financial assets that are not required to be remeasured at fair value.

In May 2018, Woodward entered into cross-currency interest rate swap agreements that synthetically converted $167,420 of floating-rate debt under Woodward’s then existing revolving credit agreement to Euro denominated floating-rate debt in conjunction with the L’Orange acquisition (the “Floating-Rate Cross-Currency Swap”). Also in May 2018, Woodward entered into cross-currency interest rate swap agreements that synthetically converted an aggregate principal amount of $400,000 of fixed-rate debt associated with the 2018 Note Purchase Agreement (as defined in Note 15, Credit ~~facilities~~Facilities, short-term borrowings and long-term debt),in Woodward’s most recently filed Form 10-K) to Euro denominated fixed-rate debt (the “Fixed-Rate Cross-Currency Swaps”).

The cross-currency interest rate swaps, which effectively reduce the interest rate on the underlying fixed and floating-rate debt under the 2018 Notes (as defined in Note 15, Credit ~~facilities~~Facilities, short-term borrowings and long-term debt),in Woodward’s most recently filed Form 10-K) and Woodward’s then existing revolving credit agreement, respectively, is recorded as a reduction to “Interest expense” in Woodward’s Condensed Consolidated Statements of Earnings.

In May 2020, ~~as a result of the COVID-19 pandemic and uncertainties in future cash flows,~~ Woodward terminated ~~the Floating-Rate Cross-Currency Swap~~ and ~~Fixed-Rate Cross-Currency Swaps. At the date of settlement, the total notional value of the~~settled its Floating-Rate Cross-Currency Swap and Fixed-Rate Cross-Currency Swaps ~~was $108,823~~ and $400,000, respectively. Woodward received net cash proceeds of $59,571, which includes $58,191 related to the fair value of the derivative assets and $4,380 of net accrued interest, less payment of $3,000 for fees to terminate the swap agreements. The proceeds received for the fair value of the instruments is recorded in “Other”, while net accrued interest is recorded in “Other” and “Accrued liabilities”, respectively, in cash flows provided by operating activities of Woodward’s Condensed Consolidated Statements of Cash Flows. The fees to terminate the swap agreements were recorded as incurred and presented in the line item “Selling, general and administrative” expenses in Woodward’s Condensed Consolidated Statements of Earnings.

~~Upon termination and settlement of the instruments, Woodward~~ entered into a new floating-rate cross-currency interest rate swap (the “2020 Floating-Rate Cross-Currency Swap”), with a notional value of $45,000, and 5 fixed-rate cross-currency interest rate swap agreements (the “2020 Fixed-Rate Cross-Currency Swaps”), with an aggregate notional value of $400,000, which effectively ~~reduce~~reduced the interest rates on the underlying fixed and floating-rate debt, respectively under the 2018 Notes and Woodward’s existing revolving credit agreement, respectively. The net interest income of the cross-currency interest rate swaps is recorded as a reduction to “Interest expense” in Woodward’s Condensed Consolidated Statements of Earnings. As of ~~June 30, 2020,~~March 31, 2021, the total notional value of the 2020 Floating-Rate Cross-Currency Swap and the 2020 Fixed-Rate Cross-Currency Swaps was ~~$45,000~~$33,750 and $400,000, respectively. See Note 7, Financial Instruments and fair value measurements, for the related fair value of the derivative instruments as of ~~June 30, 2020.~~March 31, 2021.

Concurrent with the entry into the Floating-Rate Cross-Currency Swap, a corresponding Euro denominated intercompany loan receivable with identical terms and notional amount as the underlying Euro denominated floating-rate debt, with a reciprocal cross-currency interest rate swap, was entered into by Woodward Barbados Financing SRL (“Barbados”), a wholly owned subsidiary of Woodward, and is designated as a fair value hedge under the criteria prescribed in ASC Topic 815, “Derivatives and Hedging” (“ASC 815”). The objective of the derivative instrument is to hedge against the foreign currency exchange risk attributable to the spot remeasurement of the Euro denominated intercompany loan.

In May 2020, Woodward settled the Euro denominated intercompany loan receivable with identical terms and notional value to the Floating-Rate Cross-Currency Swap and settled its reciprocal intercompany cross-currency interest rate swap. The fair value hedge designated on these instruments was discontinued at the date of settlement and resulted in a reclassification of $1,719 of previously unrecognized losses from accumulated OCI into earnings. The loss on discontinuation of the fair value hedging relationship is recognized in “Gain on cross-currency interest rate swaps, net” in Woodward’s Condensed Consolidated Statements of Earnings.

~~Concurrent~~settlement. Concurrently with settlement of the Floating-Rate Cross-Currency Swap and discontinuation of the previous fair value hedging relationship, a US dollar denominated intercompany loan payable with identical terms and notional value as the 2020 Floating-Rate Cross-Currency Swap, together with a reciprocal intercompany floating-rate cross-currency interest rate swap, was entered into by Woodward Barbados Euro Financing SRL (“Euro Barbados”), a wholly owned subsidiary of Woodward. The US dollar denominated intercompany loan and reciprocal intercompany floating-rate cross-currency interest rate swap is designated as a fair value hedge under the criteria prescribed in ASC 815. The objective of the derivative instrument is to hedge against the foreign currency exchange risk attributable to the spot remeasurement of the US dollar denominated intercompany loan, as Euro Barbados maintains a Euro functional currency.

For each floating-rate intercompany cross-currency interest rate swap, only the change in the fair value related to the cross-currency basis spread, or excluded component, of the derivative instrument is recognized in accumulated ~~OCI.~~other comprehensive income (“OCI”). The remaining change in the fair value of the derivative instrument is recognized in foreign currency transaction gain or loss included in “Selling, general and administrative costs” in Woodward’s Condensed Consolidated Statements of Earnings. The change in the fair value of the derivative instrument in foreign currency transaction gain or loss offsets the change in the spot remeasurement of the intercompany Euro and US dollar denominated loans. Hedge effectiveness is assessed based on the fair value changes of the derivative instrument, after excluding any fair value changes related to the cross-currency basis spread. The initial cost of the cross-currency basis spread is recorded in earnings each period through the swap accrual process. There are no credit-risk-related contingent features associated with the intercompany floating-rate cross-currency interest rate swap.

In conjunction with the entry into the Fixed-Rate Cross-Currency Swaps, 5 corresponding intercompany loans receivable, with identical terms and amounts of each tranche of the underlying aggregate principal amount of $400,000 of fixed-rate debt, and reciprocal cross-currency interest rate swaps were entered into by Barbados, which are designated as cash flow hedges under the criteria prescribed in ASC 815. The objective of these derivative instruments is to hedge the risk of variability in cash flows attributable to the foreign currency exchange risk of cash flows for future principal and interest payments associated with the Euro denominated intercompany loans over a ~~fifteen -year~~fifteen-year period.

In May 2020, Woodward settled the Euro denominated intercompany loans receivable with identical terms and notional value to the Fixed-Rate Cross-Currency Swaps and reciprocal cross-currency interest rate swaps. The cash flow hedges designated on these instruments were discontinued at the date of settlement and resulted in a reclassification of $32,200 of previously unrecognized gains from accumulated OCI into earnings. The gain on discontinuation of the cash flow hedging relationships is recognized in “Gain on cross-currency interest rate swaps, net” in Woodward’s Condensed Consolidated Statements of Earnings.

~~Concurrent~~settlement. Concurrently with settlement of the Fixed-Rate Cross-Currency Swaps and the discontinuation of the previous cash flow hedging relationships, 5 corresponding US dollar intercompany loans payable, with identical terms and notional values of each tranche of the 2020 Fixed-Rate Cross-Currency Swaps, together with reciprocal fixed-rate intercompany cross-currency interest rate swaps, were entered into by Euro Barbados, which are designated as cash flow hedges under the criteria prescribed in ASC 815. The objective of these derivative instruments is to hedge the risk of variability in cash flows attributable to the foreign currency exchange risk of cash flows for future principal and interest payments associated with the US dollar denominated intercompany loans over a thirteen-year period, as Euro Barbados maintains a Euro functional currency.

For each of the fixed-rate intercompany cross-currency interest rate swaps, changes in the fair values of the derivative instruments are recognized in accumulated OCI and reclassified to foreign currency transaction gain or loss included in “Selling, general and administrative costs” in Woodward’s Condensed Consolidated Statements of Earnings. Reclassifications out of accumulated OCI of the change in fair value occur each reporting period based upon changes in the spot rate remeasurement of the Euro and US dollar denominated intercompany loans, including associated interest. Hedge effectiveness is assessed based on the fair value changes of the derivative instruments and such hedges are deemed to be highly effective in offsetting exposure to variability in foreign exchange rates. There are no credit-risk-related contingent features associated with these fixed-rate cross-currency interest rate swaps.

On September 23, 2016, Woodward and Woodward International Holding B.V., a wholly owned subsidiary of Woodward organized under the laws of The Netherlands (the “BV Subsidiary”), each entered into a note purchase agreement (the “2016 Note Purchase Agreement”) relating to the sale by Woodward and the BV Subsidiary of an aggregate principal amount of €160,000 of senior unsecured notes in a series of private placement transactions. Woodward issued €40,000 aggregate principal amount of Woodward’s Series M Senior Notes due September 23, 2026 (the “Series M Notes”). Woodward designated the Series M Notes as a hedge of a foreign currency exposure of Woodward’s net investment in its Euro denominated functional currency subsidiaries. Related to the Series M Notes, included in foreign currency translation adjustments within total comprehensive (losses) earnings are net foreign exchange ~~losses~~gains of ~~$792~~$2,329 for the three-months and ~~$1,187~~$102 for the ~~nine-months~~six-months ended ~~June 30, 2020,~~March 31, 2021, compared to net foreign exchange ~~losses~~gains of ~~$598~~$650 for the three-months and net foreign exchange ~~gains~~losses of ~~$976~~$395 for the ~~nine-months~~six-months ended ~~June 30, 2019.~~March 31, 2020.

The following table discloses the impact of derivative instruments designated as qualifying hedging instruments on Woodward’s Condensed Consolidated Statements of Earnings:

		Three-Months Ended									Three-Months Ended
		June 30, 2020									March 31, 2021
Derivatives in:	Location	Amount of (Income) Expense Recognized in Earnings on Derivative			Amount of (Gain) Loss Recognized in Accumulated OCI on Derivative		Amount of (Gain) Loss Reclassified from Accumulated OCI into Earnings			Location	Amount of (Income) Expense Recognized in Earnings on Derivative			Amount of (Gain) Loss Recognized in Accumulated OCI on Derivative			Amount of (Gain) Loss Reclassified from Accumulated OCI into Earnings
Cross-currency interest rate swap agreement designated as fair value hedges	Selling, general and administrative expenses	$	2,254		$	718	$	2,254		Selling, general and administrative expenses	$	(1,660	)	$	(1,401	)	$	(1,660	)
Cross-currency interest rate swap agreements designated as cash flow hedges	Selling, general and administrative expenses		(24,885	)		25,293		(24,885	)	Selling, general and administrative expenses		(19,023	)		(7,491	)		(19,023	)
Treasury lock agreement designated as cash flow hedge	Interest expense		(18	)		—		(18	)
		$	(22,649	)	$	26,011	$	(22,649	)		$	(20,683	)	$	(8,892	)	$	(20,683	)

		Three-Months Ended									Three-Months Ended
		June 30, 2019									March 31, 2020
Derivatives in:	Location	Amount of (Income) Expense Recognized in Earnings on Derivative			Amount of (Gain) Loss Recognized in Accumulated OCI on Derivative		Amount of (Gain) Loss Reclassified from Accumulated OCI into Earnings			Location	Amount of (Income) Expense Recognized in Earnings on Derivative			Amount of (Gain) Loss Recognized in Accumulated OCI on Derivative			Amount of (Gain) Loss Reclassified from Accumulated OCI into Earnings
Cross-currency interest rate swap agreement designated as fair value hedges	Selling, general and administrative expenses	$	1,340		$	2,315	$	1,664		Selling, general and administrative expenses	$	(2,043	)	$	(1,523	)	$	(1,646	)
Cross-currency interest rate swap agreements designated as cash flow hedges	Selling, general and administrative expenses		5,244			4,990		5,244		Selling, general and administrative expenses		(5,598	)		(43,775	)		(5,598	)
Treasury lock agreement designated as cash flow hedge	Interest expense		(18	)		—		(18	)	Interest expense		(18	)		—			(18	)
		$	6,566		$	7,305	$	6,890			$	(7,659	)	$	(45,298	)	$	(7,262	)

		Nine-Months Ended										Six-Months Ended
		June 30, 2019										March 31, 2021
Derivatives in:	Location	Amount of (Income) Expense Recognized in Earnings on Derivative			Amount of (Gain) Loss Recognized in Accumulated OCI on Derivative			Amount of (Gain) Loss Reclassified from Accumulated OCI into Earnings			Location	Amount of (Income) Expense Recognized in Earnings on Derivative		Amount of (Gain) Loss Recognized in Accumulated OCI on Derivative		Amount of (Gain) Loss Reclassified from Accumulated OCI into Earnings
Cross-currency interest rate swap agreement designated as fair value hedges	Selling, general and administrative expenses	$	(4,082	)	$	(3,220	)	$	(3,471	)	Selling, general and administrative expenses	$	190	$	262	$	190
Cross-currency interest rate swap agreements designated as cash flow hedges	Selling, general and administrative expenses		(8,306	)		(17,647	)		(8,306	)	Selling, general and administrative expenses		87		21,504		87
Treasury lock agreement designated as cash flow hedge	Interest expense		(54	)		—			(54	)
		$	(12,442	)	$	(20,867	)	$	(11,831	)		$	277	$	21,766	$	277

The remaining unrecognized gains and losses in Woodward’s Condensed Consolidated Balance Sheets associated with derivative instruments that were previously entered into by Woodward, which are classified in accumulated OCI, were net losses of ~~$15,230~~$42,620 as of ~~June 30, 2020~~March 31, 2021 and ~~$5,004~~$21,132 as of September 30, ~~2019.~~2020.

	Nine-Months Ended June 30,				Six-Months Ended March 31,
	2020		2019		2021		2020
Interest paid, net of amounts capitalized	$	24,323	$	36,018	$	14,238	$	14,146
Income taxes paid		79,353		56,210		20,843		65,283
Income tax refunds received		15,123		1,453		12,143		11,012
Non-cash activities:
Purchases of property, plant and equipment on account		2,230		4,423		2,040		2,325
Impact of the adoption of ASC 606		—		38,700
Impact of the adoption of ASC 842 (Note 5)		255		—
Impact of the adoption of ASU 2016-16		—		1,005
Common shares issued from treasury to settle benefit obligations (Note 21)		14,748		14,846
Purchases of treasury stock on account		—		4,204
Impact of the adoption of ASC 842						—		255
Common shares issued from treasury to settle benefit obligations						14,900		14,748

In ~~the first quarter of~~ fiscal year 2020, Woodward’s board of directors (“the Board”) approved a plan to divest Woodward’s renewable power systems business, protective relays business, and other businesses within the Company’s Industrial segment (collectively, the “disposal group”).

Woodward determined that the approved plan to divest the disposal group represented a triggering event requiring (i) the net assets of the disposal group to be classified as held for sale and (ii) the long-lived assets attributable to the disposal group be assessed for impairment. Given the facts and circumstances at that time, Woodward determined that the value of the long-lived assets of the disposal group, including goodwill, intangible assets, ROU assets and property, plant, and equipment, were not recoverable and a $22,900 non-cash impairment charge was recorded during ~~the nine-months ended June 30,~~fiscal year 2020. The non-cash impairment charge removed all the goodwill, intangible assets, ROU assets and property, plant, and equipment associated with the disposal group from the Condensed Consolidated Balance Sheets as of ~~June 30,~~March 31, 2020.

Further, on the approval of the divestiture plan and subsequent marketing of the disposal group, Woodward determined that based on the current market conditions, the carrying value of the disposal group’s remaining held for sale net assets exceeded the fair value. As a result, Woodward recorded a valuation allowance to reduce the carrying value of the net assets of the disposal group to their fair value. The non-cash impairment charge associated with the long-lived assets, and related valuation allowance for the other remaining net assets attributable to the disposal group, resulted in a total impairment charge of $37,902.

In determining the amount by which the carrying value of the disposal group’s remaining net assets exceeded their fair value, Woodward considered primarily the market value of the assets held for sale based on negotiations it had entered into with affiliates of the AURELIUS Group for the sale of the majority of the disposal group. On January 31, 2020, Woodward entered into a definitive agreement to sell the majority of the disposal group to affiliates of the AURELIUS Group for $23,400, subject to customary purchase price adjustments, consisting of cash and a $6,000 promissory note. The assets were primarily located in Germany, Poland and Bulgaria and accounted for approximately $80,000 of sales in fiscal year 2019. The valuation reserve recorded to reduce the carrying value of the net assets held for sale was based on the estimated selling price pursuant to the definitive agreement reduced by the estimated working capital adjustments, transaction costs, and anticipated losses on assets held for sale that were not included in the disposal group to be sold to the AURELIUS Group.

During the third quarter of fiscal year 2020, Woodward recognized an additional loss on sale of the disposal group of $2,540 as a result of working capital adjustments realized upon closing of the sale. The loss on sale of the disposal group is recorded in the line item “Other (income) expense, net” in the Condensed Consolidated Statements of Earnings.

~~The transactions consummating the sale of the disposal group were completed on April 30, 2020. The carrying value of the assets and liabilities sold were as follows:~~

	June 30,			September 30,			March 31,			September 30,
	2020			2019			2021			2020
Raw materials	$	139,440		$	134,878		$	122,056		$	123,626
Work in progress		107,904			133,885			92,124			92,934
Component parts⁽¹⁾		297,263			287,128			254,042			255,980
Finished goods		87,642			59,051			70,321			66,889
Customer supplied inventory		17,799			13,396			15,790			14,955
On-hand inventory for which control has transferred to the customer		(144,105	)		(111,502	)		(132,012	)		(116,441	)
	$	505,943		$	516,836		$	422,321		$	437,943

	June 30,			September 30,			March 31,			September 30,
	2020			2019			2021			2020
Land and land improvements	$	89,379		$	94,976		$	86,131		$	83,095
Buildings and building improvements		577,538			587,541			551,726			551,540
Leasehold improvements		18,029			17,446			19,164			18,610
Machinery and production equipment		753,709			731,159			788,147			776,884
Computer equipment and software		122,434			124,201			123,001			123,903
Office furniture and equipment		40,723			39,934			41,249			41,177
Other		19,479			19,346			19,838			19,814
Construction in progress		42,449			57,624			27,772			36,367
		1,663,740			1,672,227			1,657,028			1,651,390
Less accumulated depreciation		(655,481	)		(613,452	)		(691,823	)		(653,975	)
Property, plant, and equipment, net	$	1,008,259		$	1,058,775		$	965,205		$	997,415

InDuring the second quarter of fiscal year 2018, the Company announced its decision to relocate its Duarte, California operations to the Company’s newly renovated Drake Campus in Fort Collins, Colorado, and in fiscal year 2019, Woodward finalized the relocation. Onthree-months ended December ~~30,~~31, 2019, the Company closed on the sale of one of two parcels of real property at Woodward’s former Duarte operations and recorded a pre-tax gain on sale of assets of ~~$13,522 (see Note 18,~~ ~~Other (income) expense, net). The carrying value of~~$13,522.

During the remaining parcel of Duarte real property is $2,520 as of June 30, 2020, all of which the Company has identified as an asset held for sale and is included in “Land and land improvements”. The asset held for sale is included in unallocated corporate property, plant, and equipment. Based on an existing real property purchase agreement and current market conditions, the Company expects to record an additional gain on the subsequent sale of the remaining parcel of real property, which is expected to close by September 30, 2020. The Company assessed whether the decision to relocate from its Duarte facility could indicate a potential impairment of the assets at the Duarte facility and concluded that the assets were not impaired as of June 30, 2020 and September 30, 2019.

~~In the first quarter of fiscal year 2020,~~three-months ended December 31, 2019, Woodward determined that the approved plan to divest of the disposal group ~~(see Note 10,~~ ~~Sale of businesses~~) represented a triggering event requiring the long-lived assets attributable to the disposal group be assessed for impairment. Given the facts and circumstances at that time, Woodward determined that the remaining value of the plant, property and equipment of the disposal group was not recoverable and a $13,421 non-cash impairment charge was recorded during ~~the nine-months ended June 30,~~fiscal year 2020.

