UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934

WOODWARD GOVERNOR COMPANY

(Exact name of registrant as specified in its charter)

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

1000 East Drake Road, Fort Collins, Colorado		80525
(Address of principal executive offices)		(Zip Code)

Title of each class:		Name of each exchange on which registered:
Common stock, par value $0.001455 per share		The NASDAQ Global Select Market

Securities registered pursuant to Section 12(g) of the Act:
None

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes o No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definitions of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer þ		Accelerated filer o		Non-accelerated filer o		Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No þ

As of April 20, 2010, 68,474,778 shares of the common stock with a par value of $0.001455 per share were outstanding.

 

 

TABLE OF CONTENTS

		Page
PART I — FINANCIAL INFORMATION
Item 1. Financial Statements			3
Condensed Consolidated Statements of Earnings			3
Condensed Consolidated Balance Sheets			4
Condensed Consolidated Statements of Cash Flows			5
Condensed Consolidated Statements of Stockholders’ Equity			6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			37
Forward Looking Statements			37
Overview			38
Results of Operations			42
Financial Condition, Liquidity, and Capital Resources			48
Item 3. Quantitative and Qualitative Disclosures About Market Risk			56
Item 4. Controls and Procedures			56
PART II — OTHER INFORMATION
Item 1. Legal Proceedings			57
Item 1A. Risk Factors			57
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			58
Item 4. Other information			59
Item 6. Exhibits			59
Signatures			60
Exhibit 31.1
Exhibit 31.2
Exhibit 32.1

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

WOODWARD GOVERNOR COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except per share amounts)
(Unaudited)

		Three Months Ended								Six Months Ended
		March 31,								March 31,
		2010				2009				2010				2009
						(as recast, Note 2)								(as recast, Note 2)
Net sales		$	349,352			$	334,661			$	688,660			$	679,405
Costs and expenses:
Cost of goods sold			244,316				235,539				483,868				479,825
Selling, general and administrative expenses			34,130				29,093				66,965				61,553
Research and development costs			19,698				18,796				38,012				37,880
Amortization of intangible assets			8,655				5,055				17,836				9,883
Restructuring and other charges			—				15,159				—				15,159
Interest expense			7,324				6,707				15,575				13,244
Interest income			(120	)			(221	)			(230	)			(883	)
Other income			(473	)			(338	)			(827	)			(369	)
Other expense			4				16				153				100
Total costs and expenses			313,534				309,806				621,352				616,392
Earnings before income taxes			35,818				24,855				67,308				63,013
Income taxes			(11,642	)			(6,333	)			(20,686	)			(17,388	)
Net earnings			24,176				18,522				46,622				45,625
Net earnings attributable to noncontrolling interests			(108	)			(48	)			(198	)			(87	)
Net earnings attributable to Woodward		$	24,068			$	18,474			$	46,424			$	45,538
Comprehensive Earnings (Note 19):
Comprehensive earnings attributable to Woodward		$	14,005			$	7,895			$	33,788			$	27,818
Comprehensive earnings (losses) attributable to noncontrolling interests			149				(33	)			281				(44	)
Comprehensive earnings		$	14,154			$	7,862			$	34,069			$	27,774
Earnings per share (Note 6):
Basic earnings per share attributable to Woodward		$	0.35			$	0.27			$	0.68			$	0.67
Diluted earnings per share attributable to Woodward		$	0.34			$	0.27			$	0.66			$	0.66
Weighted Average Common Shares Outstanding (Note 6):
Basic			68,436				67,824				68,398				67,810
Diluted			69,876				68,832				69,830				69,067
Cash dividends per share		$	0.060			$	0.060			$	0.120			$	0.120

See accompanying Notes to Consolidated Financial Statements.

WOODWARD GOVERNOR COMPANY

CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share amounts)
(Unaudited)

		March 31, 2010				September 30, 2009
						(as recast, Note 2)
ASSETS
Current assets:
Cash and cash equivalents		$	72,560			$	100,863
Accounts receivable, less allowance for losses of $2,283 and $2,660, respectively			195,837				209,626
Inventories			291,600				302,339
Income taxes receivable			13,196				16,302
Deferred income tax assets			38,054				45,413
Other current assets			22,612				21,701
Total current assets			633,859				696,244
Property, plant and equipment, net			196,899				208,885
Goodwill			437,928				442,802
Intangible assets, net			309,322				327,773
Deferred income tax assets			7,248				8,200
Other assets			13,082				12,518
Total assets		$	1,598,338			$	1,696,422
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Short-term borrowings		$	—			$	—
Current portion of long-term debt			18,522				45,569
Accounts payable			91,446				81,108
Income taxes payable			6,055				8,084
Accrued liabilities			103,950				127,317
Total current liabilities			219,973				262,078
Long-term debt, less current portion			445,137				526,771
Deferred income tax liabilities			83,130				86,048
Other liabilities			106,641				110,010
Total liabilities			854,881				984,907
Commitments and contingencies (Note 20)
Stockholders’ equity:
Preferred stock, par value $0.003 per share, 10,000 shares authorized, no shares issued			—				—
Common stock, par value $0.001455 per share, 150,000 share authorized, 72,960 shares issued and outstanding			106				106
Additional paid-in capital			77,428				73,197
Accumulated other comprehensive earnings (losses)			(2,507	)			10,129
Deferred compensation			4,715				4,904
Retained earnings			779,722				741,505
			859,464				829,841
Treasury stock at cost, 4,487 shares and 4,621 shares, respectively			(113,629	)			(115,478	)
Treasury stock held for deferred compensation, at cost, 365 shares and 389 shares, respectively			(4,715	)			(4,904	)
Total Woodward stockholders’ equity			741,120				709,459
Noncontrolling interest in consolidated subsidiary (Note 2)			2,337				2,056
Total stockholders’ equity			743,457				711,515
Total liabilities and stockholders’ equity		$	1,598,338			$	1,696,422

See accompanying Notes to Consolidated Financial Statements.

WOODWARD GOVERNOR COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)

		Six Months Ended March 31,
		2010				2009
						(as recast, Note 2)
Cash flows from operating activities
Net earnings		$	46,622			$	45,625
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization			37,994				28,358
Net loss on sales of assets			57				634
Stock-based compensation			3,883				3,145
Excess tax benefits from stock-based compensation			(541	)			(211	)
Deferred income taxes			7,528				6,810
Reclassification of unrealized losses on derivatives to earnings			141				72
Changes in operating assets and liabilities, net of business acquisitions:
Accounts receivable			10,517				9,376
Inventories			8,330				(12,999	)
Accounts payable and accrued liabilities			15,933				(28,318	)
Current income taxes			2,027				6,821
Other			(6,510	)			(7,487	)
Net cash provided by operating activities			125,981				51,826
Cash flows from investing activities:
Payments for purchases of property, plant and equipment			(14,136	)			(15,354	)
Proceeds from sales of property, plant and equipment			246				188
Business acquisitions, net of cash acquired			(25,000	)			(369,065	)
Proceeds from working capital adjustment on disposal of F&P product line			660				—
Net cash used in investing activities			(38,230	)			(384,231	)
Cash flows from financing activities:
Cash dividends paid			(8,207	)			(8,136	)
Proceeds from sales of treasury stock			1,655				888
Excess tax benefits from stock compensation			541				211
Proceeds from issuance of long-term debt			—				400,000
Borrowings on revolving lines of credit and short-term borrowings			32,715				31,853
Payments on revolving lines of credit and short-term borrowings			(32,715	)			(35,884	)
Payments of long-term debt			(108,569	)			(12,850	)
Payments of long-term debt assumed in MPC acquisition			—				(18,610	)
Payment for cash flow hedge			—				(1,308	)
Debt issuance costs			—				(3,081	)
Net cash provided by (used in) financing activities			(114,580	)			353,083
Effect of exchange rate changes on cash and cash equivalents			(1,474	)			(3,638	)
Net change in cash and cash equivalents			(28,303	)			17,040
Cash and cash equivalents at beginning of period			100,863				109,833
Cash and cash equivalents at end of period		$	72,560			$	126,873

See accompanying Notes to Consolidated Financial Statements.

WOODWARD GOVERNOR COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In thousands)
(Unaudited)

		Stockholders’ equity attributable to Woodward
										Accumu-																Treasury				Noncon-
										lated																stock				trolling
										other																held for				interest in
						Additional				compre-				Deferred								Treasury				deferred				consol-
		Common				paid-in				hensive				compen-				Retained				stock at				compen-				idated
		stock				capital				earnings				sation				earnings				cost				sation				subsidiary				Total
Balances as of September 30, 2009		$	106			$	73,197			$	10,129			$	4,904			$	741,505			$	(115,478	)		$	(4,904	)		$	2,056			$	711,515
Net earnings			—				—				—				—				46,424				—				—				198				46,622
Cash dividends			—				—				—				—				(8,207	)			—				—				—				(8,207	)
Sale of Treasury Stock			—				(215	)			—				—				—				1,809				—				—				1,594
Tax benefit attributable to exercise of stock options			—				541				—				—				—				—				—				—				541
Stock-based compensation			—				3,883				—				—				—				—				—				—				3,883
Purchase of stock by deferred compensation plan			—				22				—				119				—				40				(119	)			—				62
Distribution of stock from deferred compensation plan			—				—				—				(308	)			—				—				308				—				—
Foreign currency translation adjustments, net			—				—				(12,971	)			—				—				—				—				83				(12,888	)
Reclassification of unrecognized losses on derivatives to earnings, net			—				—				87				—				—				—				—				—				87
Minimum post-retirement benefits liability adjustments, net			—				—				248				—				—				—				—				—				248
Balances as of March 31, 2010		$	106			$	77,428			$	(2,507	)		$	4,715			$	779,722			$	(113,629	)		$	(4,715	)		$	2,337			$	743,457
Balances as of September 30, 2008		$	106			$	68,520			$	20,485			$	5,283			$	663,442			$	(122,759	)		$	(5,283	)		$	2,622			$	632,416
Net earnings			—				—				—				—				45,538				—				—				87				45,625
Cash dividends			—				—				—				—				(8,136	)			—				—				—				(8,136	)
Sale of Treasury Stock			—				(489	)			—				—				—				703				—				—				214
Tax benefit attributable to exercise of stock options			—				211				—				—				—				—				—				—				211
Stock-based compensation			—				3,145				—				—				—				—				—				—				3,145
Purchase of stock by deferred compensation plan			—				304				—				708				—				369				(708	)			—				673
Distribution of stock from deferred compensation plan			—				—				—				(862	)			—				—				862				—				—
Foreign currency translation adjustments, net			—				—				(17,162	)			—				—				—				—				(131	)			(17,293	)
Reclassification of unrecognized losses on derivatives to earnings, net			—				—				44				—				—				—				—				—				44
Payments for cash flow hedge, net of deferred tax			—				—				(811	)			—				—				—				—				—				(811	)
Minimum post-retirement benefits liability adjustments, net			—				—				209				—				—				—				—				—				209
Balances as of March 31, 2009		$	106			$	71,691			$	2,765			$	5,129			$	700,844			$	(121,687	)		$	(5,129	)		$	2,578			$	656,297

See accompanying Notes to Consolidated Financial Statements.

Woodward Governor Company
Note to Condensed Consolidated Financial Statements (Unaudited)
(Ammounts in thousands, except per share amounts)

Note 1. Basis of presentation and nature of operations

Basis of presentation

The Condensed Consolidated Financial Statements of Woodward Governor Company (“Woodward” or the “Company”) as of March 31, 2010 and for the three and six months ended March 31, 2010 and 2009, included herein, have not been audited by an independent registered public accounting firm. These Condensed Consolidated Financial Statements reflect all normal recurring adjustments which, in the opinion of management, are necessary to present fairly Woodward’s financial position as of March 31, 2010, and the results of operations and cash flows for the periods presented herein. The Condensed Consolidated Balance Sheet as of September 30, 2009 was derived from Woodward’s Annual Report on Form 10-K for the fiscal year ended September 30, 2009, adjusted to reflect the October 1, 2009 adoption of authoritative guidance relative to accounting and reporting standards for the noncontrolling interest in a subsidiary and authoritative guidance relative to inclusion of participating securities in the calculation of earnings per share, as discussed in Note 2, New accounting standards. The results of operations for the three and six month periods ended March 31, 2010 are not necessarily indicative of the operating results to be expected for other interim periods or for the full fiscal year. Dollar amounts contained in these Condensed Consolidated Financial Statements are in thousands, except per share amounts.