For the three and ~~nine-months~~six-months ended ~~June 30,~~March 31, 2021 and 2020, ~~and 2019,~~ Woodward had depreciation expense as follows:

	September 30, 2019		Impairment Charges			Effects of Foreign Currency Translation		June 30, 2020		September 30, 2020		Effects of Foreign Currency Translation			March 31, 2021
Aerospace	$	455,423	$	—		$	—	$	455,423	$	455,423	$	—		$	455,423
Industrial		342,430		(8,640	)		7,159		340,949		352,829		(278	)		352,551
Consolidated	$	797,853	$	(8,640	)	$	7,159	$	796,372	$	808,252	$	(278	)	$	807,974

Woodward tests goodwill for impairment during the fourth quarter of each fiscal year, and at any time there is an indication goodwill is more-likely-than-not impaired, commonly referred to as triggering events. Woodward’s fourth quarter of fiscal year ~~2019~~2020 impairment test resulted in no impairment.

InDuring the ~~first quarter of fiscal year 2020,~~three-months ended December 31, 2019, Woodward determined that the approved plan to divest of the disposal group ~~(see Note 10,~~ ~~Sale of businesses~~) represented a triggering event requiring the long-lived assets attributable to the disposal group be assessed for impairment. Given the facts and circumstances at the time, Woodward determined that the remaining value of the goodwill of the disposal group was not recoverable, and an $8,640 non-cash impairment charge was recorded during ~~the nine-months ended June 30,~~fiscal year 2020.

During the ~~second and third quarters of fiscal year 2020,~~six-months ended March 31, 2021, Woodward determined the economic uncertainty and global disruption caused by the COVID-19 pandemic ~~will~~ significantly ~~impact future~~impacted sales of all business units. Management concluded the overall economic disruption triggered by the COVID-19 pandemic generated a series of factors to consider relative to possible triggering events. However, management further concluded these factors do not individually or collectively represent triggering events that would indicate it was more likely than not that the fair value of a reporting unit is below its carrying amount as of ~~June 30, 2020.~~March 31, 2021. Woodward will continue to monitor the impacts of the COVID-19 pandemic on earnings that may impact the carrying value of goodwill and long-lived assets in future periods.

	June 30, 2020							September 30, 2019							March 31, 2021							September 30, 2020
	Gross Carrying Value		Accumulated Amortization			Net Carrying Amount		Gross Carrying Value		Accumulated Amortization			Net Carrying Amount		Gross Carrying Value		Accumulated Amortization			Net Carrying Amount		Gross Carrying Value		Accumulated Amortization			Net Carrying Amount
Intangible assets with finite lives:
Customer relationships and contracts:
Aerospace	$	281,683	$	(192,890	)	$	88,793	$	281,683	$	(181,995	)	$	99,688	$	281,683	$	(203,451	)	$	78,232	$	281,683	$	(196,520	)	$	85,163
Industrial		412,644		(51,883	)		360,761		407,683		(43,986	)		363,697		408,252		(46,887	)		361,365		429,249		(57,045	)		372,204
Total	$	694,327	$	(244,773	)	$	449,554	$	689,366	$	(225,981	)	$	463,385	$	689,935	$	(250,338	)	$	439,597	$	710,932	$	(253,565	)	$	457,367

Intellectual property:
Aerospace	$	—	$	—		$	—	$	—	$	—		$	—	$	—	$	—		$	—	$	—	$	—		$	—
Industrial		15,750		(15,565	)		185		19,201		(18,705	)		496		15,821		(15,775	)		46		15,778		(15,640	)		138
Total	$	15,750	$	(15,565	)	$	185	$	19,201	$	(18,705	)	$	496	$	15,821	$	(15,775	)	$	46	$	15,778	$	(15,640	)	$	138

Process technology:
Aerospace	$	76,371	$	(62,946	)	$	13,425	$	76,371	$	(59,913	)	$	16,458	$	76,370	$	(65,565	)	$	10,805	$	76,371	$	(63,956	)	$	12,415
Industrial		87,733		(20,992	)		66,741		92,820		(24,926	)		67,894		90,796		(24,266	)		66,530		90,945		(22,300	)		68,645
Total	$	164,104	$	(83,938	)	$	80,166	$	169,191	$	(84,839	)	$	84,352	$	167,166	$	(89,831	)	$	77,335	$	167,316	$	(86,256	)	$	81,060

Backlog:
Aerospace	$	—	$	—		$	—	$	—	$	—		$	—
Industrial		41,590		(41,590	)		—		40,500		(40,500	)		—
Total	$	41,590	$	(41,590	)	$	—	$	40,500	$	(40,500	)	$	—

Other intangibles:
Aerospace	$	—	$	—		$	—	$	—	$	—		$	—	$	—	$	—		$	—	$	—	$	—		$	—
Industrial		225		(156	)		69		1,541		(1,249	)		292		233		(221	)		12		235		(183	)		52
Total	$	225	$	(156	)	$	69	$	1,541	$	(1,249	)	$	292	$	233	$	(221	)	$	12	$	235	$	(183	)	$	52

Intangible asset with indefinite life:
Tradename:
Aerospace	$	—	$	—		$	—	$	—	$	—		$	—	$	—	$	—		$	—	$	—	$	—		$	—
Industrial		65,184		—			65,184		63,467		—			63,467		67,958		—			67,958		68,094		—			68,094
Total	$	65,184	$	—		$	65,184	$	63,467	$	—		$	63,467	$	67,958	$	—		$	67,958	$	68,094	$	—		$	68,094

Total intangibles:
Aerospace	$	358,054	$	(255,836	)	$	102,218	$	358,054	$	(241,908	)	$	116,146	$	358,053	$	(269,016	)	$	89,037	$	358,054	$	(260,476	)	$	97,578
Industrial		623,126		(130,186	)		492,940		625,212		(129,366	)		495,846		583,060		(87,149	)		495,911		647,738		(138,605	)		509,133
Consolidated Total	$	981,180	$	(386,022	)	$	595,158	$	983,266	$	(371,274	)	$	611,992	$	941,113	$	(356,165	)	$	584,948	$	1,005,792	$	(399,081	)	$	606,711

Woodward tests the indefinite lived tradename intangible asset for impairment during the fourth quarter of each fiscal year, or at any time there is an indication the indefinite lived tradename intangible asset is more-likely-than-not impaired commonly referred to as triggering events.

~~In the first~~Woodward’s fourth quarter of fiscal year 2020 impairment test resulted in no impairment.

During the three-months ended December 31, 2019, Woodward determined that the approved plan to divest of the disposal group ~~(see Note 10,~~ ~~Sale of businesses~~) represented a triggering event requiring the long-lived assets attributable to the disposal group be assessed for impairment. Given the facts and circumstances at that time, Woodward determined that the remaining value of the intangible assets of the disposal group was not recoverable, and a $200 non-cash impairment charge was recorded ~~for the nine-months ended June 30,~~during fiscal year 2020.

For the three and ~~nine-months~~six-months ended ~~June 30,~~March 31, 2021 and 2020, ~~and 2019,~~ Woodward recorded amortization expense associated with intangibles of the following:

Year Ending September 30:
2020 (remaining)	$	9,788
2021		40,084
2021 (remaining)			$	20,668
2022		37,975		39,954
2023		36,923		38,903
2024		33,146		35,151
2025				29,937
Thereafter		372,058		352,377
	$	529,974	$	516,990

Woodward maintains a $1,000,000 revolving credit facility established under a revolving credit agreement among Woodward, a syndicate of lenders and Wells Fargo Bank, National Association, as administrative agent (the “Revolving Credit Agreement”). The Revolving Credit Agreement provides for the option to increase available borrowings up to $1,500,000, subject to lenders’ participation. Borrowings under the Revolving Credit Agreement can be made by Woodward and certain of its foreign subsidiaries in U.S. dollars or in foreign currencies other than the U.S. dollar and generally bear interest at LIBOR plus 0.875% to 1.75%. The Revolving Credit Agreement matures on June 19, 2024. Under the Revolving Credit Agreement, there were ~~$98,639 in principal amount of~~0 borrowings outstanding as of ~~June 30, 2020, at an effective interest rate of 1.28%,~~March 31, 2021 and ~~$262,297 in principal amount of borrowings outstanding as of~~ September 30, 2019, at an effective interest rate of 3.01%. As of June 30, 2020, $98,639 of borrowings under the Revolving Credit Agreement were classified as short-term borrowings based on Woodward’s intent and ability to pay this amount in the next twelve months. As of September 30, 2019, $220,000 of the borrowings under the Revolving Credit Agreement were classified as short-term borrowings.2020.

Woodward has other foreign lines of credit and foreign overdraft facilities at various financial institutions, which are generally reviewed annually for renewal and are subject to the usual terms and conditions applied by the financial institutions. Pursuant to the terms of the related facility agreements, Woodward’s foreign performance guarantee facilities are limited in use to providing performance guarantees to third parties. There were 0 borrowings outstanding on Woodward’s foreign lines of credit and foreign overdraft facilities as of ~~both June 30, 2020~~March 31, 2021 and September 30, ~~2019.~~2020.

On October 1, 2013, Woodward entered into a note purchase agreement relating to the sale by Woodward of an aggregate principal amount of $250,000 of its senior unsecured notes in a series of private placement transactions. Woodward issued the Series G, H and I Notes (the “First Closing Notes”) on October 1, 2013. Woodward issued the Series J, K and L Notes (the “Second Closing Notes” and together with the First Closing Notes, collectively the “USD Notes”) on November 15, ~~2013. The current portion~~2020, Woodward paid the entire principal balance of ~~long-term debt as of June 30, 2020 includes the aggregate principal amount of the~~$100,000 on its Series G and ~~Series J notes, both of which mature on November 15, 2020, and the current portion of finance lease liabilities.~~

On September 23, 2016, Woodward and the BV Subsidiary each entered into note purchase agreements (the “2016 Note Purchase Agreements”) relating to the sale by Woodward and the BV Subsidiary of an aggregate principal amount of €160,000 of senior unsecured notes in a series of private placement transactions. Woodward issued €40,000 Series M Notes. The BV Subsidiary issued (a) €77,000 aggregate principal amount of the BV Subsidiary’s Series N Senior Notes (the “Series N Notes”) and (b) €43,000 aggregate principal amount of the BV Subsidiary’s Series O Senior Notes (the “Series O Notes” and together with the Series M Notes and the Series N Notes, the “2016 Notes”).

On May 31, 2018, Woodward entered into a note purchase agreement (the “2018 Note Purchase Agreement”) relating to the sale by Woodward of an aggregate principal amount of $400,000 of senior unsecured notes comprised of (a) $85,000 aggregate principal amount of its Series P Senior Notes (the “Series P Notes”), (b) $85,000 aggregate principal amount of its Series Q Senior Notes (the “Series Q Notes”), (c) $75,000 aggregate principal amount of its Series R Senior Notes (the “Series R Notes”), (d) $75,000 aggregate principal amount of its Series S Senior Notes (the “Series S Notes”), and (e) $80,000 aggregate principal amount of its Series T Senior Notes (the “Series T Notes”, and together with the Series P Notes, the Series Q Notes, the Series R Notes, and the Series S Notes, the “2018 Notes,” and, together with the USD Notes and 2016 Notes, the “Notes”), in a series of private placement transactions.

In connection with the issuance of the 2018 Notes, the Company entered into cross-currency swap transactions in respect of each tranche of the 2018 Notes, which effectively reduced the interest rates on the Series P Notes to 1.82% per annum, the Series Q Notes to 2.15% per annum, the Series R Notes to 2.42% per annum, the Series S Notes to 2.55% per annum and the Series T Notes to 2.90% per annum (see Note 8, ~~Derivative instruments and hedging activities~~).

Interest on the First Closing Notes, and the Series K and L Notes is payable semi-annually on April 1 and October 1 of each year until all principal is paid. Interest on the Series F Notes is payable semi-annually on April 15 and October 15 of each year until all principal is paid. Interest on the 2016 Notes is payable semi-annually on March 23 and September 23 of each year, until all principal is paid. Interest on the Series J Notes ~~is payable quarterly~~using cash on ~~January 1, April 1, July 1~~hand and October 1 of each year until all principal is paid. As of June 30, 2020, the Series J Notes bore interest at an effective rate of 1.63%. Interest on the 2018 Notes is payable semi-annually on May 30 and November 30 of each year until all principal is paid.

Unamortized debt issuance costs associated with the Notes of $2,229 as of June 30, 2020 and $2,478 as of September 30, 2019 were recorded as a reduction in “Long-term debt, less current portion” in the Condensed Consolidated Balance Sheets. Unamortized debt issuance costs associated with Woodward’sproceeds from borrowings under its existing ~~and previous~~ revolving credit agreements of $2,392 as of June 30, 2020 and $2,840 as of September 30, 2019 were recorded as “Other assets” in the Condensed Consolidated Balance Sheets. Amortization of debt issuance costs is included in operating activities in the Condensed Consolidated Statements of Cash Flows.facility.

	June 30,		September 30,		March 31,		September 30,
	2020		2019		2021		2020
Salaries and other member benefits	$	53,094	$	115,649	$	43,803	$	50,850
Warranties		21,380		27,309		18,576		18,972
Interest payable		6,182		13,808		14,547		15,281
Accrued retirement benefits		3,617		3,587		3,013		3,051
Current portion of loss reserve on contractual lease commitments ⁽¹⁾		—		1,245
Restructuring charges		4,978		507		403		3,395
Taxes, other than income		16,001		15,708		25,027		13,925
Net current contract liabilities (Note 3)		30,222		27,891
Net current contract liabilities						28,760		24,620
Other		26,821		22,423		30,221		21,700
	$	162,295	$	228,127	$	164,350	$	151,794

Provisions of Woodward’s sales agreements include product warranties customary to these types of agreements. Accruals are established for specifically identified warranty issues that are probable to result in future costs. Warranty costs are accrued as revenue is recognized on a non-specific basis whenever past experience indicates a normal and predictable pattern exists.

	Three-Months Ended June 30,						Nine-Months Ended June 30,						Three-Months Ended March 31,						Six-Months Ended March 31,
	2020			2019			2020			2019			2021			2020			2021			2020
Warranties, beginning of period	$	21,770		$	21,790		$	27,309		$	20,130		$	21,079		$	18,927		$	18,972		$	27,309
Impact from adoption of ASC 606		—			—			—			704
Expense, net of recoveries		2,407			4,268			6,189			10,035			(377	)		8,115			1,012			3,782
Reductions for settlement of previous warranty liabilities		(2,874	)		(3,315	)		(12,328	)		(7,864	)		(1,843	)		(5,177	)		(1,451	)		(9,454	)
Foreign currency exchange rate changes		77			105			210			(157	)		(283	)		(95	)		43			133
Warranties, end of period	$	21,380		$	22,848		$	21,380		$	22,848		$	18,576		$	21,770		$	18,576		$	21,770

In the second quarter of fiscal year 2018, the Company recorded restructuring charges totaling $17,013, the majority of which relate to the Company’s decision to relocate its Duarte, California operations to the Company’s newly renovated Drake Campus in Fort Collins, Colorado. The Duarte facility, which manufactures thrust reverser actuation systems, is part of the Company’s Aerospace segment. The remaining restructuring charges recognized during the fiscal year ended September 30, 2018 consist of workforce management costs related to aligning the Company’s industrial turbomachinery business, which is part of the Company’s Industrial segment, with the then current market conditions. All of the restructuring charges recorded during the fiscal year ended September 30, 2018 were recorded as nonsegment expenses.

During the third quarter of fiscal year 2020, the Company committed to a plan of termination (the “Termination Plan”) in response to the ongoing global economic challenges resulting from the COVID-19 pandemic and its impact on the Company’s business. The Termination Plan involved the termination and/or furlough of employees and contractors at certain of the Company’s operating facilities, primarily in the United States. As a result of the Termination Plan, the Company incurred ~~$19,040~~$23,673 of restructuring charges related to employee severance and benefits costs as of ~~June 30, 2020, with the majority of the cash expenditures being paid by June~~September 30, 2020. All of the restructuring charges recorded during the ~~nine-months~~fiscal year ended ~~June~~September 30, 2020 were recorded as nonsegment expenses.

The summary of activity in accrued restructuring charges during the ~~nine-months~~six-months ended ~~June 30,~~March 31, 2021 and 2020 ~~and June 30, 2019~~ are as follows:

			Period Activity														Period Activity
	Balances as of October 1, 2019		Charges (reductions)		Cash receipts (payments)			Foreign currency exchange rate changes			Non-cash activity		Balances as of June 30, 2020		Balances as of September 30, 2020		Charges		Payments			Foreign currency exchange rate changes		Non-cash activity			Balances as of March 31, 2021
Workforce management costs associated with:
Duarte plant relocation	$	440	$	—	$	(440	)	$	—		$	—	$	—
Industrial turbomachinery business realignment		67		—		(67	)		—			—		—
COVID-19 pandemic		—		19,040		(14,052	)		(10	)		—		4,978	$	3,395	$	—	$	(2,287	)	$	21	$	(726	)	$	403
Total	$	507	$	19,040	$	(14,559	)	$	(10	)	$	—	$	4,978	$	3,395	$	—	$	(2,287	)	$	21	$	(726	)	$	403

			Period Activity													Period Activity
	Balances as of October 1, 2018		Charges (reductions)		Cash receipts (payments)			Foreign currency exchange rate changes		Non-cash activity		Balances as of June 30, 2019		Balances as of September 30, 2019		Charges		Payments			Foreign currency exchange rate changes		Non-cash activity			Balances as of March 31, 2020
Workforce management costs associated with:
Duarte plant relocation	$	12,504	$	—	$	(7,908	)	$	—	$	—	$	4,596	$	440	$	—	$	(440	)	$	—	$	—		$	—
Industrial turbomachinery business realignment		4,018		—		(3,251	)		—		—		767		67		—		(24	)		—		(43	)		—
Total	$	16,522	$	—	$	(11,159	)	$	—	$	—	$	5,363	$	507	$	—	$	(464	)	$	—	$	(43	)	$	—

	June 30,		September 30,		March 31,		September 30,
	2020		2019		2021		2020
Net accrued retirement benefits, less amounts recognized within accrued liabilities	$	113,568	$	111,257	$	116,694	$	114,013
Total unrecognized tax benefits		12,373		10,644		13,758		10,230
Noncurrent income taxes payable		18,322		20,251		16,388		18,322
Deferred economic incentives ⁽¹⁾		9,352		11,535		8,594		9,105
Loss reserve on contractual lease commitments ⁽²⁾		—		1,754
Net noncurrent contract liabilities ⁽³⁾		356,175		337,165
Cross-currency swap derivative liability						71,421		51,387
Noncurrent operating lease liabilities						17,178		14,569
Net noncurrent contract liabilities						376,806		366,642
Other		65,737		13,482		25,061		33,637
	$	575,527	$	506,088	$	645,900	$	617,905

	Three-Months Ended						Nine-Months Ended						Three-Months Ended						Six-Months Ended
	June 30,						June 30,						March 31,						March 31,
	2020			2019			2020			2019			2021			2020			2021			2020
Equity interest in the earnings of the JV (Note 6)	$	(931	)	$	(3,290	)	$	(8,824	)	$	(7,761	)	$	(3,779	)	$	(4,681	)	$	(6,165	)	$	(7,893	)
Net (gain) loss on sales of assets and businesses⁽¹⁾		2,545			680			(11,012	)		880
Net gain on sales of assets and businesses⁽¹⁾														(1,354	)		(10	)		(1,942	)		(13,557	)
Rent income		(520	)		(44	)		(1,095	)		(188	)		(393	)		(324	)		(743	)		(575	)
Net (gain) loss on investments in deferred compensation program		(3,456	)		(894	)		(1,680	)		(821	)		(2,274	)		3,021			(3,257	)		1,776
Other components of net periodic pension and other postretirement benefit, excluding service cost and interest expense		(2,911	)		(3,245	)		(8,884	)		(9,739	)		(3,401	)		(2,926	)		(7,051	)		(5,973	)
Other		(230	)		(123	)		(496	)		(505	)		(130	)		(143	)		(296	)		(266	)
	$	(5,503	)	$	(6,916	)	$	(31,991	)	$	(18,134	)	$	(11,331	)	$	(5,063	)	$	(19,454	)	$	(26,488	)

The estimated annual effective rate is applied to the year-to-date ordinary income at the end of each quarter to compute the estimated year-to-date tax applicable to ordinary income. The tax expense or benefit related to ordinary income in each quarter is equal to the difference between the most recent year-to-date and the prior quarter year-to-date computations.

The determination of the estimated annual effective tax rate is based upon a number of significant estimates and judgments. In addition, as a global commercial enterprise, Woodward’s tax expense can be impacted by changes in tax rates or laws, the finalization of tax audits and reviews, changes in the estimate of the amount of undistributed foreign earnings that Woodward considers indefinitely reinvested, issuance of future guidance, interpretation, and rule-making, and other factors that cannot be predicted with certainty. As such, there can be significant volatility in interim tax provisions.