The Condensed Consolidated Financial Statements included herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). 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 unaudited Condensed Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and Notes thereto included in Woodward’s Annual Report on Form 10-K for the fiscal year ended September 30, 2009 and other financial information filed with the SEC.

Management is required to use estimates and assumptions that affect the reported amount of assets and liabilities at the date of the financial statements and the reported revenues and expenses recognized during the reporting period, and certain financial statement disclosures, in the preparation of the Condensed Consolidated Financial Statements. Significant estimates in these Condensed Consolidated Financial Statements include allowances for doubtful accounts, net realizable value of inventories, percent complete on long-term contracts, cost of sales incentives, useful lives of property and identifiable intangible assets, the evaluation of impairments of property, identifiable intangible assets and goodwill, income tax and valuation reserves, the valuation of assets and liabilities acquired in business combinations, 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, and contingencies. Actual results could vary materially from Woodward’s estimates.

Nature of operations

Woodward is an independent designer, manufacturer, and service provider of energy control and optimization solutions for commercial and military aircraft and ground vehicles, turbines, reciprocating engines, and electrical power system equipment. Woodward’s innovative fluid energy, combustion control, electrical energy and motion control systems help customers offer cleaner, more reliable and more cost-effective equipment. Leading original equipment manufacturers use Woodward’s products and services in the aerospace, power generation and distribution and transportation markets.

Woodward has four operating business segments — Turbine Systems, Airframe Systems, Electrical Power Systems and Engine Systems:

•

Turbine Systems develops and manufactures systems and components that provide energy control and optimization solutions for aircraft propulsion applications, including fuel and combustion systems for turbine engines, as well as industrial gas and steam turbine markets.

•

Airframe Systems develops and manufactures high-performance cockpit, electromechanical and hydraulic motion control systems, and mission-critical actuation systems and controls for weapons, aircraft, turbine engines and combat vehicles, primarily for aerospace and military applications.

•

Electrical Power Systems develops and manufactures systems and components that provide power sensing and energy control systems that improve the security, quality, reliability and availability of electrical power networks for industrial markets, which include the power generation, power distribution and power conversion industries.

•

Engine Systems develops and manufactures systems and components that provide energy control and optimization solutions for the industrial engine markets, which include the power generation, transportation and process industries.

Woodward Governor Company
Notes to Condensed Consolidated Financial
Statements — (Continued)

On April 3, 2009, Woodward acquired all of the outstanding capital stock of HR Textron Inc. from Textron Inc., its parent company, and the United Kingdom assets and certain liabilities related to HR Textron Inc.’s business (collectively “HRT”). HR Textron Inc. became a wholly owned subsidiary of Woodward and was renamed Woodward HRT, Inc. following the consummation of the acquisition. HRT has been integrated into Woodward within its Airframe Systems business segment.

On August 10, 2009, Woodward HRT sold the Fuel and Pneumatics product line (the “F&P product line”) originally acquired by Woodward in April 2009 as part of the HRT acquisition.

Additional information about the acquisition of HRT and the sale of the F&P product line is included in Note 4, Business acquisitions and dispositions.

To provide better focus and alignment of its business segment operations, Woodward moved the development and manufacture of systems and components for steam turbine markets from Engine Systems to Turbine Systems in the fourth quarter of fiscal 2009. All segment information for the three and six month periods ended March 31, 2009 has been recast to reflect the realigned segment structure.

Note 2. New accounting standards

Accounting changes and recently adopted accounting standards

In September 2006, the Financial Accounting Standards Board (“FASB”) issued authoritative guidance which defines fair value, establishes a framework for measuring fair value, and requires additional disclosures about a company’s financial and nonfinancial assets and liabilities that are measured at fair value. In February 2008, the FASB issued authoritative guidance which delayed the effective date of this guidance for nonfinancial assets and liabilities, except for items that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually), to fiscal years, and interim periods within those fiscal years, beginning after November 15, 2008. On October 1, 2008, Woodward adopted the measurement and disclosure impact of this guidance with respect to financial assets and liabilities. On October 1, 2009, Woodward adopted the measurement and disclosure of fair value with respect to non-financial assets and liabilities. This guidance did not change existing guidance on whether or not an instrument is carried at fair value. The adoption had no impact on Woodward’s financial position and results of operations and required no additional disclosures in these Condensed Consolidated Financial Statements.

In November 2007, the FASB issued authoritative guidance to address accounting for collaborative arrangement activities that are conducted without the creation of a separate legal entity for the arrangement. Revenues and costs incurred with third parties in connection with the collaborative arrangement should be presented gross or net by the collaborators pursuant to pre-existing accounting standards. Payments to or from collaborators should be presented in the income statement based on the nature of the arrangement, the nature of the company’s business and whether the payments are within the scope of other accounting literature. Other detailed information related to the collaborative arrangement is also required to be disclosed. The requirements under this guidance must be applied to collaborative arrangements in existence at the beginning of Woodward’s fiscal 2010 using a modified version of retrospective application. Woodward is currently not a party to significant collaborative arrangement activities, as defined by this guidance, and therefore, the adoption of this guidance had no impact on its Condensed Consolidated Financial Statements.

In December 2007, the FASB issued authoritative guidance to affirm that the acquisition method of accounting (previously referred to as the purchase method) be used for all business combinations and for an acquirer to be identified for each business combination. This guidance defines the acquirer as the entity that obtains control of one or more businesses in the business combination and establishes the acquisition date as the date that the acquirer achieves control. Among other requirements, this guidance requires the acquiring entity in a business combination to recognize the identifiable assets acquired, liabilities assumed and any noncontrolling interest in the acquiree at their acquisition-date fair values, and with limited exceptions, acquisition-related costs will generally be expensed as incurred. This guidance requires certain financial statement disclosures to enable users to evaluate and understand the nature and financial effects of the business combination. This guidance must be applied prospectively to business combinations that are consummated on or after October 1, 2009. Accordingly, Woodward will record and disclose business combinations under the revised standard for any transactions consummated on or after October 1, 2009. In addition, adjustments of certain income tax balances related to acquired deferred assets, including those acquired prior to the adoption of this new authoritative guidance, will be reported as an increase or decrease to income tax expense. Accordingly, Woodward has recorded adjustments of certain income tax balances under the revised authoritative guidance beginning October 1, 2009.

Woodward Governor Company
Notes to Condensed Consolidated Financial
Statements — (Continued)

In December 2007, the FASB issued authoritative guidance to establish accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. Among other requirements, this guidance clarifies that a noncontrolling interest in a subsidiary, which is sometimes referred to as minority interest, is to be reported in the Condensed Consolidated Balance Sheets within stockholders’ equity, but separate from the parent’s stockholders’ equity. This guidance also requires consolidated net earnings and comprehensive earnings to include the amounts attributable to both the parent and the noncontrolling interest. Woodward adopted this guidance effective October 1, 2009. This guidance must be applied prospectively for fiscal years, and interim periods within those fiscal years, beginning in fiscal 2010, except for the presentation and disclosure requirements, which have been applied retrospectively for all periods presented. Accordingly, the following have been retrospectively adjusted: the Condensed Consolidated Statement of Earnings for the three and six months ended March 31, 2009, the Condensed Consolidated Balance Sheet as of September 30, 2009, the Condensed Consolidated Statement of Cash Flows for the six months ended March 31, 2009, the Condensed Consolidated Statement of Stockholders’ Equity for the six months ended March 31, 2009, accumulated other comprehensive earnings for the six months ended March 31, 2009 as presented in Note 18, Accumulated other comprehensive earnings, and total comprehensive earnings for the three and six months ended March 31, 2009 as presented in Note 19, Total comprehensive earnings. In accordance with the authoritative guidance, Woodward’s Consolidated Financial Statements have been recast from amounts previously reported as follows:

		As of September 30,
		2009								2008								2007
		As previously								As previously								As previously
		reported				As recast				reported				As recast				reported				As recast
Balance Sheet:
Total assets		$	1,696,422			$	1,696,422			$	927,017			$	927,017			$	829,767			$	829,767
Total liabilities		$	987,184			$	984,907			$	297,389			$	294,601			$	285,336			$	282,554
Total stockholders’ equity			709,238				711,515				629,628				632,416				544,431				547,213
Total liabilities and stockholders’ equity		$	1,696,422			$	1,696,422			$	927,017			$	927,017			$	829,767			$	829,767
Statements of stockholders’ equity:
Preferred stock		$	—			$	—			$	—			$	—			$	—			$	—
Common stock			106				106				106				106				106				106
Additional paid-in capital			73,197				73,197				68,520				68,520				48,641				48,641
Accumulated other comprehensive earnings			9,908				10,129				20,319				20,485				23,010				22,892
Deferred compensation			4,904				4,904				5,283				5,283				4,752				4,752
Retained earnings			741,505				741,505				663,442				663,442				565,136				565,136
Treasury Stock			(120,382	)			(120,382	)			(128,042	)			(128,042	)			(97,214	)			(97,214	)
Total Woodward stockholders’ equity			709,238				709,459				629,628				629,794				544,431				544,313
Noncontrolling interest in consolidated subsidiary			—				2,056				—				2,622				—				2,900
Total stockholders’ equity		$	709,238			$	711,515			$	629,628			$	632,416			$	544,431			$	547,213

Woodward Governor Company
Notes to Condensed Consolidated Financial
Statements — (Continued)

		For the year ended September 30,
		2009								2008								2007
		As previously								As previously								As previously
		reported				As recast				reported				As recast				reported				As recast
Statements of Earnings:
Net sales		$	1,430,125			$	1,430,125			$	1,258,204			$	1,258,204			$	1,042,337			$	1,042,337
Total costs and expenses			1,307,713				1,307,649				1,076,294				1,075,619				910,349				909,657
Earnings before income taxes			122,412				122,476				181,910				182,585				131,988				132,680
Income taxes			(28,060	)			(28,060	)			(60,030	)			(60,030	)			(33,831	)			(33,831	)
Net earnings			94,352				94,416				121,880				122,555				98,157				98,849
Net earnings attributable to noncontrolling interests			—				(64	)			—				(675	)			—				(692	)
Net earnings attributable to Woodward		$	94,352			$	94,352			$	121,880			$	121,880			$	98,157			$	98,157
Comprehensive earnings attributable to Woodward		$	83,941			$	83,996			$	119,189			$	119,473			$	109,528			$	109,319
Comp. earnings attributable to noncontrolling interests			—				9				—				391				—				901
Comprehensive earnings		$	83,941			$	84,005			$	119,189			$	119,864			$	109,528			$	110,220
Earnings per share attributable to Woodward:
Basic		$	1.39			$	1.39			$	1.80			$	1.80			$	1.43			$	1.43
Diluted		$	1.37			$	1.37			$	1.75			$	1.75			$	1.39			$	1.39
Statements of cash flows:
Cash flows provided by operating activities		$	218,652			$	218,652			$	125,354			$	125,354			$	117,718			$	117,718
Cash used in investing activities			(714,130	)			(714,130	)			(35,909	)			(35,909	)			(67,048	)			(67,048	)
Cash provided by (used in) financing activities			487,940				487,940				(48,904	)			(48,904	)			(66,496	)			(66,496	)
Effect of exchange rate changes on cash and cash equivalents			(1,432	)			(1,432	)			(2,343	)			(2,343	)			3,743				3,743
Net change in cash and cash equivalents		$	(8,970	)		$	(8,970	)		$	38,198			$	38,198			$	(12,083	)		$	(12,083	)

In April 2008, the FASB issued authoritative guidance to amend the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset and to require additional disclosures. The guidance for determining useful lives must be applied prospectively to intangible assets acquired after the effective date. The disclosure requirements must be applied prospectively to all intangible assets recognized as of the effective date. Woodward adopted this guidance as of October 1, 2009. The adoption of this guidance had no impact on its Condensed Consolidated Financial Statements.

In November 2008, the FASB issued authoritative guidance regarding the accounting for defensive intangible assets. Defensive intangible assets are assets acquired in a business combination that the acquirer (a) does not intend to use or (b) intends to use in a way other than the assets’ highest and best use as determined by an evaluation of market participant assumptions. While defensive intangible assets are not being actively used, they are likely contributing to an increase in the value of other assets owned by the acquiring entity. This guidance requires defensive intangible assets to be accounted for as separate units of accounting at the time of acquisition and the useful life of such assets to be based on the period over which the assets will directly or indirectly affect the entity’s cash flows. Woodward will record and disclose defensive intangible assets under the revised standard for transactions consummated, if any, on or after October 1, 2009.