Within the calculation of Woodward’s annual effective tax rate, Woodward has used assumptions and estimates that may change as a result of future guidance, interpretation, and rule-making from the IRS, the SEC, and the FASB and/or various other tax jurisdictions. Changes in corporate tax rates, the net deferred tax assets and/or liabilities relating to Woodward’s U.S. operations, the taxation of foreign earnings, and the deductibility of expenses contained in the Tax Act or other future tax reform legislation could have a material impact on Woodward’s future income tax expense.

The following table sets forth the tax expense and the effective tax rate for Woodward’s earnings before income taxes:

	Three-Months Ended						Nine-Months Ended						Three-Months Ended						Six-Months Ended
	June 30,						June 30,						March 31,						March 31,
	2020			2019			2020			2019			2021			2020			2021			2020
Earnings before income taxes	$	45,016		$	92,314		$	213,763		$	243,997		$	78,487		$	107,199		$	126,071		$	168,747
Income tax expense		6,551			26,207			30,607			51,191			10,174			15,881			16,188			24,056
Effective tax rate		14.6	%		28.4	%		14.3	%		21.0	%		13.0	%		14.8	%		12.8	%		14.3	%

The decrease in the effective tax rate for the three-months ended ~~June 30, 2020,~~March 31, 2021 compared to the three-months ended ~~June 30, 2019~~March 31, 2020 is primarily attributable to ~~(i)~~a larger favorable increase in the ~~additional~~net excess income tax ~~expense resulting~~benefit from ~~Transition Tax regulations issued~~stock-based compensation in the second quarter of fiscal year 2021 compared to the second quarter of fiscal year 2020, partially offset by income tax credits in the ~~IRS~~second quarter of the prior year as a result of a reduction in projected earnings, which did not repeat in the current year quarter.

This decrease was partially offset by increased taxes on ~~June 14, 2019~~combined foreign earnings when compared to the second quarter of fiscal year 2020, a reduction of India’s tax on dividend distributions that occurred during the second quarter of fiscal year 2020 which did not repeat in the current quarter, and ~~(ii) increased foreign~~the change to the annual effective tax rate benefit related to state income tax credits compared to full-year projected earnings in ~~a lower tax jurisdiction resulting from the net gain on the termination~~first quarter and second quarter of the ~~cross-currency interest rate swaps. This decrease was partially offset by a reduction~~prior year, which did not repeat in ~~certain state tax credits and a smaller favorable net excess income tax benefits from stock-based compensation.~~the current quarter.

The decrease in the effective tax rate for the ~~nine-months~~six-months ended ~~June 30, 2020~~March 31, 2021 compared to the ~~nine-months~~six-months ended ~~June 30, 2019~~March 31, 2020 is primarily attributable to (i) the additional income tax expense resulting from Transition Tax regulations issued by the IRS on June 14, 2019 which did not repeat in the current fiscal year (ii) increased foreign earnings in a lower tax jurisdiction resulting from the net gain on the termination of the cross-currency interest rate swaps, and (iii) the tax benefit associated with the impairment of assets sold. This decrease was partially offset by a smallerlarger favorable increase in the net excess income tax benefits from stock-based ~~compensation.~~compensation and the impact of decreased projected full-year earnings for fiscal year 2021 relative to the expected tax benefits from the research credit and various state income tax credits. This decrease is partially offset by the tax benefit associated with the impairment of assets held for sale and India’s tax on dividend distributions in fiscal year 2020, which did not repeat in the current fiscal year, and increased taxes on combined foreign earnings when compared to the prior fiscal year.

Gross unrecognized tax benefits were ~~$11,907~~$13,314 as of ~~June 30, 2020,~~March 31, 2021, and ~~$10,305~~$9,851 as of September 30, ~~2019.~~2020. At ~~June 30, 2020,~~March 31, 2021, the amount of the liability for unrecognized tax benefits that, if recognized, would impact Woodward’s effective tax rate was ~~$5,159.~~$7,349. At this time, Woodward ~~does not believe~~believes it is reasonably possible that the liability for unrecognized tax benefits will decrease by as much as $1,884 in the next twelve ~~months. Woodward accrues~~months due to the completion of review by tax authorities, lapses of statutes, and the settlement of tax positions. Woodward’s tax expense includes accruals for potential interest and penalties related to unrecognized tax benefits and all other interest and penalties related to tax ~~payments in tax expense. Woodward had accrued gross interest and penalties of $605 as of June 30, 2020 and $437 as of September 30, 2019.~~

In March 2020, the U.S. Congress passed the “Coronavirus Aid, Relief, and. Economic Security Act” (the “CARES Act”). The CARES Act provides relief from the certain economic impacts of COVID-19 to companies and individuals. Non-income tax impacts of the CARES Act include (i) extension of payment deadliness for certain U.S. payroll taxes and (ii) tax credits for certain qualifying costs incurred by the Company in connection with certain facility closures due to COVID-19. Non-income tax credits are generally recognized as a reduction to costs in the period in which the related costs the credits are intended to compensate are incurred. The non-income tax impacts of the CARES Act were insignificant to the results of operations for the three and nine-months ended June 30, 2020. payments.

Woodward’s tax returns are subject to audits by U.S. federal, state, and foreign tax authorities, and these audits are at various stages of completion at any given time. Reviews of tax matters by authorities and lapses of the applicable statutes of limitation may result in changes to tax expense. Woodward’s fiscal years remaining open to examination for U.S. Federal income taxes include fiscal years ~~2017~~2018 and thereafter. ~~Woodward is currently under examination by the Internal Revenue Service (“IRS”) for fiscal year 2017, which included a foreign tax credit carryback to fiscal year 2016.~~ Woodward’s fiscal years remaining open to examination for significant U.S. state income tax jurisdictions include fiscal years 2016 and thereafter. Woodward’s fiscal years remaining open to examination in significant foreign jurisdictions include 2016 and thereafter.

Woodward provides various retirement benefits to eligible members of the Company, including contributions to various defined contribution plans, pension benefits associated with defined benefit plans, postretirement medical benefits and postretirement life insurance benefits. Eligibility requirements and benefit levels vary depending on employee location.

Most of the Company’s U.S. employees are eligible to participate in the U.S. defined contribution plan. The U.S. defined contribution plan allows employees to defer part of their annual income for income tax purposes into their personal 401(k) accounts. The Company makes matching contributions to eligible employee accounts, which are also deferred for employee personal income tax purposes. Certain non-U.S. employees are also eligible to participate in similar non-U.S. plans.

Most of Woodward’s U.S. employees with at least two years of service receive an annual contribution of Woodward stock, equal to 5% of their eligible prior year wages, to their personal Woodward Retirement Savings Plan accounts. Woodward fulfilled its annual Woodward stock contribution obligation using shares held in treasury stock by issuing a total of 128 shares of common stock for a value of $14,900 in the second quarter of fiscal year 2021, compared to a total of 124 shares of common stock for a value of $14,748 in the second quarter of fiscal year ~~2020, compared to a total of 158 shares of common stock for a value of $14,846 in the second quarter of fiscal year 2019.~~2020.

The amount of expense associated with defined contribution plans was as follows:

Woodward has defined benefit plans that provide pension benefits for certain retired employees in the United States, the United Kingdom, Japan, and Germany. Woodward also provides other postretirement benefits to its employees including postretirement medical benefits and life insurance benefits. Postretirement medical benefits are provided to certain current and retired employees and their covered dependents and beneficiaries in the United ~~States and the United Kingdom.~~States. Life insurance benefits are provided to certain retirees in the United States under frozen plans, which are no longer available to current employees. A September 30 measurement date is utilized to value plan assets and obligations for all of Woodward’s defined benefit pension and other postretirement benefit plans.

On October 26, 2018, the High Court of Justice in the United Kingdom (the “High Court”) issued a ruling (the “Court Ruling”) requiring defined benefit plan sponsors in the United Kingdom to equalize benefits payable to men and women under its United Kingdom defined benefit pension plans by amending those plans to increase the pension benefits payable to participants that accrued such benefits during the period from 1990 to 1997. In the Court Ruling, the High Court also provided details on acceptable alternative methods of amending plans to equalize the pension benefits. Although final guidance around the appropriate equalization methodology to be used has not yet been issued, Woodward has concluded that Court Ruling is applicable to its defined benefit pension plan in the United Kingdom and has made the necessary plan amendments. Woodward’s current estimate of the impact of the Court Ruling in the amount of $601 has been reflected in the United Kingdom defined benefit pension plan’s obligation and assets as of September 30, 2019 and is being amortized as a net prior service cost beginning in fiscal year 2020. Woodward does not expect that any changes to the estimate resulting from final guidance around the appropriate equalization methodology to be used will be material to the United Kingdom defined benefit pension plan’s obligation.

U.S. GAAP requires that, for obligations outstanding as of September 30, ~~2019,~~2020, the funded status reported in interim periods shall be the same asset or liability recognized in the previous year end statement of financial position adjusted for (a) subsequent accruals of net periodic benefit cost that exclude the amortization of amounts previously recognized in other comprehensive income (for example, subsequent accruals of service cost, interest cost, and return on plan assets) and (b) contributions to a funded plan or benefit payments. However, U.S. GAAP further requires an interim re-measurement of plan assets and obligations when there are substantial plan amendments, settlements, or curtailments. Many variables, such as changes in interest rates, mortality rates, health care costs, investment returns and/or the market value of plan assets, can affect the funded status of our defined benefit pension and other postretirement benefit plans and cause volatility in the net periodic benefit cost and future funding requirements of the plans. Woodward has concluded that the changes in the market conditions as a result of the COVID-19 pandemic do not require an interim re-measurement as Woodward believes that the assumptions, such as the discount rate and expected return on plan assets, used to project the plans’ assets and pension benefit liabilities are conservative, therefore resulting in a proper projection of Woodward’s benefit obligations. Woodward further believes that as a result of the known impacts of the COVID-19 pandemic there are not any significant changes in plan assets, plan amendments, settlements, or curtailments that would result in an interim re–measurement.

The components of the net periodic retirement pension costs recognized are as follows:

	Three-Months Ended June 30,																		Three-Months Ended March 31,
	United States						Other Countries						Total						United States						Other Countries						Total
	2020			2019			2020			2019			2020			2019			2021			2020			2021			2020			2021			2020
Service cost	$	414		$	363		$	706		$	509		$	1,120		$	872		$	432		$	415		$	736		$	708		$	1,168		$	1,123
Interest cost		1,398			1,596			313			477			1,711			2,073			1,239			1,397			343			319			1,582			1,716
Expected return on plan assets		(3,087	)		(2,996	)		(690	)		(663	)		(3,777	)		(3,659	)		(3,536	)		(3,086	)		(625	)		(708	)		(4,161	)		(3,794	)
Amortization of:
Net actuarial loss		358			154			257			71			615			225			135			357			234			260			369			617
Prior service cost		234			177			5			—			239			177			243			234			6			6			249			240
Net periodic retirement pension (benefit) cost	$	(683	)	$	(706	)	$	591		$	394		$	(92	)	$	(312	)	$	(1,487	)	$	(683	)	$	694		$	585		$	(793	)	$	(98	)
Contributions paid	$	—		$	—		$	335		$	319		$	335		$	319		$	—		$	—		$	675		$	601		$	675		$	601

	Nine-Months Ended June 30,																		Six-Months Ended March 31,
	United States						Other Countries						Total						United States						Other Countries						Total
	2020			2019			2020			2019			2020			2019			2021			2020			2021			2020			2021			2020
Service cost	$	1,244		$	1,088		$	2,124		$	1,533		$	3,368		$	2,621		$	864		$	830		$	1,465		$	1,418		$	2,329		$	2,248
Interest cost		4,193			4,788			953			1,442			5,146			6,230			2,478			2,795			676			640			3,154			3,435
Expected return on plan assets		(9,260	)		(8,989	)		(2,230	)		(1,997	)		(11,490	)		(10,986	)		(7,072	)		(6,173	)		(1,227	)		(1,540	)		(8,299	)		(7,713	)
Amortization of:
Net actuarial loss		1,073			463			778			215			1,851			678			270			715			462			521			732			1,236
Prior service cost		702			532			17			—			719			532			485			468			12			12			497			480
Net periodic retirement pension (benefit) cost	$	(2,048	)	$	(2,118	)	$	1,642		$	1,193		$	(406	)	$	(925	)	$	(2,975	)	$	(1,365	)	$	1,388		$	1,051		$	(1,587	)	$	(314	)
Contributions paid	$	—		$	—		$	2,067		$	1,382		$	2,067		$	1,382		$	—		$	—		$	1,218		$	1,732		$	1,218		$	1,732

The components of net periodic retirement pension costs other than the service cost and interest cost components are included in the line item “Other (income) expense, net” in the Condensed Consolidated Statements of Earnings. The interest cost component is ~~include~~included in the line item “Interest expense” in the Condensed Consolidated Statements of Earnings.

The components of the net periodic other postretirement benefit costs recognized are as follows:

	Three-Months Ended					Nine-Months Ended					Three-Months Ended				Six-Months Ended
	June 30,					June 30,					March 31,				March 31,
	2020		2019			2020		2019			2021		2020		2021		2020
Service cost	$	1	$	1		$	2	$	4		$	1	$	—	$	1	$	1
Interest cost		195		288			586		865			149		196		299		391
Amortization of:
Net actuarial loss		12		13			35		41			8		11		15		23
Prior service cost (benefit)		1		(1	)		2		(4	)
Prior service cost												1		—		1		1
Net periodic other postretirement cost	$	209	$	301		$	625	$	906		$	159	$	207	$	316	$	416
Contributions paid	$	851	$	512		$	1,372	$	1,589		$	940	$	176	$	978	$	521

The components of net periodic other postretirement benefit costs other than the service cost and interest cost components are included in the line item “Other (income) expense, net” in the Condensed Consolidated Statements of Earnings. The interest cost component is included in the line item “Interest expense” in the Condensed Consolidated Statements of Earnings.

The amount of cash contributions made to these plans in any year is dependent upon a number of factors, including minimum funding requirements in the jurisdictions in which Woodward operates and arrangements made with trustees of certain foreign plans. As a result, the actual funding in fiscal year ~~2020~~2021 may differ from the current estimate. Woodward estimates its remaining cash contributions in fiscal year ~~2020~~2021 will be as follows:

Woodward operates multiemployer defined benefit plans for certain employees in both the Netherlands and Japan. The amounts of contributions associated with the multiemployer defined benefit plans were as follows:

In the first quarter of fiscal year 2017, the Board terminated the Company’s prior stock repurchase program and replaced it with a new program for the repurchase of up to $500,000 of Woodward’s outstanding shares of common stock on the open market or in privately negotiated transactions over a three year period that ended in November 2019 (the “2017 Authorization”). Effective upon the expiration of the 2017 Authorization in November 2019, ~~Woodward’s board of directors~~the Board approved a new program for the repurchase of up to $500,000 of Woodward’s outstanding shares of common stock on the open market or in privately negotiated transactions over a three year period that will end in 2022 (the “2019 Authorization”). In the first ~~nine-months~~half of fiscal year ~~2020,~~2021, Woodward purchased 0 shares of its common stock under the 2019 Authorization. Woodward repurchased 124 shares of ~~its~~ common stock for $13,346 under the 2019 ~~Authorization. Woodward repurchased 1,102 shares of common stock for $110,311 under the 2017~~ Authorization in the first ~~nine-months~~half of fiscal year ~~2019.~~ 2020.

Provisions governing outstanding stock option awards are included in the 2017 Omnibus Incentive Plan, as amended from time to time (the “2017 Plan”) and the 2006 Omnibus Incentive Plan (the “2006 Plan”), as applicable.

The 2017 Plan was approved by Woodward’s stockholders in January 2017 and is a successor plan to the 2006 Plan. As of September 14, 2016, the effective date of the 2017 Plan, the Board delegated authority to administer the 2017 Plan to the compensation committee of the Board (the “Committee”), including, but not limited to, the power to determine the recipients of awards and the terms of those awards. On January 29, 2020 and January 27, 2021, Woodward’s stockholders approved an additional 1,000 and 1,500 shares, respectively, of Woodward’s common stock to be made available for future grants. Under the 2017 Plan, there were approximately ~~1,965~~2,692 shares of Woodward’s common stock available for future grants as of ~~June 30, 2020~~March 31, 2021 and ~~1,783~~1,972 shares as of September 30, ~~2019.~~2020.

Woodward believes that stock options align the interests of its employees and directors with the interests of its stockholders. Stock option awards are granted with an exercise price equal to the market price of Woodward’s stock at the date the grants are awarded, a ten year term, and generally have a four year vesting schedule at a rate of 25% per year.

The fair value of options granted is estimated as of the grant date using the Black-Scholes-Merton option-valuation model using the assumptions in the following table. Woodward calculates the expected term, which represents the average period of time that stock options granted are expected to be outstanding, based upon historical experience of plan participants. Expected volatility is based on historical volatility using daily stock price observations. The estimated dividend yield is based upon Woodward’s historical dividend practice and the market value of its common stock. The risk-free rate is based on the U.S. treasury yield curve, for periods within the contractual life of the stock option, at the time of grant.

		Three-Months Ended					Nine-Months Ended								Three-Months Ended								Six-Months Ended
		June 30,					June 30,								March 31,								March 31,
		2020			2019	2020				2019					2021					2020		2021				2020
Weighted-average exercise price per share	$	58.40			n/a	$	90.57			$	79.12			$	122.88					$	127.84	$	82.46			$	104.91
Weighted-average grant date market value of Woodward stock	$	58.40			n/a	$	90.57			$	79.12			$	122.88					$	127.84	$	82.46			$	104.91
Expected term (years)		6.5			n/a		6.4	-	8.7		6.5	-	8.7			6.5	-		8.7		6.5		6.5	-	8.7		6.4	-	8.7
Estimated volatility		33.1%	-	34.3%	n/a		25.7%	-	34.3%		25.7%	-	31.0%		33.9%		-	36.2%			25.7%		33.3%	-	36.2%		25.7%	-	30.1%
Estimated dividend yield		0.5%	-	0.6%	n/a		0.5%	-	0.9%		0.7%	-	0.8%		0.5%		-	0.6%		0.9%			0.3%	-	0.6%		0.6%	-	0.9%
Risk-free interest rate		0.4%			n/a		0.4%	-	1.7%		2.6%	-	3.1%		0.6%		-	1.1%			1.7%		0.4%	-	1.1%		1.6%	-	1.7%

The following is a summary of the activity for stock option awards during the three and ~~nine-months~~six-months ended ~~June 30, 2020:~~

	Three-Months Ended					Nine-Months Ended					Three-Months Ended					Six-Months Ended
	June 30, 2020					June 30, 2020					March 31, 2021					March 31, 2021
	Number of options			Weighted-Average Exercise Price per Share		Number of options			Weighted-Average Exercise Price per Share		Number of options			Weighted-Average Exercise Price per Share		Number of options			Weighted-Average Exercise Price per Share
Options, beginning balance		5,623		$	60.50		5,387		$	53.73		5,901		$	65.47		5,443		$	62.00
Options granted		280			58.40		909			90.57		26			122.88		773			82.46
Options exercised		(66	)		31.15		(429	)		34.44		(410	)		41.71		(696	)		40.93
Options expired		(3	)		70.89		(3	)		70.89
Options forfeited		(57	)		103.58		(87	)		96.52		—			—		(3	)		87.38
Options, ending balance		5,777			60.31		5,777			60.31		5,517			67.50		5,517			67.50

Changes in non-vested stock options during the three and ~~nine-months~~six-months ended ~~June 30, 2020~~March 31, 2021 were as follows:

	Three-Months Ended					Nine-Months Ended					Three-Months Ended					Six-Months Ended
	June 30, 2020					June 30, 2020					March 31, 2021					March 31, 2021
	Number of options			Weighted-Average Grant Date Fair Value per Share		Number of options			Weighted-Average Grant Date Fair Value Per Share		Number of options			Weighted-Average Grant Date Fair Value per Share		Number of options			Weighted-Average Grant Date Fair Value Per Share
Non-vested options outstanding, beginning balance		1,867		$	25.95		2,068		$	23.43		2,170		$	25.40		2,078		$	24.69
Options granted		280			16.92		909			24.98		26			42.45		773			28.22
Options vested		—			—		(800	)		21.52		(90	)		20.66		(742	)		25.19
Options forfeited		(57	)		27.89		(87	)		27.01		—			—		(3	)		25.18
Non-vested options outstanding, ending balance		2,090			24.69		2,090			24.69		2,106			25.81		2,106			25.81

Information about stock options that have vested, or are expected to vest, and are exercisable at ~~June 30, 2020~~March 31, 2021 was as follows:

Restricted stock units have been granted to certain employees of L’Orange (at acquisition) and other current Woodward members in key management positions. Each restricted stock unit entitles the holder to one share of the Company’s common stock upon vesting. The restricted stock units were granted with a two year vesting schedule and vest on the one and two year anniversaries of the grant date at a rate of 50% per year. The restricted stock units do not participate in dividends during the vesting period. The fair value of restricted stock units granted were estimated using the closing price of Woodward common stock on the grant date.

~~A summary of the activity for restricted stock units for the three and nine-months ended June 30, 2020:~~

Woodward recognizes stock-based compensation expense on a straight-line basis over the requisite service period. Pursuant to form stock option agreements used by the Company, with terms approved by the administrator of the applicable plan, the requisite service period can be less than the four year vesting period based on grantee’s retirement eligibility. As such, the recognition of stock-based compensation expense associated with some stock option grants can be accelerated to a period of less than four years, including immediate recognition of stock-based compensation expense on the date of grant.

During the third quarter of fiscal year 2020, Woodward entered into a Separation and Release Agreement with Jonathan (“Jack”) W. Thayer, the Company’s former Chief Financial Officer. Under the provisions of the agreement, all stock options previously granted to Mr. Thayer, other than an award granted in October 2019, were modified to provide for continued vesting post-termination based on the original schedule and an extension of the exercise period for the remaining ten-year term of the options. As a result of the modification to these awards, Woodward recognized an additional $2,376 of stock compensation expense, before tax, during the three-months ended June 30, 2020.

At ~~June 30, 2020,~~March 31, 2021, there was approximately ~~$20,088~~$15,693 of total unrecognized compensation expense related to non-vested stock-based compensation arrangements, including both stock options and restricted stock awards. The pre-vesting forfeiture rates for purposes of determining stock-based compensation expense recognized were estimated to be 0% for members of the Board and 9%7.3% for all others. The remaining unrecognized compensation cost is expected to be recognized over a weighted-average period of approximately ~~1.9~~2.1 years.

On April 5, 2020, the Board declared a dividend distribution of 1 right (a “Right”) for each outstanding share of common stock of the Company to stockholders of record as of the close of business on April 16, 2020 (the “Record Date”). Each Right entitles the registered holder, upon the occurrence of specified events, to purchase from the Company one one-thousandth of a share of Series B Participating Preferred Stock, par value $0.003 per share (the “Preferred Stock”), of the Company at an exercise price of $480.00 (the “Exercise Price”). In addition, each Right entitles the registered holder (other than any person or group that acquires 15% or more of the Company’s common stock without the approval of the Board), following the occurrence of other specified events, to purchase common stock of the Company or stock of any acquirer of the Company at a substantial discount. The complete terms of the Rights are set forth in a Preferred Stock Rights Agreement (the “Rights Agreement”), dated as of April 5, 2020, between the Company and American Stock Transfer & Trust Company, LLC, as rights agent.

The Board adopted the Rights Agreement to protect stockholders from coercive or otherwise unfair takeover tactics. In general terms, it works by imposing a significant penalty upon any person or group that acquires 15% or more of the common stock of the Company without the approval of the Board. As a result, the overall effect of the Rights Agreement and the issuance of the Rights may be to render more difficult or discourage a merger, tender or exchange offer or other business combination involving the Company that is not approved by the Board. However, neither the Rights Agreement nor the Rights should interfere with any merger, tender or exchange offer or other business combination approved by the Board.

~~The Rights expire on the earliest of (i) on April 5, 2021 (unless such date is extended) or (ii) the redemption or exchange of the Rights pursuant to the Rights Agreement.~~

Woodward is currently involved in claims, pending or threatened litigation or other legal proceedings, investigations and/or regulatory proceedings arising in the normal course of business, including, among others, those relating to product liability claims, employment matters, worker’s compensation claims, contractual disputes, product warranty claims and alleged violations of various laws and regulations. Woodward accrues for known individual matters using estimates of the most likely amount of loss where it believes that it is probable the matter will result in a loss when ultimately resolved and such loss is reasonably estimable.

Legal costs are expensed as incurred and are classified in “Selling, general and administrative expenses” on the Condensed Consolidated Statements of Earnings.

Woodward is partially self-insured in the United States for healthcare and worker’s compensation up to predetermined amounts, above which third party insurance applies. Management regularly reviews the probable outcome of related claims and proceedings, the expenses expected to be incurred, the availability and limits of the insurance coverage, and the established accruals for liabilities.

While the outcome of pending claims, legal and regulatory proceedings, and investigations cannot be predicted with certainty, management believes that any liabilities that may result from these claims, proceedings and investigations will not have a material effect on Woodward’s liquidity, financial condition, or results of operations.

In the event of a change in control of Woodward, as defined in change-in-control agreements with its corporate officers, Woodward may be required to pay termination benefits to such officers.

Woodward serves the aerospace and industrial markets through its 2 reportable segments – Aerospace and Industrial. When appropriate, Woodward’s reportable segments are aggregations of Woodward’s operating segments. Woodward uses operating segment information internally to manage its business, including the assessment of operating segment performance and decisions for the allocation of resources between operating segments.

The accounting policies of the reportable segments are the same as those of the Company. Woodward evaluates segment profit or loss based on internal performance measures for each segment in a given period. In connection with that assessment, Woodward generally excludes matters such as certain charges for restructuring, interest income and expense, certain gains and losses from asset dispositions, or other non-recurring and/or non-operationally related expenses.

	Three-Months Ended						Nine-Months Ended						Three-Months Ended						Six-Months Ended
	June 30,						June 30,						March 31,						March 31,
	2020			2019			2020			2019			2021			2020			2021			2020
Segment external net sales:
Aerospace	$	306,494		$	498,775		$	1,254,655		$	1,374,616		$	364,706		$	474,236		$	686,373		$	948,161
Industrial		217,332			253,230			709,746			789,044			216,615			245,984			432,567			492,414
Total consolidated net sales	$	523,826		$	752,005		$	1,964,401		$	2,163,660		$	581,321		$	720,220		$	1,118,940		$	1,440,575
Segment earnings:
Aerospace	$	41,096		$	103,238		$	251,645		$	277,814		$	69,008		$	117,638		$	115,474		$	210,549
Industrial		27,438			26,240			81,640			82,537			27,871			25,972			60,759			54,202
Nonsegment expenses		(15,158	)		(26,714	)		(94,360	)		(83,211	)		(10,426	)		(28,131	)		(33,785	)		(79,202	)
Interest expense, net		(8,360	)		(10,450	)		(25,162	)		(33,143	)		(7,966	)		(8,280	)		(16,377	)		(16,802	)
Consolidated earnings before income taxes	$	45,016		$	92,314		$	213,763		$	243,997		$	78,487		$	107,199		$	126,071		$	168,747

Segment assets consist of accounts ~~receivable, inventories,~~receivable; inventories; property, plant, and equipment, ~~net, goodwill,~~net; goodwill; and other intangibles, net. A summary of consolidated total assets by segment follows:

	June 30, 2020		September 30, 2019		March 31, 2021		September 30, 2020
Segment assets:
Aerospace	$	1,807,013	$	1,900,657	$	1,735,452	$	1,752,516
Industrial		1,531,655		1,561,441		1,529,109		1,529,411
Unallocated corporate property, plant and equipment, net		104,285		114,887		103,949		106,380
Other unallocated assets		463,716		379,541		652,262		515,029
Consolidated total assets	$	3,906,669	$	3,956,526	$	4,020,772	$	3,903,336

On ~~July 29, 2020,~~April 28, 2021, the Board approved a cash dividend of ~~$0.08125~~$0.1625 per share for the quarter, payable on ~~August 31, 2020,~~June 1, 2021, for stockholders of record as of ~~August 17, 2020.~~May 18, 2021.

This Quarterly Report on Form 10-Q, including “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” contains forward-looking statements regarding future events and our future results within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact are statements that are deemed forward-looking statements. These statements are based on current expectations, estimates, forecasts, and projections about the industries in which we operate and the beliefs and assumptions of management. Words such as “anticipate,” “believe,” “estimate,” “seek,” “goal,” “expect,” “forecast,” “intend,” “continue,” “outlook,” “plan,” “project,” “target,” “strive,” “can,” “could,” “may,” “should,” “will,” “would,” variations of such words, and similar expressions are intended to identify such forward-looking statements. In addition, any statements that refer to projections of our future financial performance, our anticipated growth and trends in our businesses, and other characteristics of future events or circumstances are forward-looking statements. Forward-looking statements may include, among others, statements relating to:

We undertake no obligation to revise or update any forward-looking statements for any reason, except as required by applicable law.

Unless we have indicated otherwise or the context otherwise requires, references in this Form 10-Q to “Woodward,” “the Company,” “we,” “us,” and “our” refer to Woodward, Inc. and its consolidated subsidiaries.

Except where we have otherwise indicated or the context otherwise requires, amounts presented in this Form 10-Q are in thousands, except per share amounts.

In March 2020, the World Health Organization ~~(“WHO”)~~ declared COVID-19 to be a global pandemic. The pandemic has led to significant volatility in financial, commodities (including oil and gas) and other markets and industries (including the aviation industry) and has negatively affected the business and results of operations for the Company. As the COVID-19 ~~outbreak a pandemic. In an effort~~pandemic progressed, we reacted quickly to ~~contain~~navigate the uncertain market environment, reduce our cost structure, increase our focus on operational excellence, and prioritize diligent cash management. The aggressive actions we implemented continue to drive strong cash flow, improve our liquidity and overall financial position, and enable ongoing investments in opportunities for growth in the markets in which we do business.

The ongoing rollout of vaccines across many countries is driving optimism for economic recovery, but the enduring turbulence caused by the COVID-19 ~~or slow its spread, governments around~~pandemic, including significantly reduced global passenger travel and new viral variants, continues to cloud near-term forecasts. We are unable to predict the ~~world have also enacted various measures,~~extent to which the pandemic and related impacts will continue to adversely affect our business, including ~~orders to close all businesses not deemed “essential,” isolate residents to their homes or places~~our operational performance, results of ~~residence,~~operations, financial position, and ~~practice social distancing when engaging in essential activities. In an effort to protect~~ the ~~health and safety of its employees, we have implemented enhanced cleaning protocols and adopted social distancing policies at all~~achievement of our locations, including working from home, reducing the number of people working in locations at any one time, and suspending employee travel. We have taken steps to align our business with the unfavorable economic conditions, including the implementation of enhanced measures through our global supply chain and business unit management teams to ensure we are efficiently utilizing inventory on hand, as well as our internal processing capabilities. In addition, we have taken specific actions to reduce costs and implemented staff reductions, reduction in employee hours and/or salaries, furloughs, temporary layoffs, or a combination of these actions, at many of its locations.

~~These actions and the global health crisis caused by COVID-19 have negatively impacted business activity across the globe. Since the end of~~strategic objectives. Nonetheless, the second quarter of fiscal year 2020, we have experienced declining demand and both our aerospace and industrial markets have been significantly impacted economically, which resulted in a rapid decline in orders from and shipments to customers. Outbreaks in various regions also resulted in the extended shutdown of certain businesses in these regions, which has resulted in disruptions or delays to our supply chain. Although we have experienced certain impacts2021 showed improved results from the ~~global emergence~~first quarter of fiscal year 2021 and we believe our markets will continue to improve for the remainder of the ~~COVID-19 pandemic, the full extent it will have on our business is currently unknown. When COVID-19 is demonstrably contained, we anticipate an improvement in economic activity; however, the timing~~year and ~~degree of such improvement will depend on the rate and pace of reopening, and the effectiveness of the containment efforts deployed by various national, state, and local governments.~~into fiscal year 2022.

~~We have been deemed an essential business and therefore have continued to operate during the pandemic.~~ We will continue to actively monitor the situation and may potentially take further actions ~~altering~~to alter our business operations that we determine are in the best interests of our shareholders, employees, customers, communities, business partners, ~~suppliers,~~ and ~~shareholders,~~suppliers, or as required by federal, state, or local authorities. It is not clear what the potential effects any such alterations or modifications may have on our business in future periods, including the effects on the Company's customers, employees, and prospects, or on our financial ~~results for the remainder of fiscal year 2020.~~ results.

In the first quarter of fiscal year 2020, Woodward’s board of directors (the “Board”) approved a plan to divest our renewable power systems business, protective relay business, and other businesses within the Industrial segment (collectively, the “disposal group”). The assets of the disposal group were primarily located in Germany, Poland and Bulgaria, and ~~accounted for approximately $80,000 of sales in fiscal year 2019. The~~the transactions consummating the sale of the disposal group were completed on April 30, 2020 (the “Closing”).

Financial information for the disposal group is reflected in our financial statements prior to the date of Closing.

Net sales for the ~~third~~second quarter of fiscal year ~~2020~~2021 were ~~$523,826,~~$581,321, a decrease of ~~30.3%~~19.3% or $138,899, from ~~$752,005~~$720,220 for the ~~third~~second quarter of the prior fiscal year. Foreign currency exchange rates had ~~an unfavorable~~a favorable impact on net sales of ~~$4,143~~$11,006 for the ~~third~~second quarter of fiscal year ~~2020,~~2021 as compared to the same period of the prior year. There were no sales for the disposal group for the second quarter of fiscal year 2021, as the disposal group was divested on April 30, 2020. Net sales excluding the disposal group for the ~~third~~second quarter of fiscal year 2020 were ~~$516,096, a decrease of 29.2% from $729,192~~$688,853. Aerospace segment net sales for the ~~third~~second quarter of fiscal year 2021 were down 23.1% to $364,706, compared to $474,236 for the second quarter of the prior fiscal year. Sequentially, Aerospace segment net sales for the ~~third~~second quarter of fiscal year 2021 were up 13.4%, or $43,039, compared to $321,667 for the first quarter of fiscal year 2021. Industrial segment net sales for the second quarter of fiscal year 2021 were $216,615, down 11.9% compared to $245,984 for the second quarter of fiscal year 2020. Industrial segment net sales excluding the disposal group were $214,617 for the second quarter of fiscal year 2020. Sequentially, Industrial segment net sales for the second quarter of fiscal year 2021 were flat compared to the first quarter of fiscal year 2021. Foreign currency exchange rates had a favorable impact on Industrial segment net sales of $10,435 for the second quarter of fiscal year 2021 as compared to the same period of the prior year.

Net earnings and adjusted net earnings for the second quarter of fiscal year 2021 were both $68,313, or $1.04 per diluted share. Net earnings for the second quarter of fiscal year 2020 were ~~down 38.6% to $306,494, compared to $498,775~~$91,318, or $1.41 per diluted share, and adjusted net earnings for the ~~third quarter of the prior fiscal year. Industrial segment net sales for the third~~second quarter of fiscal year 2020 were ~~$217,332, down 14.2%, compared to $253,230 for~~$104,052, or $1.61 per diluted share.

The effective tax rate and adjusted effective tax rate in the ~~third~~second quarter of fiscal year ~~2019. Industrial segment net sales for the third quarter of fiscal year 2020, excluding net sales for the disposal group,~~2021 were ~~$209,602, down 9.0%, compared to $230,417 for the third quarter of fiscal year 2019.~~

Net earnings for the third quarter of fiscal year 2020 were $38,465, or $0.61 per diluted share, compared to $66,107, or $1.02 per diluted share, for the third quarter of fiscal year 2019. Net earnings excluding the disposal group for the third quarter of fiscal year 2020 were not materially different from reported net earnings for the same period. Adjusted net earnings for the third quarter of fiscal year 2020 were $30,654, or adjusted earnings per share of $0.48 per diluted share, compared to $83,856, or $1.30 per diluted share, for the third quarter of fiscal year 2019.

both 13.0%. The effective tax rate in the ~~third~~second quarter of fiscal year 2020 was ~~14.6%~~14.8%, ~~compared to 28.4% for~~and the ~~third quarter of the prior fiscal year. The~~ adjusted effective tax rate in the ~~third~~second quarter of fiscal year 2020 was ~~29.1%, compared to 17.8% for the third quarter of the prior fiscal year.~~16.2%.

Earnings before interest and taxes (“EBIT”) and adjusted EBIT for the ~~third~~second quarter of fiscal year ~~2020~~2021 was ~~$53,376,~~$86,453, down ~~48.1%~~25.1% from ~~$102,764~~$115,479 in the same period of fiscal year ~~2019.~~2020. Earnings before interest, taxes, depreciation and amortization (“EBITDA”) and adjusted EBITDA for the ~~third~~second quarter of fiscal year ~~2020~~2021 was ~~$85,482,~~$118,932, down ~~37.0%~~19.9% from ~~$135,734~~$148,504 for the same period of fiscal year ~~2019.~~2020. Adjusted EBIT and adjusted EBITDA for the ~~third~~second quarter of fiscal year 2020 was $51,583, down 54.1% from $112,403 for the third quarter of fiscal year 2019. Adjusted EBITDA for the third quarter of fiscal year 2020 was $83,689, down 41.4% from $142,769 for the third quarter of fiscal year 2019. were $132,401 and $165,426, respectively.

Aerospace segment earnings as a percent of segment net sales were ~~13.4%~~18.9% in the ~~third~~second quarter of fiscal year ~~2020,~~2021, compared to ~~20.7%~~24.8% in the ~~third~~second quarter of the prior fiscal year. Industrial segment earnings as a percent of segment net sales in the ~~third~~second quarter of fiscal year ~~2020~~2021 were ~~12.6%~~12.9%, compared to ~~10.4%~~10.6% in the ~~third~~second quarter of the prior fiscal year. ~~Excluding~~For the ~~disposal group, Industrial segment earnings as a percent of net sales were 13.0% in the third~~second quarter of fiscal year 2020, ~~compared to 11.9% in the third quarter of the prior fiscal year. There were no adjustments to~~ Industrial segment earnings ~~as a percent~~excluding the disposal group were 11.6% of Industrial segment net sales ~~for~~excluding the ~~third quarter of fiscal year 2020, which were up compared to adjusted Industrial segment earnings as a percent of segment net sales of 11.4% for the third quarter of fiscal year 2019.~~disposal group.

Adjusted net earnings, adjusted earnings per share, adjusted effective tax rate, EBIT, adjusted EBIT, EBITDA, and adjusted EBITDA, as well as Industrial segment sales excluding the disposal group and ~~adjusted~~ Industrial segment earnings excluding the disposal group, are non-U.S. GAAP financial measures. A description of these measures as well as a reconciliation of these non-U.S. GAAP financial measures to the closest U.S. GAAP financial measures can be found under the caption “Non-U.S. GAAP Measures” in this Item 2 – Management’s Discussion and Analysis of Financial Conditions and Results of Operations.

Net sales for the first ~~nine-months~~half of fiscal year ~~2020~~2021 were ~~$1,964,401,~~$1,118,940, a decrease of ~~9.2%~~22.3% or $321,635, from ~~$2,163,660~~$1,440,575 for the first ~~nine-months~~half of the prior fiscal year. Foreign currency exchange rates had ~~an unfavorable~~a favorable impact on net sales of ~~$12,949~~$20,484 for the first ~~nine-months~~half of fiscal year ~~2020.~~2021. Aerospace segment net sales for the first ~~nine-months~~half of ~~2020~~fiscal year 2021 were down ~~8.7%~~27.6% to ~~$1,254,655,~~$686,373, compared to ~~$1,374,616~~$948,161 for the first ~~nine-months~~half of the prior fiscal year. Industrial segment net sales for the first ~~nine-months~~half of fiscal year ~~2020~~2021 were ~~$709,746,~~$432,567, down ~~10.0%~~12.2% compared to ~~$789,044~~$492,414 for the first ~~nine-months~~half of fiscal year ~~2019.~~2020. Industrial segment net sales excluding the disposal group for the first ~~nine-months~~half of fiscal year 2020 were ~~$642,083, down 11.4%, compared to $724,377~~$432,480.

Net earnings and adjusted net earnings for the first ~~nine-months~~half of fiscal year ~~2020.~~

2021 were both $109,883, or $1.68 per diluted share. Net earnings for the first ~~nine-months~~half of fiscal year 2020 were ~~$183,156,~~$144,691, or ~~$2.85~~$2.24 per diluted share, ~~compared to $192,806, or $2.99 diluted share,~~and adjusted net earnings for the first ~~nine-months of fiscal year 2019. Net earnings excluding the disposal group for the first nine-months~~half of fiscal year 2020 were ~~not materially different from reported net earnings for the same period. Adjusted net earnings for the first nine-months of fiscal year 2020 were $205,920,~~$175,266, or ~~adjusted earnings per share of $3.20~~$2.71 per diluted ~~share, compared to adjusted net earnings of $235,760, or $3.67 per diluted share, for the first nine-months of fiscal year 2019.~~share.