In November 2008, the FASB issued authoritative guidance addressing whether securities granted in share-based payment transactions are participating securities prior to vesting and, therefore, need to be included in the earnings allocation in computing earnings per share under the two class method. This guidance became effective for Woodward on October 1, 2009. Upon the adoption of this guidance, all outstanding restricted stock, which are participating securities, are considered in the calculation of both the basic and fully diluted earnings per share calculations in these Condensed Consolidated Financial Statements. The effects of this change are required to be applied retrospectively. Accordingly, the historical earnings per share presented in the Condensed Consolidated Statements of Earnings and in Note 6, Earnings per share have been recast to reflect the retrospective application of this guidance.

In April 2009, the FASB issued authoritative guidance to require that assets acquired and liabilities assumed in a business combination that arise from contingencies be recognized at fair value if fair value can be reasonably determined. If the fair value of such assets or liabilities cannot be reasonably determined, then they would generally be recognized in accordance with certain other pre-existing accounting standards. This guidance also amends the subsequent accounting for assets and liabilities arising from contingencies in a business combination and certain other disclosure requirements. This guidance became effective for assets or liabilities arising from contingencies in business combinations that are consummated on or after October 1, 2009. Accordingly, Woodward will record and disclose assets acquired and liabilities assumed in business combinations that arise from contingencies under the revised standard for any transactions consummated on or after October 1, 2009.

Woodward Governor Company
Notes to Condensed Consolidated Financial
Statements — (Continued)

Issued but not yet effective accounting standards:

In December 2008, the FASB issued authoritative guidance to require employers to provide additional disclosures about plan assets of a defined benefit pension or other postretirement plan. These disclosures should principally include information detailing investment policies and strategies, the major categories of plan assets, the inputs and valuation techniques used to measure the fair value of plan assets and an understanding of significant concentrations of risk within plan assets. The required disclosures must be provided for fiscal years ending after December 15, 2009 (Woodward’s fiscal 2010, the anticipated period of adoption). These disclosures will be presented in Woodward’s Consolidated Financial Statements for the year ended September 30, 2010. Upon initial application, this guidance is not required to be applied to earlier periods that are presented for comparative purposes. Woodward does not expect this guidance to have a significant impact on its September 30, 2010 Consolidated Financial Statements.

In June 2009, the FASB issued authoritative guidance to eliminate the exception to consolidate a qualifying special-purpose entity, change the approach to determining the primary beneficiary of a variable interest entity and require companies to more frequently re-assess whether they must consolidate variable interest entities. Under the new guidance, the primary beneficiary of a variable interest entity is identified qualitatively as the enterprise that has both (a) the power to direct the activities of a variable interest entity that most significantly impact the entity’s economic performance, and (b) the obligation to absorb losses of the entity that could potentially be significant to the variable interest entity or the right to receive benefits from the entity that could potentially be significant to the variable interest entity. This guidance becomes effective for Woodward’s fiscal year 2011 and interim reporting periods thereafter. Woodward does not expect this guidance to have a material impact on its Condensed Consolidated Financial Statements.

In June 2009, the FASB issued authoritative guidance to require an analysis to determine whether a variable interest gives the entity a controlling financial interest in a variable interest entity. This guidance requires an ongoing reassessment and eliminates the quantitative approach previously required for determining whether an entity is the primary beneficiary. This guidance will be effective for fiscal years beginning after November 15, 2009 (fiscal year 2011 for Woodward). Woodward is currently assessing the impact that this guidance may have on its Condensed Consolidated Financial Statements.

In October 2009, the FASB issued authoritative guidance that enables vendors to account for products or services sold to customers (deliverables) separately rather than as a combined unit, as was generally required by past guidance. The revised guidance provides for two significant changes to the existing multiple element revenue arrangements guidance. The first change, which will likely result in the requirement to separate more deliverables within an arrangement, relates to the determination of when the individual deliverables included in a multiple element arrangement may be treated as separate units of accounting. The second change modifies the manner in which the transaction consideration is allocated across the separately identified deliverables. Together, these changes are likely to result in earlier recognition of revenue and related costs for multiple-element arrangements than under previous guidance. This guidance also significantly expands the disclosures required for multiple-element revenue arrangements. This guidance is required to be adopted in fiscal years beginning on or after June 15, 2010 (fiscal year 2011 for Woodward). Woodward expects to adopt the guidance as of October 1, 2010. Woodward is currently assessing the impact this guidance may have on its Condensed Consolidated Financial Statements.

In October 2009, the FASB issued authoritative guidance that changes the accounting model for revenue arrangements that include both tangible products and software elements. The revised guidance provides that tangible products containing software components and nonsoftware components that function together to deliver the tangible product’s essential functionality are no longer within the scope of the software revenue guidance in Accounting Standards Codification (“ASC”) Subtopic 985-605. In addition, the guidance requires that hardware components of a tangible product containing software components always be excluded from the software revenue guidance. This guidance also significantly expands the disclosures required for multiple-element revenue arrangements. This guidance is required to be adopted in fiscal years beginning on or after June 15, 2010 (fiscal year 2011 for Woodward). Woodward is currently assessing the impact this guidance may have on its Condensed Consolidated Financial Statements.

Woodward Governor Company
Notes to Condensed Consolidated Financial
Statements — (Continued)

Note 3. Supplemental statements of cash flows information

Supplemental cash flow information follows:

		Six Months Ended
		March 31,
		2010				2009
Interest expense paid		$	15,609			$	5,699
Income taxes paid			17,285				8,887
Income tax refunds received			8,691				2,788
Non-cash investing activities:
Long-term debt assumed in business acquisition			—				18,610
Purchases of property, plant and equipment on account			629				899
Sales of assets on account			—				410

MPC Products Corporation (“MPC Products”), one of Woodward’s subsidiaries acquired in fiscal year 2009, was previously subject to an investigation by the Department of Justice (“DOJ”) regarding certain of its government contract pricing practices prior to June 2005. In fiscal 2010, MPC Products settled the criminal and civil claims related to the DOJ’s investigation and paid approximately $22,500 in compensation and a fine of $2,500. The purchase price Woodward paid in connection with the acquisition of MPC Products was reduced by $25,000 at the time of the acquisition, which represents the amounts discussed above. Payment of this amount during the six months ended March 31, 2010 is reflected as an investing activity in the Condensed Consolidated Statement of Cash Flows.