The effective tax rate ~~in the first nine-months of fiscal year 2020 was 14.3%, compared to 21.0% for the first nine-months of the prior fiscal year. The~~and adjusted effective tax rate in the first ~~nine-months~~half of fiscal year 2021 were both 12.8%. For the first half of fiscal year 2020, the effective tax rate was ~~18.7%, compared to 18.2% for~~14.3% and the ~~first nine-months of the prior fiscal year.~~adjusted effective tax rate was 16.6%.

EBIT and adjusted EBIT for the first ~~nine-months~~half of fiscal year ~~2020~~2021 was ~~$238,925,~~$142,448, down ~~13.8%~~23.2% from ~~$277,140~~$185,549 in the same period of fiscal year ~~2019.~~2020. EBITDA and adjusted EBITDA for the first ~~nine-months~~half of fiscal year ~~2020~~2021 was ~~$336,507,~~$208,004, down ~~12.7%~~17.1% from ~~$385,608~~$251,025 for the same period of fiscal year ~~2019.~~2020. Adjusted EBIT ~~for the first nine-months of fiscal year 2020 was $278,434, down 13.4% from $321,399 for the same period of fiscal year 2019. Adjusted~~and adjusted EBITDA for the first ~~nine-months~~half of fiscal year ~~2020 was $376,016, down 8.0% from $408,767 for the same period of fiscal year 2019.~~ 2021 were $226,851 and $292,327, respectively.

Aerospace segment earnings as a percent of segment net sales were ~~20.1%~~16.8% in the first ~~nine-months~~half of fiscal year ~~2020,~~2021, compared to ~~20.2%~~22.2% in the first ~~nine-months~~half of the prior fiscal year. Industrial segment earnings as a percent of segment net sales in the first ~~nine-months~~half of fiscal year ~~2020~~2021 were ~~11.5%~~14.0%, compared to ~~10.5%~~11.0% in the first ~~nine-months~~half of the prior fiscal year. Industrial segment earnings ~~as a percent~~excluding the disposal group were 11.8% of Industrial segment net sales excluding the disposal group ~~were 12.2% in~~for the first ~~nine-months~~half of fiscal year 2020, compared to 11.9% in the first nine-months of the prior fiscal year. There were no adjustments to Industrial segment earnings as a percent of segment net sales for the nine-months of fiscal year 2020, which were down compared to adjusted Industrial segment earnings as a percent of segment net sales of 13.1% for the first nine-months of fiscal year 2019.2020.

Net cash provided by operating activities for the first ~~nine-months~~half of fiscal year ~~2020~~2021 was ~~$212,416,~~$218,997, compared to ~~$219,202~~$52,179 for the first ~~nine-months~~half of fiscal year ~~2019.~~2020. The ~~decrease~~increase in net cash provided by operating activities in the first ~~nine-months~~half of fiscal year ~~2020~~2021 compared to the first ~~nine-months~~half of the prior fiscal year is primarily attributable to the timing of ~~certain~~cash payments to suppliers, as well as cash payments for ~~accounts payable,~~ annual bonuses and ~~taxes due, partially offset by timing~~certain tax payments, both of ~~cash received from customers as well as proceeds from settlement~~which were paid in the first half of ~~cross-currency interest rate swaps.~~fiscal year 2020 but were not paid in the first half of fiscal year 2021.

For the first ~~nine-months~~half of fiscal year ~~2020,~~2021, free cash flow, which we define as net cash ~~flows~~flow from operating activities less payments for property, plant and equipment, was ~~$173,344,~~$205,684, compared to ~~$141,297~~$22,818 for the first ~~nine-months~~half of fiscal year ~~2019.~~2020. Adjusted free cash flow, which we define as free cash flow, plus the cash proceeds from the sale of real property at our former Duarte, California operations ~~and excluding cash paid for merger and divestiture transaction costs, cash paid for restructuring charges, and cash proceeds received from settlement of our cross-currency interest rate swaps,~~ was ~~$168,596~~$28,980 for the first ~~nine-months~~half of fiscal year 2020. ~~A reconciliation~~No adjustments were made to free cash flow for the first half of ~~free~~fiscal year 2021. Free cash flow and adjusted free cash flow ~~both~~are non-U.S. GAAP financial measures. A description of these measures as well as a reconciliation of these non-U.S. GAAP financial measures to the closest U.S. GAAP financial measures can be found under the caption “Non-U.S. GAAP Measures” in this Item 2 – Management’s Discussion and Analysis of Financial Conditions and Results of Operations.

At ~~June 30, 2020,~~March 31, 2021, we held ~~$101,363~~$287,595 in cash and cash equivalents and had total outstanding debt of ~~$929,447.~~$737,493. We have additional borrowing availability of ~~$889,914,~~$989,131, net of outstanding letters of credit, under our revolving credit agreement. At ~~June 30, 2020,~~March 31, 2021, we also had additional borrowing capacity of ~~$7,523~~$7,442 under various foreign lines of credit and foreign overdraft facilities.

The following table sets forth consolidated statements of earnings data as a percentage of net sales for each period indicated:

	Three-Months Ended												Nine-Months Ended												Three-Months Ended												Six-Months Ended
	June 30, 2020			% of Net Sales			June 30, 2019			% of Net Sales			June 30, 2020			% of Net Sales			June 30, 2019			% of Net Sales			March 31, 2021			% of Net Sales			March 31, 2020			% of Net Sales			March 31, 2021			% of Net Sales			March 31, 2020			% of Net Sales
Net sales	$	523,826			100	%	$	752,005			100	%	$	1,964,401			100	%	$	2,163,660			100	%	$	581,321			100	%	$	720,220			100	%	$	1,118,940			100	%	$	1,440,575			100	%
Costs and expenses:
Cost of goods sold		395,511			75.5	%		562,516			74.8	%		1,447,942			73.7	%		1,621,531			74.9	%		434,243			74.7	%		517,514			71.9	%		835,883			74.7	%		1,052,431			73.1	%
Selling, general, and administrative expenses		57,361			11.0	%		52,980			7.0	%		177,035			9.0	%		159,764			7.4	%		44,329			7.6	%		57,629			8.0	%		100,440			9.0	%		119,674			8.3	%
Research and development costs		34,522			6.6	%		40,661			5.4	%		106,029			5.4	%		123,359			5.7	%		27,627			4.8	%		34,661			4.8	%		59,623			5.3	%		71,507			5.0	%
Impairment of assets sold		—			0.0	%		—			0.0	%		37,902			1.9	%		—			0.0	%		—			0.0	%		—			0.0	%		—			0.0	%		37,902			2.6	%
Restructuring charges		19,040			3.6	%		—			0.0	%		19,040			1.0	%		—			0.0	%
Gain on cross-currency interest rate swaps, net		(30,481	)		(5.8	)%		—			0.0	%		(30,481	)		(1.6	)%		—			0.0	%
Interest expense		8,737			1.7	%		10,798			1.4	%		26,502			1.3	%		34,156			1.6	%		8,249			1.4	%		8,756			1.2	%		17,155			1.5	%		17,765			1.2	%
Interest income		(377	)		(0.1	)%		(348	)		(0.0	)%		(1,340	)		(0.1	)%		(1,013	)		(0.0	)%		(283	)		(0.1	)%		(476	)		(0.1	)%		(778	)		(0.1	)%		(963	)		(0.1	)%
Other (income) expense, net		(5,503	)		(1.1	)%		(6,916	)		(0.9	)%		(31,991	)		(1.6	)%		(18,134	)		(0.8	)%		(11,331	)		(1.9	)%		(5,063	)		(0.7	)%		(19,454	)		(1.7	)%		(26,488	)		(1.8	)%
Total costs and expenses		478,810			91.4	%		659,691			87.7	%		1,750,638			89.1	%		1,919,663			88.7	%		502,834			86.5	%		613,021			85.1	%		992,869			88.7	%		1,271,828			88.3	%
Earnings before income taxes		45,016			8.6	%		92,314			12.3	%		213,763			10.9	%		243,997			11.3	%		78,487			13.5	%		107,199			14.9	%		126,071			11.3	%		168,747			11.7	%
Income tax expense		6,551			1.3	%		26,207			3.5	%		30,607			1.6	%		51,191			2.4	%		10,174			1.8	%		15,881			2.2	%		16,188			1.4	%		24,056			1.7	%
Net earnings	$	38,465			7.3	%	$	66,107			8.8	%	$	183,156			9.3	%	$	192,806			8.9	%	$	68,313			11.8	%	$	91,318			12.7	%	$	109,883			9.8	%	$	144,691			10.0	%

	June 30,		September 30,		March 31,		September 30,
	2020		2019		2021		2020
Working capital	$	701,319	$	563,792	$	1,026,754	$	818,533
Short-term borrowings		98,639		220,000
Current portion of long-term debt		101,643		—		1,398		101,634
Total debt		929,447		1,084,899		737,493		838,483
Total stockholders' equity		1,909,766		1,726,741		2,133,301		1,992,677

Consolidated net sales for the ~~third~~second quarter of fiscal year ~~2020~~2021 decreased by ~~$228,179,~~$138,899, or ~~30.3%~~19.3%, compared to the same period of fiscal year ~~2019.~~2020. Consolidated net sales for the first ~~nine-months~~half of fiscal year ~~2020~~2021 decreased by ~~$199,259,~~$321,635, or ~~9.2%~~22.3%, compared to the same period of fiscal year ~~2019.~~2020.

	Three-Month Period			Nine-Month Period			Three-Month Period			Six-Month Period
Consolidated net sales for the period ended June 30, 2019	$	752,005		$	2,163,660
Consolidated net sales for the period ended March 31, 2020							$	720,220		$	1,440,575
Aerospace volume		(187,541	)		(129,834	)		(105,566	)		(255,603	)
Industrial volume		(20,122	)		(54,391	)		(8,933	)		(20,348	)
Disposal group divestiture impact		(11,700	)		(11,700	)
Disposals group divestiture impact								(31,367	)		(59,933	)
Noncash consideration		(8,443	)		(5,002	)		(7,655	)		(13,973	)
Effects of changes in price and sales mix		3,770			14,617			3,616			7,738
Effects of changes in foreign currency rates		(4,143	)		(12,949	)		11,006			20,484
Consolidated net sales for the period ended June 30, 2020	$	523,826		$	1,964,401
Consolidated net sales for the period ended March 31, 2021							$	581,321		$	1,118,940

The decrease in consolidated net sales for the ~~third~~second quarter and first ~~nine-months~~half of fiscal year ~~2020~~2021 is primarily attributable to the decline in sales volume related to the ongoing impact of the COVID-19 ~~pandemic and extended grounding of the Boeing 737 MAX aircraft.~~pandemic. In the Aerospace segment, the decrease in net sales volumes is primarily attributable to lower commercial sales as a result of the secular decline in global passenger traffic and original equipment manufacturer (“OEM”) production rates, ~~plant closures and furloughs, all~~in each case as a result of the global COVID-19 pandemic. In the Industrial segment, the decrease in net sales volumes is primarily attributable to the divestiture of the disposal group, continued weakness in the oil and gas market and the associated aftermarket ~~compounded by~~due to the ongoing impact of the COVID-19 pandemic, partially offset by favorable effects of foreign currency exchange rates and ~~the divestiture of the disposal group. We expect the volume decreases~~strong demand for natural gas powered trucks in ~~consolidated net sales for the third quarter of fiscal year 2020 will continue until markets stabilize from the adverse impacts caused by the COVID-19 pandemic.~~China.

Cost of goods sold decreased by ~~$167,005~~$83,271 to ~~$395,511,~~$434,243, or ~~75.5%~~74.7% of net sales, for the ~~third~~second quarter of fiscal year ~~2020,~~2021, from ~~$562,516,~~$517,514, or ~~74.8%~~71.9% of net sales, for the ~~third~~second quarter of fiscal year ~~2019.~~2020. Cost of goods sold decreased by ~~$173,589~~$216,548 to ~~$1,447,942,~~$835,883, or ~~73.7%~~74.7% of net sales, for the first ~~nine-months~~half of fiscal year ~~2020~~2021 from ~~$1,621,531,~~$1,052,431, or ~~74.9%~~73.1% of net sales, for the first ~~nine-months~~half of fiscal year 2019. The decrease in cost of goods sold in the third quarter of fiscal year 2020 is primarily attributable to lower sales volume as a result of global disruption from the COVID-19 pandemic and the elimination of annual bonus for fiscal year 2020. The decrease in cost of goods sold ~~for~~in the second quarter and first ~~nine-months~~half of fiscal year ~~2020, as~~2021 compared to the same period of the prior year is primarily ~~attributable~~due to lower sales volume as a result of the global disruption ~~from~~caused by the COVID-19 pandemic, the elimination of annual bonus for fiscal year 2020, as well as Duarte move-related costs and purchase accounting impacts related to the amortization of the backlog intangible acquired in connection with the acquisition of Woodward L’Orange which were recognized in the first nine-months of fiscal year 2019, whereas there were no such costs recognized in the first nine-months of fiscal year 2020.pandemic.

Gross margin (as measured by net sales less cost of goods sold, divided by net sales) was ~~24.5%~~25.3% for the ~~third~~second quarter and ~~26.3%~~first half of fiscal year 2021, compared to 28.1% for the second quarter and 26.9% for the first ~~nine-months~~half of fiscal year ~~2020, compared to 25.2% for the third quarter and 25.1% for the first nine-months of fiscal year 2019.~~2020. The decrease in gross margin for the ~~third~~second quarter and first half of fiscal year ~~2020~~2021 compared to the same ~~period~~periods of the prior year is primarily ~~attributable~~due to lower Aerospace OEM and aftermarket sales volume as a result of ~~as a result of~~ global disruption ~~from~~caused by the COVID-19 pandemic, partially offset by the elimination of annual bonus for fiscal year 2020. The increase in gross margin for the first nine-months of fiscal year 2020 is primarily attributable to the elimination of annual bonus for fiscal year 2020, as well as Duarte move-related costs and purchase accounting impacts related to the amortization of the backlog intangible acquired in connection with the acquisition of Woodward L’Orange which were recognized in the third quarter and first nine-months of fiscal year 2019, whereas there were no such costs recognized in the third quarter and first nine-months of fiscal year 2020.pandemic.

Selling, general and administrative expenses ~~increased~~decreased by ~~$4,381,~~$13,300, or ~~8.3%~~23.1%, to ~~$57,361~~$44,329 for the ~~third~~second quarter of fiscal year ~~2020,~~2021, compared to ~~$52,980~~$57,629 for the ~~third~~second quarter of fiscal year ~~2019.~~2020. Selling, general, and administrative expenses ~~increased~~decreased by ~~$17,271,~~$19,234, or ~~10.8%~~16.1%, to ~~$177,035~~$100,440 for the first ~~nine-months~~half of fiscal year 2021, compared to $119,674 for the first half of fiscal year 2020. Selling, general, and administrative expenses as a percentage of net sales decreased to 7.6% for the second quarter of fiscal year 2021, compared to 8.0% for the second quarter of fiscal year 2020. While selling, general, and administrative expenses decreased on an overall dollar basis in the first half of fiscal year 2021 compared to the first half of fiscal year 2020, ~~compared to $159,764 for the first nine-months of fiscal year 2019. Selling,~~selling general and administrative expenses as a percentage of net sales increased to ~~11.0% for the third quarter of fiscal year 2020, compared to 7.0% for the third quarter of fiscal year 2019 and~~ 9.0% for the first ~~nine-months~~half of fiscal year ~~2020,~~2021, compared to ~~7.4%~~8.3% for the first ~~nine-months~~half of fiscal year ~~2019.~~

2020. The ~~increase~~decrease in selling, general and administrative expenses ~~both~~on an overall dollar basis is primarily due to a decrease in ~~dollars and as a percentage of sales, for~~certain expenses incurred in the ~~third~~second quarter of fiscal year 2020 compared to same period of the prior year is primarily due to fees incurred on termination of the cross-currency interest rate swaps and acceleration of stock compensation expense related to restructuring activities. The increase in selling, general and administrative expenses, both in dollars and as a percentage of sales, for the first nine-months of fiscal year 2020 compared to the same period of the prior year is primarily due to an increase in certain expenses to support strategic company initiatives related to merger and divestiture activities, ~~fees incurred on termination of~~which did not repeat in the ~~cross-currency interest rate swaps, and acceleration of stock compensation expense related to restructuring activities. The increase for~~current year quarter, as well as savings in the ~~third~~current year quarter ~~and first nine-months of fiscal year 2020 compared to the same periods of the prior year was partially offset by savings~~ from cost reduction ~~initiatives including the elimination of annual bonus for fiscal year 2020.~~initiatives.

Research and development costs decreased by ~~$6,139,~~$7,034, or ~~15.1%~~20.3%, to ~~$34,522~~$27,627 for the ~~third~~second quarter of fiscal year ~~2020,~~2021, as compared to ~~$40,661~~$34,661 for the ~~third~~second quarter of fiscal year ~~2019.~~2020. Research and development costs as a percentage of net sales ~~increased to 6.6%~~were flat for the ~~third~~second quarter of fiscal year ~~2020,~~2021, as compared to ~~5.4% for~~ the ~~third quarter~~same period of the prior fiscal ~~year 2019.~~year. Research and development costs decreased by ~~$17,330,~~$11,884, or ~~14.0%~~16.6%, to ~~$106,029~~$59,623 for the first ~~nine-months~~half of fiscal year ~~2020,~~2021, as compared to ~~$123,359~~$71,507 for the first ~~nine-months~~half of fiscal year ~~2019.~~ 2020. Research and development costs ~~decreased~~increased as a percentage of net sales to ~~5.4%~~5.3% for the first ~~nine-months~~half of fiscal year ~~2020,~~2021, as compared to ~~5.7%~~5.0% for the first ~~nine-months~~half of fiscal year ~~2019. The decrease in research~~2020. Research and development costs isdecreased primarily due to savings from cost reduction ~~initiatives including the elimination of annual bonus for fiscal year 2020.~~initiatives. Our research and development activities ~~also~~ extend across almost all of our customer base, and we anticipate ongoing variability in research and development due to the timing of customer business needs on current and future programs.

Impairment of assets sold was ~~composed~~comprised entirely of a charge of $37,902 recognized in the first ~~nine-months~~quarter of fiscal year 2020. ~~In the first quarter of fiscal year 2020, Woodward’s board of directors~~The Board approved a plan to divest ~~Woodward’s renewable power systems, protective relay businesses, and other businesses (collectively,~~ the ~~“disposal group”),~~disposal group, which resulted in the recognition of the associated assets and liabilities as held for ~~sale.~~sale at that time. Concurrently, Woodward determined that the assets held for sale, net of any liabilities held for sale, were impaired and recognized a non-cash impairment charge of $37,902, representing the write down of the associated net assets held for sale to their fair market value as of December 31, 2019. ~~Refer to Note 10,~~ ~~Sale of businesses, for further details.~~

Interest expense decreased by ~~$2,061,~~$507, or ~~19.1%~~5.8%, to ~~$8,737~~$8,249 for the ~~third~~second quarter of fiscal year ~~2020,~~2021, compared to ~~$10,798~~$8,756 for the ~~third~~second quarter of fiscal year ~~2019.~~2020. Interest expense increased as a percentage of net sales to ~~1.7%~~1.4% for the ~~third~~second quarter of fiscal year ~~2020,~~2021, as compared to ~~1.4%~~1.2% for the ~~third~~second quarter of fiscal year ~~2019.~~2020. Interest expense decreased by ~~$7,654,~~$610, or ~~22.4%~~3.4%, to ~~$26,502~~$17,155 for the first ~~nine-months~~half of fiscal year ~~2020,~~2021, as compared to ~~$34,156~~$17,765 for the first ~~nine-months~~half of fiscal year ~~2019.~~2020. Interest expense as a percentage of net sales was ~~1.3%~~1.5% for the first ~~nine-months~~half of fiscal year ~~2020,~~2021, compared to ~~1.6%~~1.2% for the first ~~nine-months~~half of fiscal year ~~2019. Since~~2020.In the ~~third quarter~~first half of fiscal year ~~2019,~~2021, we have paid the entire balance of two series of private placement notes totaling ~~$143,000~~$100,000 primarily using ~~free~~ cash ~~flow~~from operations and proceeds from our revolving credit facility. The revolving credit facility bears interest at a substantially lower rate than the private placement notes that were paid.