Note 4. Business acquisitions and dispositions

Woodward has recorded the HRT acquisition described below using the purchase method of accounting and, accordingly, has included the results of operations of the acquired business in its consolidated results as of the date of the acquisition. In accordance with authoritative accounting guidance for business combinations in effect during its fiscal year 2009, the purchase price for this acquisition is allocated to the tangible assets, liabilities, and intangible assets acquired based on their estimated fair values. The excess purchase price over the respective fair values of assets is recorded as goodwill. Goodwill is not amortized under U.S. GAAP but is tested for impairment at least annually (see Note 9, Goodwill). The goodwill resulting from the HRT acquisition is tax deductible.

HRT acquisition

On April 3, 2009, Woodward acquired all of the outstanding stock of HR Textron Inc. from Textron Inc., its parent company, and the United Kingdom assets and certain liabilities related to HR Textron Inc.’s business, for approximately $380,749.

HRT provides advanced technology, engineering development, and manufacturing of mission-critical actuation systems and controls for aircraft, turbine engines, weapons and combat vehicles. It is recognized for hydraulic and electric primary flight control actuation products, including electro-mechanical actuation systems for unmanned combat air vehicles and weapons, such as the Joint Direct Attack Munitions (“JDAM”) and the AIM-9X Sidewinder; hydraulic and electric flight controls for fixed and rotor wing aircraft; servovalves for global aerospace; and turret controls and stabilization systems for the U.S. M1 Abrams Main Battle Tank and other armored vehicles worldwide. HRT has been integrated into Woodward within its Airframe Systems business segment.

Woodward Governor Company
Notes to Condensed Consolidated Financial
Statements — (Continued)

The purchase price for the HRT acquisition is as follows:

Cash paid to owners		$	377,660
Cash acquired			(11	)
Direct transaction costs			3,100
Total purchase price		$	380,749

During the first six months of fiscal 2010, the estimated fair values of the acquired current assets were increased by $1,234, the accrued restructuring charges were increased by $1,834, and other the current liabilities were decreased by $2,660 to reflect updated estimates of fair values of assets acquired and liabilities assumed as of April 3, 2009.

The allocation of the purchase price to the assets acquired and liabilities assumed was finalized as of March 31, 2010. The following table summarizes estimated fair values of the assets acquired and liabilities assumed on April 3, 2009, the date of the HRT acquisition, including accrued restructuring charges:

Current assets		$	115,707
Property, plant, and equipment			41,926
Goodwill			142,699
Intangible assets			128,400
Other assets			13
Total assets acquired			428,745
Other current liabilities			19,515
Accrued restructuring charges			9,334
Postretirement benefits			13,077
Other noncurrent liabilities			6,070
Total liabilities assumed			47,996
Net assets acquired		$	380,749

A summary of the intangible assets acquired, weighted average useful lives and amortization methods follows:

Weighted

Average

Amortization

Amount

Useful Life

Method

Customer relationships

$

70,900

15 years

Accelerated

Process technology

29,000

15 years

Accelerated

Product software

4,200

20 years

Accelerated

Backlog

21,900

5 years

Accelerated

Favorable lease contracts

1,400

7 years

Straight Line

Non-compete agreements

1,000

3 years

Straight Line

Total

$

128,400

13 years

Accelerated amortization is calculated based on the pattern of estimated future economic benefits of the related intangible assets.

HRT’s favorable lease contracts relate to a facility that Woodward has determined will be vacated in late calendar year 2010, when the unamortized cost of the asset is expected to be $1,050. This amount is included in the accrued restructuring charges assumed in connection with the HRT acquisition.

Woodward made a 338(h)(10) election with the U.S. Internal Revenue Service, which allows the HRT acquisition to be treated as an asset purchase for income tax purposes. Accordingly, any deferred tax assets and liabilities recorded by Textron Inc. at the acquisition date are not available to Woodward because the election causes the HRT acquisition to be treated, for income tax purposes, as though Woodward did not purchase an ongoing business.

Woodward Governor Company
Notes to Condensed Consolidated Financial
Statements — (Continued)

In connection with the HRT acquisition, Woodward assumed certain defined benefit pension obligations contingent upon transfer of related pension plan assets. In September 2009, the trustee of the related Textron-sponsored defined benefit plan transferred $46,788 to the Woodward HRT Plan. An additional $1,019 was transferred by the Textron sponsored defined benefit plan to the Woodward HRT Plan in October 2009 and was recorded as a Woodward HRT Plan receivable as of September 30, 2009.

The results of HRT’s operations are included in Woodward’s Consolidated Statements of Earnings as of April 3, 2009.

On August 10, 2009, Woodward HRT sold the F&P product line for $48,000. During the quarter ended March 31, 2010, Woodward received an additional $660 related to working capital adjustments typical in such transactions. The F&P product line provided a variety of off-turbine fuel management and pneumatic actuation components to producers of military and commercial aircraft and helicopters, as well as their suppliers.

Pro forma results for Woodward giving effect to the HRT acquisition, excluding the F&P product line

The following unaudited pro forma financial information presents the combined results of operations of Woodward and HRT as if the acquisition had occurred as of the beginning of fiscal year 2009. The pro forma financial information is presented for informational purposes and is not indicative of the results of operations that would have been achieved if the acquisition and related borrowings had taken place at the beginning of fiscal year 2009. The unaudited pro forma financial information combines the historical results of Woodward with the historical results of HRT for that period but excludes the historical results of the F&P product line.

Prior to the HRT acquisition by Woodward, HRT was a wholly owned subsidiary of Textron Inc., and as such was not a stand-alone entity, for financial reporting purposes. Accordingly, the historical operating results of HRT may not be indicative of the results that might have been achieved, historically or in the future, if HRT had been a stand-alone entity. The unaudited pro forma results for the three and six month periods ended March 31, 2009 include amortization charges for acquired intangible assets, eliminations of intercompany transactions, adjustments for stock options issued, adjustments for depreciation expense for property, plant, and equipment, adjustments to interest expense, adjustments for estimated general and administrative costs for HRT’s historical management and administrative structure and functions, disposal of the F&P product line, and related tax effects.