Other income ~~decreased~~increased by ~~$1,413~~$6,268 to ~~$5,503~~$11,331 for the ~~third~~second quarter of fiscal year ~~2020,~~2021, compared to ~~$6,916~~$5,063 for the ~~third~~second quarter of fiscal year ~~2019.~~2020. Other income decreased by $7,034 to $19,454 for the first half of fiscal year, compared to $26,488 for the first half of fiscal year 2020. Other income increased ~~by $13,857 to $31,991~~ for the ~~first nine-months~~second quarter of fiscal year ~~2020,~~2021 compared to ~~$18,134 for~~the same period of the prior fiscal year primarily due to net market gains on investments in our deferred compensation program. Other income decreased in the first ~~nine-months~~half of fiscal year ~~2019. The increase in other income in the first nine-months of fiscal year 2020~~2021 compared to the first ~~nine-months~~half of fiscal year ~~2019 was~~2020 primarily due to a gain on the sale of a portion of our property in Duarte, California in the amount of $13,552, ~~all of~~ which was recognized in the first ~~quarter~~half of fiscal year 2020.

Income taxes were provided at an effective rate on earnings before income taxes of ~~14.6%~~13.0% for the ~~third~~second quarter and 12.8% for the first half of fiscal year 2021, and 14.8% for the second quarter and 14.3% for the first ~~nine-months~~half of fiscal year ~~2020, and 28.4% for the third quarter and 21.0% for the first nine-months of fiscal year 2019.~~2020.

The decrease in the effective tax rate for the ~~third~~second quarter of fiscal year 2021 compared to the same period of the prior year is primarily attributable to a larger favorable increase in the net excess income tax benefit from stock-based compensation in the second quarter of fiscal year 2021 compared to the second quarter of fiscal year 2020, and the impact of decreased projected full-year earnings for fiscal year 2021 relative to the expected tax benefits from the research credit. This decrease was partially offset by increased taxes on combined foreign earnings when compared to the ~~third~~second quarter of fiscal year ~~2019, is primarily attributable to~~2020, a reduction of India’s tax on dividend distributions that occurred in the ~~additional income tax expense resulting from Transition Tax regulations issued by the IRS on June 14, 2019,~~second quarter of fiscal year 2020 which did not repeat in the current ~~fiscal year~~ quarter, ~~and increased foreign earnings in a lower tax jurisdiction resulting from the net gain on cross-currency interest rate swap termination. This decrease is~~ partially offset by ~~decreased state~~income tax credits ~~and~~in the second quarter of the prior year as a ~~smaller favorable net excess income tax benefits from stock-based compensation.~~result of a reduction in projected earnings, which did not repeat in the current year quarter.

The decrease in the effective tax rate for the first ~~nine-months~~half of fiscal year ~~2020~~2021 compared to same period of the ~~first nine-months of~~prior fiscal year ~~2019~~ is primarily attributable to the additional income tax expense resulting from Transition Tax regulations issued by the IRS on June 14, 2019 which did not repeat in the current fiscal year, increased foreign earnings taxed at a lower rate resulting from the net gain on the cross-currency interest rate swap termination, and the tax benefit with the impairment of assets held for sale. This decrease is partially offset by a smallerlarger favorable increase in the net excess income tax benefits from stock-based ~~compensation.~~compensation and the impact of decreased projected full-year earnings for fiscal year 2021 relative to the expected tax benefits from the research credit and various state income tax credits. This decrease is partially offset by the tax benefit associated with the impairment of assets held for sale and India’s tax on dividend distributions in fiscal year 2020 that did not repeat in the current fiscal year, and increased taxes on combined foreign earnings when compared to the prior fiscal year.

Within the calculation of our annual effective tax rate, we have used assumptions and estimates that may change as a result of future guidance, interpretation, and rule-making from the IRS, the SEC, the FASB, and/or various other taxing jurisdictions. Changes in corporate tax rates, the net deferred tax assets and/or liabilities relating to our U.S. operations, the taxation of foreign earnings, and the deductibility of expenses contained in the Tax Act or other future tax reform legislation could have a material impact on our future U.S. tax expense.

Woodward’s tax returns are subject to audits by U.S. federal, state, and foreign tax authorities, and these audits are at various stages of completion at any given time. Reviews of tax matters by authorities and lapses of the applicable statutes of limitation may result in changes to tax expense. Woodward’s fiscal years remaining open to examination for U.S. Federal income taxes include fiscal years 2017 and thereafter. Woodward is currently under examination by the IRS for fiscal year 2017, which included a foreign tax credit carryback to fiscal year 2016. Woodward’s fiscal years remaining open to examination for significant U.S. state income tax jurisdictions include fiscal years 2016 and thereafter. Woodward’s fiscal years remaining open to examination in significant foreign jurisdictions include 2016 and thereafter.

	Three-Months Ended June 30,								Nine-Months Ended June 30,								Three-Months Ended March 31,								Six-Months Ended March 31,
	2020				2019				2020				2019				2021				2020				2021				2020
Net sales:
Aerospace	$	306,494	58.5	%	$	498,775	66.3	%	$	1,254,655	63.9	%	$	1,374,616	63.5	%	$	364,706	62.7	%	$	474,236	65.8	%	$	686,373	61.3	%	$	948,161	65.8	%
Industrial		217,332	41.5	%		253,230	33.7	%		709,746	36.1	%		789,044	36.5	%		216,615	37.3	%		245,984	34.2	%		432,567	38.7	%		492,414	34.2	%
Consolidated net sales	$	523,826	100	%	$	752,005	100	%	$	1,964,401	100	%	$	2,163,660	100	%	$	581,321	100	%	$	720,220	100	%	$	1,118,940	100	%	$	1,440,575	100	%

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

	Three-Months Ended June 30,						Nine-Months Ended June 30,						Three-Months Ended March 31,						Six-Months Ended March 31,
	2020			2019			2020			2019			2021			2020			2021			2020
Aerospace	$	41,096		$	103,238		$	251,645		$	277,814		$	69,008		$	117,638		$	115,474		$	210,549
Industrial		27,438			26,240			81,640			82,537			27,871			25,972			60,759			54,202
Nonsegment expenses		(15,158	)		(26,714	)		(94,360	)		(83,211	)		(10,426	)		(28,131	)		(33,785	)		(79,202	)
Interest expense, net		(8,360	)		(10,450	)		(25,162	)		(33,143	)		(7,966	)		(8,280	)		(16,377	)		(16,802	)
Consolidated earnings before income taxes		45,016			92,314			213,763			243,997			78,487			107,199			126,071			168,747
Income tax expense		(6,551	)		(26,207	)		(30,607	)		(51,191	)		(10,174	)		(15,881	)		(16,188	)		(24,056	)
Consolidated net earnings	$	38,465		$	66,107		$	183,156		$	192,806		$	68,313		$	91,318		$	109,883		$	144,691

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

	Three-Months Ended June 30,						Nine-Months Ended June 30,						Three-Months Ended March 31,						Six-Months Ended March 31,
	2020			2019			2020			2019			2021			2020			2021			2020
Aerospace		13.4	%		20.7	%		20.1	%		20.2	%		18.9	%		24.8	%		16.8	%		22.2	%
Industrial		12.6	%		10.4	%		11.5	%		10.5	%		12.9	%		10.6	%		14.0	%		11.0	%

Aerospace segment net sales decreased by ~~$192,281,~~$109,530, or ~~38.6%~~23.1%, to ~~$306,494~~$364,706 for the ~~third~~second quarter of fiscal year ~~2020~~2021, compared to ~~$498,775~~$474,236 for the ~~third~~second quarter of fiscal year ~~2019~~2020. Aerospace segment net sales decreased by ~~$119,961,~~$261,788, or ~~8.7%~~27.6%, to ~~$1,254,655~~$686,373 for the first ~~nine-months~~half of fiscal year ~~2020,~~2021, compared to ~~$1,374,616~~$948,161 for the same period of fiscal year ~~2019.~~ ~~The decrease in~~2020. Sequentially, segment net sales increased by $43,039, or 13.4% for the ~~third~~second quarter ~~and first nine-months~~ of fiscal year ~~2020~~ as2021, compared to $321,667 for the ~~same periods~~first quarter of fiscal year ~~2019~~2021. Segment net sales ~~was~~decreased from the prior fiscal year primarily ~~driven by~~as a result of lower commercial sales due to the ~~secular~~ decline in global passenger traffic and OEM production rates ~~plant closures and furloughs, all~~ as a result of the global COVID-19 ~~pandemic, partially offset by~~pandemic. However, sequentially, commercial OEM and aftermarket sales increased from the first quarter of fiscal year 2021 as a result of increasing production rates and utilization, the return to service of the Boeing 737 MAX aircraft, and higher ~~defense aftermarket sales.~~global passenger traffic.

Defense OEM sales decreased in the ~~third~~second quarter and first half of fiscal year 2021~~2020~~ compared to the ~~third quarter~~same periods of fiscal year 2020~~2019~~, primarily driven ~~primarily~~ by lower sales for guided weapons and fixed wing aircraft ~~due~~attributable in large part to absenteeism and supply chain ~~challenges~~disruptions as a result of ~~disruption caused by~~ the global COVID-19 pandemic, as well as a very strong quarter in the same ~~period~~periods of the prior fiscal year. Our defense aftermarket ~~has increased~~sales were flat in the second quarter and first half of fiscal year 2021 compared to the same periods of fiscal year 2020, but remain strong as the U.S. Government has prioritized the combat readiness of existing military programs on which we have content. Global conflicts and growing international demand for various other military programs continue to drive demand for defense aircraft, including fighter jets, transports, and both utility and attack rotorcraft, supported by our products and systems. Although we expect some ongoing variability in defense aftermarket sales due to the global COVID-19 pandemic and timing of continued maintenance needs and upgrade programs, we expect U.S. government funding for defense platforms on which we have content to be strong under the defense budget.

Aerospace segment earnings~~decrease~~d decreased by ~~$62,142,~~$48,630, or ~~60.2%~~41.3%, to ~~$41,096~~$69,008 for the ~~third quarter of fiscal year~~ ~~2020, compared to $103,238 for the third~~second quarter of fiscal year ~~2019~~2021, compared to $117,638 for the second quarter of fiscal year 2020. Aerospace segment earnings decreased by ~~$26,169,~~$95,075, or ~~9.4%~~45.2%, to ~~$251,645~~$115,474 for the first ~~nine-months~~half of fiscal year ~~2020,~~2021, compared to ~~$277,814~~$210,549 for the first ~~nine-months~~half of fiscal year ~~2019.~~ 2020.

The ~~net~~ decrease in Aerospace segment earnings for the ~~third~~second quarter and first ~~nine-months~~half of fiscal year ~~2020~~2021 was due to the following:

	Three-Month Period			Nine-Month Period			Three-Month Period			Six-Month Period
Earnings for the period ended June 30, 2019	$	103,238		$	277,814
Earnings for the period ended March 31, 2020							$	117,638		$	210,549
Sales volume		(91,835	)		(69,740	)		(54,256	)		(127,085	)
Price, sales mix and productivity		12,039			19,144			(5,730	)		(1,593	)
Manufacturing expansion costs		—			(7,129	)
Savings from cost reduction initiatives		17,305			36,699			7,388			19,410
Other, net		349			(5,143	)		3,968			14,193
Earnings for the period ended June 30, 2020	$	41,096		$	251,645
Earnings for the period ended March 31, 2021							$	69,008		$	115,474

Aerospace segment earnings as a percentage of segment net sales were ~~13.4%~~18.9% for the ~~third~~second quarter and ~~20.1%~~16.8% for the first ~~nine-months~~half of fiscal year ~~2020,~~2021, compared to ~~20.7%~~24.8% for the ~~third~~second quarter and ~~20.2%~~22.2% for the first ~~nine-months~~half of fiscal year ~~2019.~~2020. The decrease in Aerospace segment earnings in the ~~third~~second quarter and the first ~~nine-months~~half of fiscal year ~~2020~~ ~~decrease~~d2021 was primarily due to lower volume, including a significant decline in commercial aftermarket, as a result of the global ~~spread of the~~ COVID-19 pandemic, ~~and extended grounding of the Boeing 737 MAX aircraft,~~ partially offset by ~~favorable product mix, and~~ savings from cost reduction ~~initiatives including the elimination of annual bonus for fiscal year 2020.~~initiatives.

Industrial segment net sales decreased by ~~$35,898,~~$29,369, or ~~14.2%~~11.9%, to ~~$217,332~~$216,615 for the ~~third~~second quarter of fiscal year 2021, compared to $245,984 for the second quarter of fiscal year 2020~~, compared to $253,230~~. Industrial segment net sales for the ~~third~~second quarter of fiscal year ~~2019~~.2021 increased by $1,998, or 0.9%, compared to Industrial segment net sales excluding the disposal group ~~decreased by $20,815, or 9.0%, to $209,602~~of $214,617 for the ~~third~~second quarter of fiscal year ~~2020, compared to $230,417 for the third quarter of fiscal year 2019.~~ 2020. Industrial segment net sales decreased by ~~$79,298,~~$59,847, or ~~10.0%~~12.2%, to ~~$709,746~~$432,567 for the first ~~nine-months~~half of fiscal year ~~2020,~~2021, compared to ~~$789,044~~$492,414 for the same period of fiscal year ~~2019.~~2020. Industrial segment net sales for the first half of fiscal year 2021 were flat compared to Industrial segment net sales excluding the disposal group ~~decreased by $82,294, or 11.4%, to $642,083~~of $432,480 for the first ~~nine-months~~half of fiscal year ~~2020, compared to $724,377 for the same period of fiscal year 2019.~~ 2020. Foreign currency exchange rates had ~~an unfavorable~~a favorable impact on segment net sales of ~~$4,013~~$10,435 and ~~$12,573~~$19,722 for the ~~third~~second quarter and first ~~nine-months~~half of fiscal year ~~2020,~~2021, respectively.

The decrease in Industrial segment net sales in the ~~third~~second quarter and first ~~nine-months~~half of fiscal year ~~2020~~2021 was primarily ~~attributable~~due to the divestiture of the disposal group, lower sales volumes as a result of the weak oil and gas market and the ongoing impact of the global COVID-19 pandemic, ~~across markets we serve, continued weakness in the oil and gas market, and the divestiture of the disposal group.~~

~~The~~partially offset by strong demand for ~~diesel fuel systems was negatively impacted by a softening of the oil and~~natural gas ~~market amid a slowing global economy, pricing volatility and decreased capital investments related to reduced drilling activity, particularly within the North American fracking market.~~powered trucks in China.

Sales of fuel systems for ~~compressed~~ natural gas ~~(“CNG”)~~powered trucks in ~~Asia~~China were ~~slightly~~ up in the ~~third~~second quarter of fiscal year 2021, compared to the same period of the prior fiscal year. We foresee continued growth in global energy demand moving forward, with the bulk of this expansion coming from developing economies in Asia, as increased emissions regulations continue to drive the shift to natural gas powered and ~~first~~cleaner burning diesel engines. The industrial gas turbine market remained stable during the second quarter of fiscal year 2021 and we do not expect this market to be as negatively impacted by the global COVID-19 pandemic as other global energy markets due to low inventory levels and pent up demand for repair and overhaul.

Industrial segment earnings increased by $1,899, or 7.3%, to $27,871 for the ~~nine-months~~second quarter of fiscal year ~~2020~~2021 ~~as production rates~~, compared to $25,972 for ~~China 6 compliant trucks recovered from~~ the large pre-buy of China 5 compliant trucks, which negatively impacted sales in previous years. We anticipate the market demand for natural gas trucks to continue as the Chinese government continues to enforce China 6 regulations and continues to incentivize the use of natural gas rather than diesel. Although the industrial gas turbine market began to stabilize during the first ~~nine-months~~second ~~of fiscal year~~ ~~2020~~ as global power demand increases and domestic upgrade initiatives transition from planning to execution, we expect to see volatility in demand due to the COVID-19 pandemic. Industrial gas turbine sales in the third quarter of fiscal year 2020 benefitted from the depletion of inventory in the market and increased Woodward content on certain newer industrial gas turbines. However, this was partially offset by the weakening demand in new turbine programs due to the economic uncertainty caused by the COVID-19 pandemic and we expect lower demand in industrial gas turbine sales until the outbreak is contained and demand stabilizes.

~~Industrial segment~~. Segment earnings increased by ~~$1,198,~~$6,557, or ~~4.6%~~12.1%, to ~~$27,438~~$60,759 for the ~~third quarter~~first half of fiscal year ~~2020~~,2021, compared to ~~$26,240~~$54,202 for the ~~third quarter~~same period of fiscal year 2020. There were no earnings for the disposal group in the second quarter and first half of fiscal year 2021 because the divestiture preceded the period. ~~2019~~. Industrial segment earnings excluding the disposal group ~~decreased by $220, or 0.8%, to $27,186, compared to $27,406~~ for the ~~third~~second quarter ~~of fiscal year 2019. Industrial segment earnings decreased by $897, or 1.1%, to $81,640 for the~~and first ~~nine-months~~half of fiscal year 2020 compared to $82,537 for the same period of fiscal year 2019. Industrial segment earnings excluding the disposal group decreased by $8,439, or 9.7%, to $78,038 for the first nine-months of fiscal year 2020, compared to $86,477 for the same period of fiscal year 2019.

~~Adjusted Industrial segment earnings for the third quarter of fiscal year~~ ~~2019, which exclude certain purchase accounting impacts related to the L’Orange Acquisition,~~ were $28,844. Adjusted Industrial segment earnings for the third quarter of fiscal year 2019 excluding the disposal group were $30,050. There were no adjustments to Industrial segment earnings in the third quarter or the first ~~nine-months~~ ~~of fiscal year~~ ~~2020, which were down 4.9%~~$24,870 and ~~21.2%, respectively, compared to adjusted Industrial segment earnings of $28,844 and $103,637, respectively, for the third quarter and first~~ ~~nine-months~~ ~~of fiscal year~~ ~~2019~~.$50,854, respectively.

The ~~net~~ increase in Industrial segment earnings for the ~~third~~second quarter and first half of fiscal year ~~2020 and net decrease in Industrial segment earnings for the first~~ ~~nine-months~~ ~~of fiscal year~~ ~~2020~~2021 was due to the following:

	Three-Month Period			Nine-Month Period			Three-Month Period			Six-Month Period
Earnings for the period ended June 30, 2019	$	26,240		$	82,537
Earnings for the period ended March 31, 2020							$	25,972		$	54,202
Sales volume		(9,942	)		(26,868	)		(8,357	)		(13,722	)
Price, sales mix and productivity		(104	)		(3,781	)		(2,648	)		(3,033	)
L'Orange backlog amortization		728			13,608
Savings from cost reduction initiatives								7,629			14,202
Effects of changes in foreign currency rates		(128	)		(2,556	)		1,661			3,360
Disposal group divestiture impact		170			170
Savings from cost reduction initiatives		8,668			20,513
Other, net		1,806			(1,983	)		3,614			5,750
Earnings for the period ended June 30, 2020	$	27,438		$	81,640
Earnings for the period ended March 31, 2021							$	27,871		$	60,759

Industrial segment earnings as a percentage of segment net sales were ~~12.6%~~12.9% for the ~~third~~second quarter and ~~11.5%~~14.0% for the first half of fiscal year 2021, compared to 10.6% for the ~~nine-months~~second quarter and 11.0% for the first half of fiscal year 2020~~, compared to 10.4% for the third quarter and 10.5% for the first~~ ~~nine-months~~ ~~of fiscal year~~ ~~2019~~. Industrial segment earnings ~~as a percentage~~excluding the disposal group were 11.6% and 11.8% of Industrial segment net sales excluding the disposal group ~~were 13.0%~~ for the ~~third~~second quarter and ~~12.2% for the~~ first ~~nine-months~~half of fiscal year 2020, ~~compared to 11.9% for both the third quarter and first nine-months of fiscal year 2019.~~respectively. The increase in Industrial segment earnings in the ~~third~~second quarter and first half of fiscal year ~~2020~~2021 was primarily due to savings from cost reduction initiatives ~~including the elimination of annual bonus for fiscal year 2020,~~and favorable effects from changes in foreign currency rates, partially offset by lower sales volume. ~~The decrease in Industrial segment earnings for the first nine-months of fiscal year 2020 was primarily due to lower sales volume and product mix, partially offset by the~~ ~~amortization of the backlog intangible acquired in connection with the L’Orange acquisition that was recognized in both the third quarter and first nine-months of fiscal year 2019, whereas~~ ~~no amortization of this backlog intangible was recognized in the third quarter and first~~ ~~nine-months~~ ~~of fiscal year~~ ~~2020. The decrease in the first nine-months of fiscal year 2020 was further partially offset by savings from cost reduction initiatives including the elimination of annual bonus for fiscal year~~ ~~2020. There were no adjustments to Industrial segment earnings as a percentage of segment net sales for the third quarter or the first~~ ~~nine-months~~ ~~of fiscal year~~ ~~2020, which were down compared to adjusted Industrial segment earnings as a percentage of segment net sales of 11.4% for the third quarter and 13.1% for the first~~ ~~nine-months~~ ~~of fiscal year~~ ~~2019~~.

Nonsegment expenses decreased to ~~$15,158~~$10,426 for the ~~third~~second quarter of fiscal year ~~2020~~2021, compared to ~~$26,714~~$28,131 for the ~~third~~second quarter of fiscal year ~~2019~~2020. Included in nonsegment expenses for the ~~third~~second quarter of fiscal year 2020 was merger and divestiture transaction costs of ~~$1,732, restructuring charges of $19,040, and acceleration of stock compensation of $2,376, offset by the net gain on settlement of cross-currency interest rate swaps of $27,481. Included in~~$16,922. Aside from these items, nonsegment expenses ~~for~~decreased in the ~~third~~second quarter of fiscal year ~~2019~~2021 ~~were Duarte move-related costs in~~compared to the ~~amount of $7,035. Excluding these charges from both~~ ~~2020~~ ~~and~~ ~~2019, nonsegment expenses decreased in the third~~second quarter of fiscal year 2020 ~~compared~~primarily due to savings from cost reduction initiatives.

Nonsegment expenses decreased to $33,785 for the ~~third quarter~~first half of fiscal year ~~2019~~, ~~primarily due~~2021, compared to ~~the elimination of annual bonus for fiscal year~~ ~~2020~~.

~~Nonsegment expenses increased to $94,360~~$79,202 for the first ~~nine-months~~half of fiscal year ~~2020, compared to $83,211 for the first nine-months of fiscal year 2019.~~ 2020. Included in nonsegment expenses for the first ~~nine-months~~half of fiscal year 2020 were merger and divestiture transaction costs of $16,922, and the impairment charge on assets held for sale associated with the divestiture of our ~~disposal group~~Renewables Business in the amount of $37,902, ~~restructuring charges of $19,040, acceleration of stock compensation of $2,376, and merger and divestiture transaction costs of $18,654,~~ partially offset by ~~the net gain on settlement of our cross-currency interest rate swaps of $27,481, and~~ a gain on the sale of a portion of our property in Duarte, California in the amount of $13,552. ~~Included~~Aside from these items, the decrease in nonsegment expenses ~~for~~in the first ~~nine-months~~half of fiscal year 2021~~2019~~ ~~were Duarte move-related costs in the amount of $23,159. Excluding these charges from both~~ ~~2020~~ ~~and~~ ~~2019, nonsegment expenses decreased in the first~~ ~~nine-months~~ ~~of fiscal year~~ ~~2020~~ compared to the first ~~nine-months~~half of fiscal year 2020~~2019~~ was primarily due to savings from cost reduction ~~initiatives, which includes the elimination of annual bonus for fiscal year~~ ~~2020~~.initiatives.

Historically, we have satisfied our working capital needs, as well as capital expenditures, product development and other liquidity requirements associated with our operations, with cash flow provided by operating activities and borrowings under our credit facilities. ~~Historically,~~From time to time, we have also issued debt to supplement our cash needs, repay our other indebtedness, or finance our acquisitions. We continue to 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 ~~including capital expansion funding~~ for the foreseeable future.

Our aggregate cash and cash equivalents were $101,363 at June 30, 2020 and $99,073 at September 30, 2019, and our working capital was $701,319 at June 30, 2020 and $563,792 at September 30, 2019. Of the cash and cash equivalents held at June 30, 2020, $96,972 was held by our foreign locations and $2,880 is restricted cash held in escrow related to the sale of property in Duarte, California. We are not presently aware of any significant restrictions on the repatriation of these funds, although a portion is considered indefinitely reinvested in these foreign subsidiaries. If these funds were needed to fund our operations or satisfy obligations in the United States, then they could be repatriated and their repatriation into the United States may cause us to incur additional U.S. income taxes or foreign withholding taxes. Any additional U.S. taxes could be offset, in part or in whole, by foreign tax credits. The amount of such taxes and application of tax credits would be dependent on the income tax laws and other circumstances at the 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. The additional uncertainty associated with the “The Tax Cuts and Jobs Act” enacted in December 2017 (the “Tax Act”) increases the impracticality of determining this income tax liability.

We do not believe the one-time repatriation tax on deferred foreign income resulting from the Tax Act, which is expected to be paid over an eight-year period that began in January 2019, will have a significant impact on our cash flows in any individual fiscal year.

Consistent with common business practice in China, our Chinese subsidiaries accept bankers’ acceptance notes from Chinese customers, in settlement of certain customer accounts receivable. Bankers’ acceptance notes are financial instruments issued by Chinese financial institutions as part of financing arrangements between the financial institution and a customer of the financial institution. Bankers’ acceptance notes represent a commitment by the issuing financial institution to pay a certain amount of money at a specified future maturity date to the legal owner of the bankers’ acceptance note as of the maturity date. The maturity date of bankers’ acceptance notes varies, but it is our policy to only accept bankers’ acceptance notes with maturity dates no more than 180 days from the date of our receipt of such draft. The issuing financial institution is the obligor, not our customers. Upon our acceptance of a bankers’ acceptance note from a customer, such customer has no further obligation to pay us for the related accounts receivable balance. We had bankers’ acceptance notes of $47,863 at June 30, 2020 and $42,171 at September 30, 2019 recorded as non-customer accounts receivable in our Condensed Consolidated Balance Sheets. We only accept bankers’ acceptance notes issued by banks that are believed to be creditworthy and to which the credit risks associated with the bankers’ acceptance notes are believed to be low.

In addition to our revolving credit facility, we have various foreign credit facilities, some of which are tied to net amounts on deposit at certain foreign financial institutions. These foreign credit facilities are reviewed annually for renewal. We use borrowings under these foreign credit facilities to finance certain local operations on a periodic basis. For further discussion of our revolving credit facility and our other credit facilities, see Note 15, Credit facilities, short-term borrowings and long-term debt in the Notes to the Condensed Consolidated Financial Statements in Part I, Item I of this Form 10-Q.

At ~~June 30, 2020,~~March 31, 2021, we had total outstanding debt of ~~$929,447~~$737,493 consisting of various series of unsecured notes due between ~~2020~~2023 and 2033 ~~amounts borrowed~~and obligations under ~~our revolving credit facility, and~~ our finance leases. ~~Our Series G and Series J notes, both of which have an aggregate principal amount of $50,000, mature on November 15, 2020.~~ At ~~June 30, 2020,~~March 31, 2021, we had additional borrowing availability of ~~$889,914~~$989,131 under our revolving credit facility, net of outstanding letters of credit, and additional borrowing availability of ~~$7,523~~$7,442 under various foreign credit facilities.

At ~~June 30, 2020,~~March 31, 2021, we had ~~$98,639 of~~no borrowings outstanding under our revolving credit facility. We also had no borrowings or average daily balance outstanding under our revolving credit facility ~~all~~during the second quarter of which was classified as short-term borrowings based on our intent and ability to pay this amount in the next twelve months. Of these borrowings, as of June 30, 2020, $87,400 is denominated in U.S. dollars and €10,000 is denominated in Euro.fiscal year 2021. Revolving credit facility and short-term borrowing activity during the ~~nine-months~~six-months ended ~~June 30, 2020~~March 31, 2021 were as follows:

Maximum daily balance during the period	$	343,255		$	20,100
Average daily balance during the period	$	266,853		$	1,436
Weighted average interest rate on average daily balance		2.38	%		1.26	%

~~We believe~~To our knowledge, we were in compliance with all our debt covenants as of ~~June 30, 2020.~~March 31, 2021. Additionally, we do not believe the current known impacts of the COVID-19 pandemic will affect our ability to remain in compliance with our debt covenants. See Note 15, Credit facilities, short-term borrowings and long-term debt in the Notes to the Consolidated Financial Statements in Part II, Item 8 of our most recent Form 10-K, for more information about our covenants.

In addition to utilizing our cash resources to fund the working capital needs of our business, we evaluate additional strategic uses of our funds, including the repurchase of our common stock, payment of dividends, significant capital expenditures, consideration of strategic acquisitions and other potential uses of cash.

Our ability to service our long-term debt, to remain in compliance with the various restrictions and covenants contained in our debt agreements, and to fund working capital, capital expenditures and product development efforts will depend on our ability to generate cash from operating activities, which in turn is subject to, among other things, future operating performance as well as general economic, financial, competitive, legislative, regulatory, and other conditions, some of which may be beyond our control. We do not believe the current known impacts of the COVID-19 pandemic will impact our ability to satisfy our long-term debt obligations.

In November 2019, the ~~first quarter of fiscal year 2017, our board of directors~~Board terminated our prior stock repurchase program and replaced it with a new program for the repurchase of up to $500,000 of Woodward’s outstanding shares of common stock on the open market or in privately negotiated transactions over a three-year period ending in November 2019 (the “2017 Authorization”). Effective upon the expiration of the 2017 Authorization in November 2019, our board of directors approved a new program for the repurchase of up to $500,000 of our outstanding shares of common stock on the open market or in privately negotiated transactions over a three-year period that will end in 2022 (the “2019 ~~Authorization”)~~Authorization). In the first ~~nine-months~~half of fiscal year 2021, we repurchased no shares of our common stock under the 2019 Authorization. In the first half of fiscal year 2020, we repurchased 124 shares of our common stock for $13,346 under the 2019 Authorization. We purchased 456 shares of our common stock for $43,253 in the first nine-months of fiscal year 2019 under the 2017 Authorization. Under the now-terminated merger agreement with Hexcel, we had been generally prohibited from repurchasing our common stock during the pendency of the Merger. With the termination of the merger agreement on April 5, 2020, share repurchases were no longer restricted. However, to preserve cash flow due to the economic uncertainties caused by the COVID-19 pandemic, we do not currently anticipate making significant share repurchases for the remainder of fiscal year 2020.

Associated with our decision to relocate our Duarte, California operations to the newly renovated Drake Campus in Fort Collins, Colorado, which was finalized in fiscal year 2019, on December 30, 2019, we closed on the sale of one of two parcels of the Duarte real property and recorded a pre-tax gain on sale of assets in the amount of $13,522. The carrying value of the remaining parcel of Duarte real estate is $2,520 as of June 30, 2020, all of which we have identified as an asset held for sale as of that date. Based on an existing real property purchase agreement and current market conditions, we expect to record an additional gain on the subsequent sale of the remaining parcel of real estate, which is expected to close by September 30, 2020.

In the third quarter of fiscal year 2020, as a result of the COVID-19 pandemic and future cash flow uncertainties, we elected to terminate and settle our existing cross-currency interest rate swap derivative instruments. Concurrent with settlement of the derivative instruments, we discontinued the related foreign currency hedging relationships associated with the instruments. Upon termination of the instruments, and related hedging relationships, we recognized a pre-tax gain of $30,481 and incurred a swap breakage fee of $3,000. We received net cash proceeds of $59,571 at the date of settlement, which included $58,191 of proceeds related to the fair value of the instruments and $4,380 of net accrued interest, less the $3,000 fee to terminate the cross-currency interest rate swap agreements.

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. However, we could be adversely affected if the financial institutions providing our capital requirements refuse to honor their contractual commitments, cease lending, or declare bankruptcy. We believe the lending institutions participating in our credit arrangements are financially stable and do not currently foresee adverse impacts to financial institutions ~~providing~~supporting our capital requirements as a result of the COVID-19 ~~pandemic.~~pandemic or otherwise.

	Nine-Months Ended June 30,						Six-Months Ended March 31,
	2020			2019			2021			2020
Net cash provided by operating activities	$	212,416		$	219,202		$	218,997		$	52,179
Net cash (used in) investing activities		(10,194	)		(79,826	)
Net cash (used in) financing activities		(196,307	)		(159,008	)
Net cash provided by investing activities								589			2,131
Net cash used in financing activities								(87,785	)		(48,462	)
Effect of exchange rate changes on cash and cash equivalents		(3,625	)		(660	)		2,524			(2,072	)
Net change in cash and cash equivalents		2,290			(20,292	)		134,325			3,776
Cash and cash equivalents, including restricted cash, at beginning of year		99,073			83,594			153,270			99,073
Cash and cash equivalents, including restricted cash, at end of period	$	101,363		$	63,302		$	287,595		$	102,849

Net cash flows provided by operating activities for the first ~~nine-months~~half of fiscal year ~~2020~~2021 was ~~$212,416,~~$218,997, compared to ~~$219,202~~$52,179 for the same period of fiscal year ~~2019.~~2020. The ~~decrease~~increase in net cash provided by operating activities in the first ~~nine-months~~half of fiscal year ~~2020~~2021 compared to the first ~~nine-months~~half of the prior fiscal year is primarily attributable to the timing of ~~certain~~cash payments to suppliers, as well as cash payments for ~~accounts payable,~~ annual bonuses and ~~taxes due~~certain tax payments, both of which were paid in the first ~~nine-months~~half of fiscal year 2020, ~~partially offset by timing of cash received from customers as well as proceeds from settlement of cross-currency interest rate swaps during~~but were not paid in the ~~third quarter~~first half of fiscal year ~~2020.~~2021.

Net cash flows ~~used in~~provided by investing activities for the first ~~nine-months~~half of fiscal year ~~2020~~2021 was ~~$10,194,~~$589, compared to ~~$79,826 in~~$2,131 for the ~~first nine-months~~same period of fiscal year ~~2019.~~2020. The decrease in cash flows ~~used in~~provided by investing activities in the first ~~nine-months~~half of fiscal year ~~2020~~2021 compared to the first ~~nine-months~~half of the prior fiscal year is primarily due to ~~decreased payments for the purchase of property, plant and equipment,~~ proceeds in the amount of $18,767 from the sale of a parcel of our Duarte real property ~~and proceeds~~recognized in the ~~amount~~first half of ~~$10,443 from divestiture~~fiscal year 2020, while no such proceeds were received in same period of ~~the disposal group.~~fiscal year 2021, partially offset by lower payments for property, plant and equipment.

Net cash flows used in financing activities for the first ~~nine-months~~half of fiscal year ~~2020~~2021 was ~~$196,307,~~$87,785, compared to $48,462 for the same period of fiscal year 2020. The change in net cash flows used in financing activities ~~of $159,008~~ in the first ~~nine-months~~half of fiscal year ~~2019.~~2021 compared to the first half of the prior fiscal year is primarily attributable to the change in net debt payments. During the first ~~nine-months~~half of fiscal year ~~2020,~~2021, we had net debt payments in the amount of ~~$165,163,~~$100,835, compared to net debt payments in the amount of ~~$51,189~~$20,317 in the first ~~nine-months~~half of fiscal year ~~2019.~~ ~~Also, in the first~~ ~~nine-months~~ ~~of fiscal year~~ ~~2020, we repurchased 124 shares of our common stock for $13,346, compared to the repurchase of 1,102 shares of our common stock for $110,311 in the first~~ ~~nine-months~~ ~~of fiscal year~~ ~~2019. The common stock repurchases were made pursuant to a 10b-18 plan under the~~ ~~2019~~ ~~Authorization and a 10b5-1 plan under the 2017 Authorization.~~2020.

We have various contractual obligations, including obligations related to long-term debt, operating and finance leases, purchases, retirement pension benefit plans, and other postretirement benefit plans. These contractual obligations are summarized and discussed more fully in Management’s Discussion and Analysis of Financial Condition and Results of Operations in Part II, Item 7 of our most recent Form 10-K.

Adjusted net earnings, adjusted earnings per share, ~~adjusted~~Industrial segment net sales excluding the disposal group, Industrial segment earnings excluding the disposal group, EBIT, adjusted EBIT, EBITDA, adjusted EBITDA, free cash flow, and adjusted free cash flow are financial measures not prepared and presented in accordance with U.S. GAAP. However, we believe these non-U.S. GAAP financial measures provide additional information that enables readers to evaluate our business from the perspective of management.

The Company presents certain sales measures excluding the disposal group net sales, which it refers to as “excluding the disposal group”, for the prior year period to show the changes to Woodward’s historical business without the businesses included in the disposal group, ~~divestitures,~~ which occurred in April 2020. ~~Management~~The Company calculates Industrial segment net sales excluding net sales attributable to the disposal group by removing the net sales of the disposal group from the net sales of its Industrial segment. The Company believes that the exclusion of the disposal group net sales for the prior year period illustrates more clearly how the underlying business of ~~Woodward’s~~its Industrial segment is performing in the current year period, as ~~these~~the disposal group sales are no longer related to the ongoing operations of the Industrial segment business. The Company’s definition of Industrial segment earnings and Industrial segment earnings excluding the disposal group is discussed below.

The reconciliation of Industrial segment net sales to Industrial segment net sales excluding the disposal group is shown in the table below:

Adjusted net earnings is defined by the Company as net earnings excluding, as applicable, (i) the gain on sale of assets associated with the sale of the Company’s Duarte real property, (ii) the charge from the impairment of assets held for sale, and the losses from assets sold, associated with the Company’s divestiture of ~~its~~the disposal group, (iii) Duarte move related costs, (iv) the purchase accounting impacts related to the amortization of the backlog intangible acquired in connection with the acquisition of Woodward L’Orange on June 1, 2018 (the “L’Orange Acquisition”), (v) costs associated with the ~~previously proposed~~now-terminated merger agreement with Hexcel, ~~which merger agreement was terminated on April 5, 2020 (vi)~~and (iv) transaction costs associated with the ~~completed~~ divestiture of ~~our~~the disposal group, (vii) restructuring charges related to the COVID-19 pandemic, (viii) acceleration of stock compensation expense related to restructuring activities, and (ix) the net gain on settlement of cross-currency interest rate swaps.group. The Company believes that these excluded items are short-term in nature, not directly related to the ongoing operations of the business and therefore, the exclusion of them illustrates more clearly how the underlying business of Woodward is performing. Management uses adjusted net earnings to evaluate the Company’s performance excluding these infrequent or unusual period expenses that are not necessarily indicative of the Company’s operating performance for the period. Management defines adjusted earnings per share as adjusted net earnings, as defined above, divided by the weighted-average number of diluted shares of common stock outstanding for the period. Management uses both adjusted net earnings and adjusted earnings per share when comparing operating performance to other periods which may not have similar, infrequent or unusual charges.

The reconciliation of net earnings and earnings per share to adjusted net earnings and adjusted earnings per share, respectively, ~~for the three and nine-months ended June 30, 2020 and 2019~~ is shown in the tables ~~below.~~below:

~~Adjusted Industrial segment earnings is defined by the Company as~~ Industrial segment earnings excluding the ~~purchase accounting impacts related to the amortization of the backlog intangible acquired in connection with the L’Orange Acquisition.~~ disposal group

The Company ~~believes that these purchase accounting impacts are short-term in nature, not related~~also presents certain earnings measures excluding the disposal group for the prior year period to ~~the ongoing operations of the Industrial segment business and therefore, the exclusion of this item illustrates~~ more clearly show how the underlying business of ~~Woodward’s~~its Industrial segment is ~~performing.~~

~~The reconciliation of Industrial segment earnings to adjusted Industrial segment earnings for the three and nine-months ended June 30, 2019 is shown~~performing in the ~~table below; no such adjustments were made for the three and nine-months ended June 30, 2020.~~

current period. Industrial segment earnings excluding the disposal group is defined by the Company as Industrial segment earnings excluding the earnings or losses related to businesses included in the disposal ~~group divestitures.~~group. The Company believes that these earnings or losses are no longer related to the ongoing operations of the Industrial segment business and therefore, the exclusion of these earnings illustrates more clearly how the underlying business of Woodward’s Industrial segment is performing. Industrial segment earnings excluding the disposal group as a percentage of Industrial segment net sales excluding the disposal group is defined by management as the percentage of segment ~~net sales related~~earnings compared to segment ~~earnings~~net sales excluding the earnings ~~or losses~~(or losses) and net sales related to businesses included in the disposal ~~group divestitures.~~group.

The reconciliation of Industrial segment earnings to Industrial segment earnings excluding the disposal group ~~for the three and nine-months ended June 30, 2020 and June 30, 2019~~ is shown in the table ~~below.~~below:

Management uses EBIT to evaluate Woodward’s performance without financing and tax related considerations, as these elements do not fluctuate with operating results. Management uses EBITDA in evaluating Woodward’s operating performance, making business decisions, including developing budgets, managing expenditures, forecasting future periods, and evaluating capital structure impacts of various strategic scenarios. Securities analysts, investors and others frequently use EBIT and EBITDA in their evaluation of companies, particularly those with significant property, plant, and equipment, and intangible assets subject to amortization. The Company believes that EBIT and EBITDA are useful measures to the investor when measuring operating performance as they eliminate the impact of financing and tax expenses, which are non-operating expenses and may be driven by factors outside of the Company’s operations, such as changes in tax laws or regulations, and, in the case of EBITDA, the noncash charges associated with depreciation and amortization. Further, as interest from financing, income taxes, depreciation and amortization can vary dramatically between companies and between periods, management believes that the removal of these items can improve comparability.