The unaudited pro forma results for the three and six months ended March 31, 2009 compared to the actual results reported in these Condensed Consolidated Financial Statements follow:

		Three Months Ended								Six Months Ended
		March 31, 2009								March 31, 2009
		As reported				Pro forma				As reported				Pro forma
Revenue		$	334,661			$	385,260			$	679,405			$	791,269
Net earnings			18,522				16,850				45,625				44,924
Earnings per share:
Basic		$	0.27			$	0.25			$	0.67			$	0.66
Diluted			0.27				0.25				0.66				0.65

Note 5. Income taxes

U.S. GAAP requires that the interim period tax provision be determined as follows:

•

At the end of each quarter, Woodward estimates the tax that will be provided for the fiscal year stated as a percent of estimated “ordinary” income for the fiscal year. The term ordinary income refers to earnings from continuing operations before income taxes, excluding significant unusual or infrequently occurring items.

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

•

The tax effects of significant unusual or infrequently occurring items are recognized as discrete items in the interim period in which the events occur. The impact of changes in tax laws or rates on deferred tax amounts, the effects of changes in judgment about beginning of the year valuation allowances and changes in tax reserves resulting from the finalization of tax audits or reviews are examples of significant unusual or infrequently occurring items that are recognized as discrete items in the interim period in which the event occurs.

Woodward Governor Company
Notes to Condensed Consolidated Financial
Statements — (Continued)

The determination of the annual effective tax rate is based upon a number of significant estimates and judgments, including the estimated annual pretax income of Woodward in each tax jurisdiction in which it operates and the development of tax planning strategies during the year. 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, as well as other factors that cannot be predicted with certainty. As such, there can be significant volatility in interim tax provisions.

The following table sets out the tax expense and the effective tax rate for Woodward’s income from operations:

		Three Months Ended								Six Months Ended
		March 31,								March 31,
		2010				2009				2010				2009
Earnings before income taxes		$	35,818			$	24,855			$	67,308			$	63,013
Income tax expense			11,642				6,333				20,686				17,388
Effective tax rate			32.5	%			25.5	%			30.7	%			27.6	%

The effective tax rates in both the six months ended March 31, 2010 and the six months ended March 31, 2009 benefited from favorable resolutions of tax matters of $1,760 and $3,422, respectively.

The total amount of the gross liability for worldwide unrecognized tax benefits was $19,141 at March 31, 2010 and $19,783 at September 30, 2009.

The amounts of unrecognized tax benefits that would impact Woodward’s effective tax rate if recognized, net of expected offsetting benefits, were $15,461 at March 31, 2010 and $15,550 at September 30, 2009. At this time, Woodward estimates that it is reasonably possible that the liability for unrecognized tax benefits will decrease by as much as $3,460 in the next twelve months through completion of reviews by various worldwide tax authorities and completion of internal revaluation assessments.

Woodward recognizes interest and penalties related to unrecognized tax benefits in tax expense. Woodward had accrued interest and penalties of $4,475 as of March 31, 2010 and $3,804 as of September 30, 2009.

Woodward’s tax returns are audited by U.S., state, and foreign tax authorities and these audits are at various stages of completion at any given time. Fiscal years remaining open to examination in significant foreign jurisdictions include 2003 and forward. Woodward is subject to U.S. Federal income tax examinations for fiscal years 2006 and forward and is subject to U.S. state income tax examinations for fiscal years 2005 and forward.

The U.S. research tax credit expired as of December 31, 2009. The U.S. Congress is considering legislation to provide a one-year, retroactive extension, however as of March 31, 2010, the expired tax credit has not been reinstated. Accounting guidance requires Woodward to use the tax law in effect at the balance sheet date. Accordingly, the calculation of its fiscal 2010 income tax provision does not reflect any assumed benefit from the research tax credit for the nine months ended September 30, 2010. In the event that the research tax credit is enacted in some form in future periods, Woodward will account for that change in the tax law at that time.

Woodward does not expect the Patient Protection and Affordable Care Act to impact its income tax expense in fiscal 2010 or thereafter.

Note 6. Earnings per share

Basic earnings per share attributable to Woodward 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 attributable to Woodward reflects the weighted average number of shares outstanding after consideration of the dilutive effect of stock options.

In November 2008, the FASB issued authoritative guidance addressing whether securities granted in share-based payment transactions are participating securities prior to vesting and, thus, need to be included in the earnings allocation in computing earnings per share under the two class method. This guidance became effective for Woodward on October 1, 2009 and is required to be applied retrospectively. Upon the adoption of this guidance shares of restricted stock, which are participating securities, are considered in the calculation of both the basic and fully diluted earnings per share calculations. The March 31, 2009 historical earnings per share amounts presented below have been recast to reflect the retrospective application of this guidance for 70 shares of restricted stock outstanding as of March 31, 2009. The inclusion of this participating security did not impact previously reported basic and diluted earnings per share for the three and six month periods ended March 31, 2009, and there is no impact for the previously reported quarter ended June 30, 2009, nor for the fiscal years ended September 30, 2009, 2008 and 2007.

Woodward Governor Company
Notes to Condensed Consolidated Financial
Statements — (Continued)

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

		Three Months Ended								Six Months Ended
		March 31,								March 31,
		2010				2009				2010				2009
Numerator:
Net earnings attributable to Woodward		$	24,068			$	18,474			$	46,424			$	45,538
Denominator:
Basic			68,436				67,824				68,398				67,810
Assumed exercise of dilutive stock options			1,440				1,008				1,432				1,257
Diluted			69,876				68,832				69,830				69,067
Income per common share:
Basic earnings per share attribuable to Woodward		$	0.35			$	0.27			$	0.68			$	0.67
Diluted earnings per share attributable to Woodward		$	0.34			$	0.27			$	0.66			$	0.66

The following stock option grants were outstanding during the three and six month periods ended March 31, 2010 and 2009, but were excluded from the computation of diluted earnings per share because their inclusion would have been anti-dilutive:

		Three Months Ended								Six Months Ended
		March 31,								March 31,
		2010				2009				2010				2009
Options			1,102,367				1,443,346				447,207				696,494
Weighted-average option price		$	26.92			$	23.05			$	32.52			$	27.59

Note 7. Inventories

		March 31,				September 30,
		2010				2009
Raw materials		$	41,595			$	44,608
Work in progress			69,841				71,270
Component parts and finished goods			180,164				186,461
		$	291,600			$	302,339

Woodward Governor Company
Notes to Condensed Consolidated Financial
Statements — (Continued)

Note 8. Property, plant, and equipment — net

		March 31,				September 30,
		2010				2009
Land		$	10,899			$	11,231
Buildings and equipment			176,343				178,410
Machinery and equipment			326,696				336,903
Construction in progress			22,175				16,333
			536,113				542,877
Less accumulated depreciation			(339,214	)			(333,992	)
Property, plant and equipment, net		$	196,899			$	208,885

		Three months ended								Six months ended
		March 31,								March 31,
		2010				2009				2010				2009
Depreciation expense		$	10,403			$	9,298			$	20,158			$	18,475

Note 9. Goodwill

		September 30,				Additions /				Translation				March 31,
		2009				Adjustments				Adjustments				2010
Turbine Systems		$	86,565			$	—			$	—			$	86,565
Airframe Systems			297,412				(2,722	)			(400	)			294,290
Electrical Power Systems			17,733				—				(1,285	)			16,448
Engine Systems			41,092				—				(467	)			40,625
Consolidated		$	442,802			$	(2,722	)		$	(2,152	)		$	437,928

Additions and adjustments recorded during the year represent changes in the estimated values of assets acquired and liabilities assumed in purchase accounting, as described in Note 4, Business acquisitions and dispositions. In addition on August 10, 2009, Woodward HRT sold the F&P product line for $48,000. During the quarter ended March 31, 2010, Woodward received an additional $660 related to working capital adjustments typical in such transactions, which reduced goodwill.

Woodward tests goodwill for impairment on the reporting unit level on an annual basis and more often if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. The impairment tests consist of comparing the fair value of reporting units, determined using discounted cash flows, with its carrying amount including goodwill. If the carrying amount of the reporting unit exceeds its fair value, Woodward compares the implied value of goodwill with its carrying amount. If the carrying amount of goodwill exceeds the implied fair value of goodwill, an impairment loss would be recognized to reduce the carrying amount to its implied fair value. There was no impairment charge recorded in fiscal 2009 or in the first six months of fiscal 2010.

Woodward Governor Company
Notes to Condensed Consolidated Financial
Statements — (Continued)

Woodward completed its annual goodwill impairment test during the quarter ended March 31, 2010. Woodward considered the Turbine Systems, Airframe Systems and Engine Systems operating segments to be reporting units. Woodward evaluated goodwill for the Electrical Power Systems operating segment through three identified reporting units within the operating segment. The fair value of Woodward’s six reporting units was based on cash flow forecasts which have been updated to reflect current global economic conditions, including anticipated weakening of global demand for certain products and forecasts of demand increases anticipated as a result of the economic recovery. Forecasted cash flows were discounted using an 11.3% weighted average cost of capital assumption. The terminal value of the forecasted cash flows assumed an annual compound growth rate after five years of 4.5% and was calculated using the Gordon Growth Model.

The results of Woodward’s fiscal 2010 annual goodwill impairment test performed as of March 31, 2010 indicated that no goodwill impairment existed. The estimated fair value of each reporting units was in excess of its carrying value. At March 31, 2010 the reporting unit with the closest ratio of estimated fair value to carrying value was Woodward’s recently acquired Airframe Systems reporting unit, which has a significant concentration of business in the presently depressed business jet and regional jet market segments. Our analysis indicates a premium of over 30% compared to this reporting unit’s carrying value.

As part of the Company’s ongoing monitoring efforts, Woodward will continue to consider the global economic environment and its potential impact on Woodward’s business in assessing goodwill recoverability. There can be no assurance that Woodward’s estimates and assumptions regarding forecasted cash flows of certain reporting units, or the duration of the current economic downturn, or the period or strength of the recovery, made for purposes of the annual goodwill impairment test performed during the second fiscal quarter of 2010, will prove to be accurate predictions of the future. If Woodward’s assumptions are not realized, it is possible that an impairment charge may need to be recorded in future periods.

Woodward Governor Company
Notes to Condensed Consolidated Financial
Statements — (Continued)

Note 10. Other intangibles — net

		March 31, 2010												September 30, 2009
		Gross												Gross
		Carrying				Accumulated				Net Carrying				Carrying				Accumulated				Net Carrying
		Value				Amortization				Amount				Value				Amortization				Amount
Customer relationships:
Turbine Systems		$	44,327			$	(17,485	)		$	26,842			$	44,327			$	(16,746	)		$	27,581
Airframe Systems			176,581				(7,739	)			168,842				176,661				(2,068	)			174,593
Electrical Power Systems			2,144				(732	)			1,412				2,319				(676	)			1,643
Engine Systems			20,675				(12,647	)			8,028				20,675				(11,718	)			8,957
Total		$	243,727			$	(38,603	)		$	205,124			$	243,982			$	(31,208	)		$	212,774
Intellectual property:
Turbine Systems		$	—			$	—			$	—			$	—			$	—			$	—
Airframe Systems			—				—				—				—				—				—
Electrical Power Systems			7,593				(3,275	)			4,318				7,941				(3,073	)			4,868
Engine Systems			12,571				(6,564	)			6,007				12,613				(6,180	)			6,433
Total		$	20,164			$	(9,839	)		$	10,325			$	20,554			$	(9,253	)		$	11,301
Process technology:
Turbine Systems		$	11,941			$	(4,710	)		$	7,231			$	11,941			$	(4,511	)		$	7,430
Airframe Systems			62,941				(4,703	)			58,238				62,981				(2,590	)			60,391
Electrical Power Systems			—				—				—				1,390				(1,346	)			44
Engine Systems			12,593				(4,292	)			8,301				12,593				(3,797	)			8,796
Total		$	87,475			$	(13,705	)		$	73,770			$	88,905			$	(12,244	)		$	76,661
Other intangibles:
Turbine Systems		$	—			$	—			$	—			$	—			$	—			$	—
Airframe Systems			39,623				(21,051	)			18,572				39,646				(14,325	)			25,321
Electrical Power Systems			1,501				(338	)			1,163				1,623				(316	)			1,307
Engine Systems			460				(92	)			368				460				(51	)			409
Total		$	41,584			$	(21,481	)		$	20,103			$	41,729			$	(14,692	)		$	27,037
Consolidated		$	392,950			$	(83,628	)		$	309,322			$	395,170			$	(67,397	)		$	327,773