Adjusted EBIT and adjusted EBITDA represent further non-U.S. GAAP adjustments to EBIT and EBITDA, in each case adjusted to exclude, as applicable, (i) the gain on sale of assets associated ~~with~~will the sale of the Company’s Duarte real property, (ii) the charge from the impairment of assets held for sale, and the losses from assets sold, associated with the Company’s divestiture of its disposal group, (iii) Duarte move related costs, (iv) the purchase accounting impacts related to the amortization of the backlog intangible acquired in connection with the acquisition of Woodward L’Orange on June 1, 2018 (the “L’Orange Acquisition”), (v) costs associated with the now-terminated merger agreement with Hexcel, ~~(vi)~~and (iv) transaction costs associated with the ~~completed~~ divestiture of ~~our~~the disposal group, (vii) restructuring charges related to the COVID-19 pandemic, (viii) acceleration of stock compensation expense related to restructuring activities, and (ix) the net gain on settlement of cross-currency interest rate swaps..group. As these gains and charges are infrequent or unusual items that can be variable from period to period and do not fluctuate with operating results, management believes that by removing these gains and charges from EBIT and EBITDA it improves comparability of past, present and future operating results and provides consistency when comparing EBIT and EBITDA between periods.

EBIT and adjusted EBIT reconciled to net earnings ~~for the three and nine-months ended June 30, 2020 and 2019~~ were as follows:

EBITDA and adjusted EBITDA reconciled to net earnings ~~for the three and nine-months ended June 30, 2020 and 2019~~ were as follows:

	Three-Months Ended June 30,						Nine-Months Ended June 30,						Three-Months Ended March 31,						Six-Months Ended March 31,
	2020			2019			2020			2019			2021			2020			2021			2020
Net earnings (U.S. GAAP)	$	38,465		$	66,107		$	183,156		$	192,806		$	68,313		$	91,318		$	109,883		$	144,691
Income tax expense		6,551			26,207			30,607			51,191			10,174			15,881			16,188			24,056
Interest expense		8,737			10,798			26,502			34,156			8,249			8,756			17,155			17,765
Interest income		(377	)		(348	)		(1,340	)		(1,013	)		(283	)		(476	)		(778	)		(963	)
Amortization of intangible assets		9,728			11,305			29,481			45,470			10,560			9,848			21,029			19,753
Depreciation expense		22,378			21,665			68,101			62,998			21,919			23,177			44,527			45,723
EBITDA (Non-U.S. GAAP)		85,482			135,734			336,507			385,608			118,932			148,504			208,004			251,025
Non-U.S. GAAP adjustments:
Gain on sale of Duarte property		—			—			(13,522	)		—
Gain on sale of Duarte facility														—			—			—			(13,522	)
Impairment from assets sold		—			—			37,902			—			—			—			—			37,902
Duarte move related costs		—			7,035			—			23,159
Merger and divestiture transaction costs¹		1,732			—			18,654			—
Restructuring charges related to COVID-19		19,040			—			19,040			—
Loss on sale of disposal group		2,540			—			2,540			—
Acceleration of stock compensation		2,376			—			2,376			—
Net gain on cross-currency interest rate swaps²		(27,481	)		—			(27,481	)		—
Merger and divestiture transaction costs														—			16,922			—			16,922
Total non-U.S. GAAP adjustments		(1,793	)		7,035			39,509			23,159			—			16,922			—			41,302
Adjusted EBITDA (Non-U.S. GAAP)	$	83,689		$	142,769		$	376,016		$	408,767		$	118,932		$	165,426		$	208,004		$	292,327

The use of these non-U.S. GAAP financial measures is not intended to be considered in isolation of, or as a substitute for, the financial information prepared and presented in accordance with U.S. GAAP. As adjusted net earnings, adjusted net earnings per share, ~~adjusted~~ Industrial segment earnings excluding the disposal group, EBIT, adjusted EBIT, EBITDA, and adjusted EBITDA exclude certain financial information compared with net earnings, the most comparable U.S. GAAP financial measure, users of this financial information should consider the information that is excluded. Our calculations of adjusted net earnings, adjusted net earnings per share, ~~adjusted~~ Industrial segment earnings excluding the disposal group, EBIT, adjusted EBIT, EBITDA, and adjusted EBITDA may differ from similarly titled measures used by other companies, limiting their usefulness as comparative measures.

Management uses free cash flow, which is defined by the Company as net cash flows provided by operating activities less payments for property, plant and equipment, in reviewing the financial performance of and cash generation by 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, investing in research and development, purchasing our common stock, and paying dividends. In addition, securities analysts, investors, and others frequently use free cash flow in their evaluation of companies.

Adjusted free cash flow represents a further non-U.S. GAAP adjustment to free cash flow the prior year period to include cash proceeds received from the sale of real property located at our former operations in Duarte, California and exclude cash paid for merger and divestiture related transaction ~~costs, cash paid for restructuring costs, and excluding cash proceeds received on settlement of our cross-currency interest rate swaps.~~costs. Management believes that by including or excluding these items, as applicable, in free cash flow it better portrays the cash impact from our fiscal year 2018 decision to relocate our Duarte, California operations to the renovated Drake Campus in Fort Collins, Colorado and excludes the infrequent or unusual cash payments for merger and divestiture transaction costs, ~~restructuring charges, and proceeds from settlement of certain derivative instruments,~~ which are not indicative of the Company’s operating performance for the period.

The use of these non-U.S. GAAP financial measures is not intended to be considered in isolation of, or as substitutes for, the financial information prepared and presented in accordance with U.S. GAAP. Free cash flow and adjusted free cash flow do not necessarily represent funds available for discretionary use and is not necessarily a measure of our ability to fund our cash needs. Our calculation of free cash flow and adjusted free cash flow may differ from similarly titled measures used by other companies, limiting their usefulness as a comparative measure.

Free cash flow and adjusted free cash flow reconciled to net cash provided by operating activities ~~for the nine-months ended June 30, 2020 and 2019~~ were as follows:

	Nine-Months Ended						Six-Months Ended March 31,
	2020			2019			2021			2020
Net cash provided by operating activities (U.S. GAAP)	$	212,416		$	219,202		$	218,997		$	52,179
Payments for property, plant and equipment		(39,072	)		(77,905	)		(13,313	)		(29,361	)
Free cash flow (Non-U.S. GAAP)		173,344			141,297			205,684			22,818
Cash proceeds from the sale of the Duarte facility		18,767			—			—			18,767
Cash paid for merger and divestiture transaction costs		17,624			—			—			13,074
Cash paid for restructuring charges		14,052			—
Net cash proceeds from cross-currency interest rate swaps		(55,191	)		—
Adjusted free cash flow (Non-U.S. GAAP)	$	168,596		$	141,297		$	205,684		$	54,659

The preparation of financial statements and related disclosures in conformity with U.S. GAAP requires us to make judgments, assumptions and estimates that affect the amounts reported in the Condensed Consolidated Financial Statements and accompanying notes. Note 1, Operations and summary of significant accounting policies, to the Consolidated Financial Statements in our most recent Form 10-K, describes the significant accounting policies and methods used in the preparation of the Consolidated Financial Statements. Our critical accounting estimates, identified in Management’s Discussion and Analysis of Financial Condition and Results of Operations in Part II, Item 7 of our most recent Form 10-K, include the discussion of estimates used for revenue recognition, ~~purchase accounting,~~ inventory valuation, ~~depreciation and amortization,~~ reviews for impairment of goodwill and other long-lived assets, postretirement benefit obligations, and our provision for income taxes. Such accounting policies and estimates require significant judgments and assumptions to be used in the preparation of the Condensed Consolidated Financial Statements included in this Form 10-Q, and actual results could differ materially from the amounts reported.

From time to time, the FASB or other standards-setting bodies issue new accounting pronouncements. Updates to the FASB Accounting Standards Codification are communicated through issuance of an Accounting Standards Update.

To understand the impact of recently issued guidance, whether adopted or to be adopted, please review the information provided in Note 2, New accounting standards ~~and Note 5,~~ ~~Leases~~, in the Notes to the Condensed Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q. Unless otherwise discussed, we believe that the impact of recently issued guidance, whether adopted or to be adopted in the future, is not expected to have a material impact on our Condensed Consolidated Financial Statements upon adoption.

As of ~~June 30, 2020,~~March 31, 2021, we did not have any off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of Regulation S-K promulgated by the SEC, that have or are reasonably likely to have a current or future effect on our financial condition, changes in our financial condition, revenues, or expenses, results of operations, liquidity, capital expenditures, or capital resources, that are material to investors.

In the normal course of business, we have exposures to interest rate risk from our long-term and short-term debt and our postretirement benefit plans, and foreign currency exchange rate risk related to our foreign operations and foreign currency transactions. We are also exposed to various market risks that arise from transactions entered into in the normal course of business related to items such as the cost of raw materials and changes in inflation. Certain contractual relationships with customers and vendors mitigate risks from changes in raw material costs and foreign currency exchange rate changes that arise from normal purchasing and normal sales activities.

These market risks are discussed more fully in “Quantitative and Qualitative Disclosures About Market Risk” in Part II, Item 7A of our most recent Form 10-K. ~~Except for the broad effects of the COVID-19 pandemic and the subsequent negative impact on the global economy and major financial markets, these~~These market risks have not materially changed since the date our most recent Form 10-K was filed with the SEC.

We have established disclosure controls and procedures, which are designed to ensure that information required to be disclosed in reports filed or submitted under the Securities Exchange Act of 1934, as amended (the “Act”) is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. These disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in the reports that we file or submit under the Act is accumulated and communicated to management, including our Principal Executive Officer (Thomas A. Gendron, Chairman of the Board, Chief Executive Officer and President) and Principal Financial and Accounting Officer (Robert F. Weber, Jr., Vice Chairman and Chief Financial Officer), as appropriate, to allow timely decisions regarding required disclosures.

Thomas A. Gendron and Robert F. Weber, Jr., evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act), as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on their evaluations, they concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of ~~June 30, 2020.~~March 31, 2021.

During the quarterly period ended December 31, 2019, we adopted the new lease guidance of ASC 842. We designed new business policies and procedures to assist in the adoption and ongoing application of the new guidance, provided training, and designed and applied new internal controls related to impacted accounting and disclosures. There have not been any ~~other~~ significant changes in our internal controls over financial reporting during the quarter ended ~~June 30, 2020~~March 31, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

While the outcome of pending claims, legal and regulatory proceedings, and investigations cannot be predicted with certainty, management believes that any liabilities that may result from these claims, proceedings and investigations will not have a material effect on Woodward's liquidity, financial condition, or results of operations.

Investment in our securities involves risk. ~~In addition to the risk factor identified below, an~~An investor or potential investor should consider the risks summarized under the caption “Risk ~~Factors”~~Factors:” in Part I, Item 1A of our most recent Form 10-K ~~and our Form 10-Q for the quarter ended December 31, 2019~~ when making investment decisions regarding our securities. ~~There have been no material changes in the Company’s~~The risk factors ~~from the aforementioned~~that were disclosed in our most recent Form 10-K ~~except as set forth in~~have not materially changed since the ~~below risk factor and that, due to the termination of the Merger Agreement, the risk factors set forth in the~~date our most recent Form ~~10-Q for the quarter ended December 31, 2019 under “Risks Relating to the Proposed Merger with Hexcel” are no longer applicable.~~

The recent global COVID-19 pandemic has led to significant volatility in financial, commodities (including oil and gas) and other markets and industries (including the aviation industry) and has negatively affected the business and results of operations for the Company. We are unable to predict the extent to which the pandemic and related impacts will continue to adversely affect our business operations, financial performance, results of operations, financial position and the achievement of our strategic objectives.

In March 2020, the World Health Organization declared COVID-19 to be a global pandemic. The pandemic has led to significant volatility in financial, commodities (including oil and gas) and other markets and industries (including the aviation industry) and has negatively affected the business and results of operations for the Company. We have taken steps to align our business10-K was filed with the unfavorable economic conditions, including the implementation of enhanced measures through our operations management teams and global supply chain to ensure the Company is efficiently utilizing inventory on hand, as well as our internal processing capabilities. In addition, the Company has implemented staff reductions, reduction in employee hours, furloughs, and/or temporary layoffs, at many of its various locations. Given the ongoing and dynamic nature of the circumstances, it is difficult to predict the impact of the COVID-19 pandemic on our business, and there is no guarantee that efforts by the Company to address the adverse impacts of COVID-19 will be effective.

We serve international markets through manufacturing facilities, sales offices and representatives located in the Americas, Asia Pacific, Europe, and India and we rely on third-party suppliers in those areas. Outbreaks of COVID-19 in various regions have resulted in the extended shutdown of certain businesses in these regions, which has resulted in disruptions or delays to our supply chain. These include disruptions from the temporary closure of third-party suppliers, interruptions in product supply and restrictions on the export or shipment of our products. Furthermore, performance delays or interruptions, payment defaults or bankruptcies of our third-party suppliers have adversely affected our business.

The significant disruption or default by our suppliers has adversely impacted our sales and operating results, and we are unable to predict the magnitude of such impact. In addition, the pandemic has resulted in a widespread health crisis which has adversely affect the global economy, resulting in an economic downturn that has impacted demand for the products and services we provide, which may continue until the COVID-19 pandemic is contained.

We are heavily dependent on net sales to customers in the commercial aerospace industry. Approximately 65% of Woodward’s net sales for its fiscal year ended September 30, 2019 were derived from sales to customers in the aerospace industry, with 24% of such sales from Boeing. Actions by US federal, state and foreign governments to address the pandemic, including lockdowns, quarantines, border controls, travel restrictions and business venue closures, as well as changes in the propensity for the general public to travel by air, have had and are expected to continue to have, a significant adverse effect on the commercial aircraft markets and the demand for the products and services we provide. Furthermore, payment deferrals or defaults or bankruptcy of our customers may adversely affect our business, and may lead to additional charges, impairments and other adverse financial impacts.

In addition, the COVID-19 pandemic and resulting market volatility could result in significant effects on our liquidity, which could adversely affect our ability to remain in compliance with our debt covenants, satisfy our debt obligations, declare dividends or other distributions, and conduct share buybacks. Conditions in the financial and credit markets may also limit the availability of funding or increase the cost of funding, which could adversely affect our business, financial position and results of operations.

The ultimate impact of the COVID-19 pandemic on our operations and financial performance will depend on many factors that are not within our control, including, but not limited, to: governmental, business and individuals’ actions that have been and continue to be taken in response to the pandemic (including restrictions on travel and transport and workforce pressures); the impact of the pandemic and actions taken in response on global and regional economies, travel, and economic activity; the availability of federal, state, local or non-U.S. funding programs; general economic uncertainty in key global markets and financial market volatility; global economic conditions and levels of economic growth; and the pace of recovery when the COVID-19 pandemic subsides.SEC.

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Delaware	~~36-1984010~~
	36-1984010
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

1081 Woodward Way, Fort Collins, Colorado		80524

(Address of principal executive offices)		(Zip Code)

Title of each class	Trading Symbol(s)	Name of each exchange on which registered

Common Stock, par value $0.001455 per share	WWD	NASDAQ Global Select Market

		Page
PART I – FINANCIAL INFORMATION
Item 1.	Financial Statements	21
	Condensed Consolidated Statements of Earnings	21
	Condensed Consolidated Statements of Comprehensive Earnings	32
	Condensed Consolidated Balance Sheets	43
	Condensed Consolidated Statements of Cash Flows	54
	Condensed Consolidated Statements of Stockholders’ Equity	65
	Notes to Condensed Consolidated Financial Statements	87
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	4031
	Forward Looking Statements	4031
	Overview	4132
	Results of Operations	4334
	Liquidity and Capital Resources	4939
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	5845
Item 4.	Controls and Procedures	5845
PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	5845
Item 1A.	Risk Factors	5845
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	6046
Item 6.	Exhibits	6046
	Signatures	6147

	Three-Months Ended			Six-Months Ended
	March 31, 2021			March 31, 2021
Balance, beginning	$	7,499		$	8,359
Additions charged to costs and expenses, or sales allowance		1,040			1,128
Deductions		(837	)		(2,008	)
Other (deductions) additions¹		(180	)		43
Balance, ending	$	7,522		$	7,522

	Three-Months Ended June 30, 2020						Three-Months Ended June 30, 2019
	Aerospace		Industrial		Consolidated		Aerospace		Industrial		Consolidated
United States	$	245,347	$	48,600	$	293,947	$	386,136	$	53,380	$	439,516
Germany		5,348		40,753		46,101		18,319		50,943		69,262
Europe, excluding Germany		17,675		49,500		67,175		42,849		66,936		109,785
China		9,018		47,592		56,610		11,506		40,119		51,625
Asia, excluding China		4,438		24,934		29,372		7,402		33,737		41,139
Other countries		24,668		5,953		30,621		32,563		8,115		40,678
Total net sales	$	306,494	$	217,332	$	523,826	$	498,775	$	253,230	$	752,005

		Customer
Aerospace		The Boeing Company, General Electric Company, Raytheon ~~Company~~Technologies
Industrial		Rolls-Royce PLC, Weichai Westport, General Electric Company

	~~June 30, 2020~~
~~Weighted average remaining lease term~~
~~Operating leases~~	~~5.8 years~~
~~Finance leases~~	~~2.2 years~~
~~Weighted average discount rate~~
~~Operating leases~~		~~3.2~~	%
~~Finance leases~~		~~3.0~~	%

Retirement pension benefits:
United States	$	—
United Kingdom		34328
Japan		—
Germany		~~330~~385
Other postretirement benefits		~~1,865~~2,135

	Number		Weighted-Average Exercise Price		Weighted-Average Remaining Life in Years		Aggregate Intrinsic Value
Options outstanding		5,777	$	60.31		6.0	$	118,997
Options vested and exercisable		3,686		47.95		4.6		110,112
Options vested and expected to vest		5,678		59.95		5.9		118,261

	Number of options		Weighted-Average Exercise Price		Weighted-Average Remaining Life in Years		Aggregate Intrinsic Value
Options outstanding		5,517	$	67.50		6.4	$	293,200
Options vested and exercisable		3,423		58.05		5.1		214,223
Options vested and expected to vest		5,425		67.25		6.4		289,632

Issuer Purchases of Equity Securities (In thousands, except for shares and per share amounts)	Total Number of Shares Purchased		Weighted Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1)		Maximum Number (or Approximate Dollar Value) of Shares that may yet be Purchased under the Plans or Programs at Period End (1)
April 1, 2020 through April 30, 2020		63	$	60.56		—	$	486,654
May 1, 2020 through May 31, 2020 (2)		302		68.58		—		486,654
June 1, 2020 through June 30, 2020 (2)		47		77.55		—		486,654

	Exhibit Number	Description
	~~3.1~~10.1	~~Certificate of Designation of Rights, Preferences~~Amended and ~~Privileges of Series B Participating Preferred Stock~~
	~~4.1~~	~~Preferred Stock Rights Agreement, dated as of April 5, 2020, by and between~~Restated Woodward, Inc. ~~and American Stock Transfer & Trust Company, LLC, as rights agent~~Incentive Plan (incorporated by reference to the Company’s Current Report on Form 8-K, filed with the SEC on February 2, 2021)
*	31.1	Rule 13a-14(a)/15d-14(a) certification of Thomas A. Gendron
*	31.2	Rule 13a-14(a)/15d-14(a) certification of Robert F. Weber, Jr.
*	32.1	Section 1350 certifications
*	101	The following financial statements from the Company’s Quarterly Report on Form 10-Q for the quarter ended ~~June 30, 2020,~~March 31, 2021, formatted in Inline XBRL: (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Earnings, (iii) Condensed Consolidated Statements of Comprehensive Earnings, (iv) Condensed Consolidated Statements of Cash Flows, (v) Condensed Consolidated Statements of Stockholders’ Equity, and (vi) Notes to Condensed Consolidated Financial Statements.
*	104	Cover page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)


		WOODWARD, INC.
Date: ~~August 10, 2020~~May 4, 2021		/s/ Thomas A. Gendron
		Thomas A. Gendron
		Chairman of the Board, Chief Executive Officer, and President (on behalf of the registrant and as the registrant’s Principal Executive Officer)

Date: ~~August 10, 2020~~May 4, 2021		/s/ Robert F. Weber, Jr.
		Robert F. Weber, Jr.
		Vice Chairman and Chief Financial Officer (on behalf of the registrant and as the registrant’s Principal Financial and Accounting Officer)